Military Base Realignments and Closures
Transfer of Supply, Storage, and Distribution Functions from Military Services to Defense Logistics Agency Gao ID: GAO-08-121R October 26, 2007As a result of the 2005 base realignment and closure (BRAC) round, the military services are required to transfer to the Defense Logistics Agency (DLA) all of their supply, storage, and distribution functions at specified depot maintenance locations that are collocated with a DLA distribution depot. These transfer actions are part of a larger BRAC recommendation, commonly referred to as the Supply, Storage, and Distribution (SS&D) recommendation, that is intended to reduce both the number of supply distribution depots and related excess capacity, while providing the Department of Defense (DOD) with a logistics base that saves money and enhances the effectiveness of logistics support to operational forces. There has been disagreement among the services and DLA about whether certain personnel positions that include functions inherently involving both supply and maintenance operations at the services' industrial depots should transfer to DLA as part of this recommendation. The Air Force, Navy, and Marine Corps reached agreement with DLA about these positions in January, February, and April 2007, respectively. After repeated opposition to the transfer of certain positions, in July 2007 the Army agreed to comply with direction from the Office of the Secretary of Defense (OSD) on the specific functions and positions to transfer. DLA subsequently submitted its draft business plan for implementing the SS&D recommendation to OSD for approval on September 18, 2007. Because of the broad congressional interest in the implementation of the 2005 BRAC round recommendations, we prepared this report under the Comptroller General's authority to conduct evaluations on his own initiative. Our work was in response to concerns raised by several congressional offices about possible inefficiencies and disruptions in depot maintenance production that could potentially generate higher costs at the department's depot maintenance activities and affect equipment readiness during a critical time for maintenance and support of our nation's warfighters. Our objectives were to determine (1) what efforts have been made to determine which supply-related functions will transfer to DLA, (2) what are the military services' key concerns in implementing the transfer of functions, (3) the extent to which DLA's plans establish a transfer process that minimizes disruptions depot maintenance, and (4) what are the estimated costs and savings associated with implementing this transfer of functions.
DLA and the services have taken several actions in an effort to reach agreement on which SS&D functions and related positions and inventories are to transfer to DLA as a result of implementing the 2005 BRAC SS&D recommendation. These actions have been ongoing since late 2005 when DLA began its planning process for implementing the consolidation of SS&D functions across DOD. Some key actions include defining SS&D functions at the beginning of the planning process, contracting a study to assess the effects and risks associated with the transfers, establishing integrated process teams to work through problems and concerns and identify potential solutions, and conducting detailed analyses of depot positions to identify transfer candidates. DLA has also worked with the services to develop comprehensive action plans that include specific and detailed actions that identify each task's duration, including start and completion dates; percentage completed; organization and personnel assigned; criticality of task; and milestones. Although the services have reached agreement with DLA on the specific functions to be transferred, officials from all of the services have expressed concerns in four key areas regarding the transfers. First, officials from all of the services expressed concern that the insertion of DLA into the internal operations of their depot maintenance activities may hinder their ability to meet depot production schedules and maintain equipment readiness. Second, depot maintenance officials expressed concern that if the transfer of functions to DLA takes place using DLA's existing price structure, it would increase the cost of depot maintenance operations and the depots will have to pass these additional costs on to their customers by increasing their hourly rates, which, in turn, would affect their operation and maintenance budgets. Third, officials from each of the services expressed concern about the future maintenance, upgrades, and usage of service information technology systems transferring with depot maintenance supply functions to DLA. Fourth, depot maintenance and service officials expressed concerns about several human capital issues, ranging from turnover among affected employees and limited promotion potential to the possibility of outsourcing transferred positions to the private sector. The extent to which any of these concerns may actually materialize is unknown, as implementation has not yet begun. DLA is developing plans to minimize the risk of disrupting depot maintenance, but it faces several challenges. In addition, DLA plans to time phase the transfer of SS&D functions across the implementation period, which extends to September 2011. Our analysis of the BRAC Commission cost and savings estimates and DLA's planning documents shows that over the fiscal year 2006 to 2011 BRAC implementation period, estimated costs have increased by about $45 million and estimated savings have decreased--by about $1 billion--for transferring the SS&D functions and associated inventories from the military services' industrial depots to DLA.
GAO-08-121R, Military Base Realignments and Closures: Transfer of Supply, Storage, and Distribution Functions from Military Services to Defense Logistics Agency
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October 26, 2007:
Congressional Addressees:
Subject: Military Base Realignments and Closures: Transfer of Supply,
Storage, and Distribution Functions from Military Services to Defense
Logistics Agency:
As a result of the 2005 base realignment and closure (BRAC) round, the
military services are required to transfer to the Defense Logistics
Agency (DLA) all of their supply, storage, and distribution functions
at specified depot maintenance locations that are collocated with a DLA
distribution depot.[Footnote 1] These transfer actions are part of a
larger BRAC recommendation, commonly referred to as the Supply,
Storage, and Distribution (SS&D) recommendation, that is intended to
reduce both the number of supply distribution depots and related excess
capacity, while providing the Department of Defense (DOD) with a
logistics base that saves money and enhances the effectiveness of
logistics support to operational forces. There has been disagreement
among the services and DLA about whether certain personnel positions
that include functions inherently involving both supply and maintenance
operations at the services' industrial depots should transfer to DLA as
part of this recommendation. The Air Force, Navy, and Marine Corps
reached agreement with DLA about these positions in January, February,
and April 2007, respectively. After repeated opposition to the transfer
of certain positions, in July 2007 the Army agreed to comply with
direction from the Office of the Secretary of Defense (OSD) on the
specific functions and positions to transfer. DLA subsequently
submitted its draft business plan for implementing the SS&D
recommendation to OSD for approval on September 18, 2007.
Because of the broad congressional interest in the implementation of
the 2005 BRAC round recommendations, we prepared this report under the
Comptroller General's authority to conduct evaluations on his own
initiative. Our work was in response to concerns raised by several
congressional offices about possible inefficiencies and disruptions in
depot maintenance production that could potentially generate higher
costs at the department's depot maintenance activities and affect
equipment readiness during a critical time for maintenance and support
of our nation's warfighters. Our objectives were to determine (1) what
efforts have been made to determine which supply-related functions will
transfer to DLA, (2) what are the military services' key concerns in
implementing the transfer of functions, (3) the extent to which DLA's
plans establish a transfer process that minimizes disruptions in depot
maintenance, and (4) what are the estimated costs and savings
associated with implementing this transfer of functions. This review is
one in a series of reviews on the implementation of the closures and
realignments in the BRAC 2005 round that we have undertaken under the
Comptroller General's authority to conduct evaluations on his own
initiative. As part of that work, we are currently reviewing the cost
and savings estimates for the larger SS&D recommendation, as well as
the progress and challenges in implementing the recommendation.
To address these objectives, we focused on the 13 service industrial
sites that are collocated with DLA depots and were included in the BRAC
SS&D recommendation. We analyzed implementation planning data and
interviewed officials at various levels within DOD, DLA headquarters,
the military services' headquarters, and various service industrial
depots cited in the SS&D recommendation.[Footnote 2] We also spoke with
industrial depot union representatives for the employees who would
potentially be affected by the transfers in each of the military
services. In addition, we reviewed DLA's cost and savings estimates as
presented in its September 2007 draft SS&D business plan and supporting
documents. We also relied on interviews with DLA and service officials
and analyses conducted as part of our ongoing work on implementation of
the SS&D recommendation. We reviewed DLA's planning actions regarding
the transfer of functions virtually as they were occurring. While we
determined that the data presented in DLA's planning documents were
sufficiently reliable for the purposes of this report, it should be
noted that BRAC business plans are considered "living" documents and
the data presented therein represent a point in time as plans are
subject to change as implementation proceeds. Moreover, since this
report contains data from the draft business plan for the SS&D
recommendation, the data used in this report could change if the
business plan is revised.
We relied heavily on testimonial evidence as to actions that are
planned to occur in the future because little other evidence existed at
the time of our review. Specifically, because the implementation
planning process is not yet complete and no SS&D functions are expected
to transfer prior to October 2007, little documentary evidence was
available to assess DLA and the services' planning efforts. Moreover,
at the time of our review, only the Air Force and Navy had begun
detailed implementation planning with DLA at the depot level. Only
after the BRAC SS&D recommendation is fully implemented can the precise
effects of the transfer of SS&D functions to DLA on depot maintenance
be determined. Furthermore, since this review only focused on the
industrial sites included in the BRAC recommendation, we did not
include in our review nine other service sites[Footnote 3] that were
not included in the BRAC recommendation but that were required by the
Under Secretary of Defense for Acquisition, Technology, and Logistics
in a June 22, 2005, administrative decision to transfer similar supply-
related functions and associated personnel to DLA. We conducted our
review from June 2007 through September 2007 in accordance with
generally accepted government auditing standards. More detailed
information on our scope and methodology appears in enclosure I.
Results in Brief:
DLA and the services have taken several actions in an effort to reach
agreement on which SS&D functions and related positions and inventories
are to transfer to DLA as a result of implementing the 2005 BRAC SS&D
recommendation. These actions have been ongoing since late 2005 when
DLA began its planning process for implementing the consolidation of
SS&D functions across DOD. Some key actions include defining SS&D
functions at the beginning of the planning process, contracting a study
to assess the effects and risks associated with the transfers,
establishing integrated process teams to work through problems and
concerns and identify potential solutions, and conducting detailed
analyses of depot positions to identify transfer candidates. DLA has
also worked with the services to develop comprehensive action plans
that include specific and detailed actions that identify each task's
duration, including start and completion dates; percentage completed;
organization and personnel assigned; criticality of task; and
milestones. For example, as of June 6, 2007, the action plan for
implementing the SS&D recommendation at Warner Robins Air Logistics
Center included these details for 773 organizational areas and tasks.
As of April 2007, DLA had reached initial agreements with the Air
Force, Navy, and Marine Corps on which functions and positions are to
transfer to DLA; however, the Army opposed transferring positions it
considers related to its production functions. On July 20, 2007, the
Under Secretary of Defense for Acquisition, Technology, and Logistics
directed the Army to transfer 191.3 full-time equivalent positions to
DLA, and the Army subsequently confirmed that it would transfer these
positions to DLA as directed.
Although the services have reached agreement with DLA on the specific
functions to be transferred, officials from all of the services have
expressed concerns in four key areas regarding the transfers. First,
officials from all of the services expressed concern that the insertion
of DLA into the internal operations of their depot maintenance
activities may hinder their ability to meet depot production schedules
and maintain equipment readiness. The Army's continued reluctance to
ultimately reach agreement with DLA regarding the positions to be
transferred stems from concerns related to its work-in-process
operations, which comprise highly integrated production and supply
functions with many of the same personnel performing both functions.
Army officials maintained that these positions should not transfer to
DLA because of their production functions. Second, depot maintenance
officials expressed concern that if the transfer of functions to DLA
takes place using DLA's existing price structure, it would increase the
cost of depot maintenance operations and the depots will have to pass
these additional costs on to their customers by increasing their hourly
rates, which, in turn, would affect their operation and maintenance
budgets. Third, officials from each of the services expressed concern
about the future maintenance, upgrades, and usage of service
information technology systems transferring with depot maintenance
supply functions to DLA. Fourth, depot maintenance and service
officials expressed concerns about several human capital issues,
ranging from turnover among affected employees and limited promotion
potential to the possibility of outsourcing transferred positions to
the private sector. The extent to which any of these concerns may
actually materialize is unknown, as implementation has not yet begun.
DLA is developing plans to minimize the risk of disrupting depot
maintenance, but it faces several challenges. While no plan can
guarantee that no disruptions will occur, DLA's evolving plans
incorporate several features that we believe, if implemented as
intended, are likely to lessen the risk associated with the transfer of
functions. These features, some of which are designed to address
challenges faced by DLA and the services, include the transferring of
SS&D positions on an "as-is, where-is" basis, which means that
employees filling those positions will perform the same duties at the
same location. In addition, DLA plans to time phase the transfer of
SS&D functions across the implementation period, which extends to
September 2011. The general order of progression begins with the Air
Force in October 2007, followed in succeeding years by the Navy, then
the Marine Corps, and then the Army. DLA has established integrated
process teams along with a plan of action and milestones, and has
flexibility to adjust the numbers of positions to transfer if further
analysis warrants. Furthermore, DLA and the Air Force have negotiated a
memorandum of agreement to establish business rules that set forth the
requirements and responsibilities for implementation planning. DLA and
the other services are to complete such agreements as implementation
continues. Finally, DLA and the services plan to negotiate agreements
that will establish responsibilities, metrics to measure performance,
costs, and business rules that should help minimize the risk of
disrupting depot maintenance.
Our analysis of the BRAC Commission cost and savings estimates[Footnote
4] and DLA's planning documents shows that over the fiscal year 2006 to
2011 BRAC implementation period, estimated costs have increased by
about $45 million and estimated savings have decreased--by about $1
billion--for transferring the SS&D functions and associated inventories
from the military services' industrial depots to DLA. We noted changes
to the estimates in three key areas: information technology costs,
civilian personnel savings, and inventory-related savings. First, we
found that as of September 2007, integrating the services' inventory
management systems with DLA's systems is expected to cost $79 million-
-an increase of $45 million above the original 2005 BRAC Commission
estimate. Second, the estimated savings associated with reducing
civilian personnel are expected to be almost $11 million--a decrease of
about $13 million--due to the elimination of fewer positions. There are
no savings associated with the immediate transfer of positions from the
services to DLA because the transfers are being made on an "as-is,
where-is" basis. Instead, the estimate for civilian salary savings was
based on the expectation that DLA would eliminate in the future 6.5
percent of the positions that transferred from the services' industrial
depots to DLA, beginning in fiscal year 2007. The 6.5 percent factor
was used by the BRAC Commission to estimate eliminations and personnel
savings. DLA has used this same factor to project personnel savings.
DLA officials told us that they plan to achieve this goal over time
through attrition. Third, we found that all but about $31 million of
the initial estimated savings of about $1 billion for transferring SS&D
functions and associated inventories have been eliminated. The BRAC
Commission's estimate for transferring SS&D functions and associated
inventories from the services' industrial depots to DLA was based on
data generated by DOD during the BRAC decision-making process, and the
belief that eliminating duplicate inventory--inventory stored by both
the services and the DLA depots--would produce savings. However, after
further review, DLA and the services found that the data were flawed.
For example, war reserve materiel, materiel held for other customers,
and materiel stored at the Red River Army Depot were incorrectly
included in the BRAC estimating model. Therefore, the estimated savings
associated with these items will not occur. Once DLA realized this, it
replaced the initial estimated savings with about $203 million in
projected savings of which almost $172 million were derived from
inventory reduction initiatives that are not directly a result of BRAC
actions. Finally, cost increases for certain operation and maintenance
costs may be associated with the transfer of SS&D functions, but at the
time of our review these cost data were not available to determine the
extent to which these costs are applicable to the transfer of
functions.
In commenting on a draft of this report, DOD concurred in principle
with our findings and conclusions. DOD further provided comments that
were intended to clarify its estimates for the savings to be achieved
for the transfer of supply-related functions that it believes are
attributable to BRAC. DOD's comments and our evaluation of them are
discussed on page 23.
Background:
On May 13, 2005, the Secretary of Defense made public his
recommendations for the 2005 BRAC round. The BRAC Commission,
established by law[Footnote 5] as an independent entity to evaluate
DOD's recommendations, presented its findings, along with its own
recommendations, to the President on September 8, 2005. The President
approved the Commission's recommendations in their entirety and
forwarded them to Congress on September 15, 2005. When Congress did not
pass a joint resolution of disapproval of the recommendations, they
became effective on November 9, 2005. DOD has until September 15, 2011,
to complete the implementation of all recommendations. In our July 2005
report on the 2005 BRAC round process and recommendations,[Footnote 6]
we reported that the 2005 BRAC round was different from prior BRAC
rounds in that relatively few of the recommendations focused on closing
active bases. In establishing goals for the 2005 BRAC round, the
Secretary of Defense expressed his interest in "transforming DOD by
aligning the infrastructure with the defense strategy"; consequently,
several of the recommendations from the 2005 round involved business
process reengineering efforts.[Footnote 7] The selection criteria
incorporated into the legislation authorizing the 2005 BRAC
round[Footnote 8] required DOD to give priority to four criteria
dealing with military value, while the extent and timing of potential
costs and savings was one of several "other" criteria that were
required to be considered when finalizing proposed recommendations for
realignments and closures.
The SS&D recommendation from the 2005 BRAC round is a business process
reengineering recommendation that is intended to reconfigure DLA's
distribution depot network to save money and enhance the effectiveness
of logistics support to operational forces. It also includes provisions
to consolidate all SS&D functions and inventories at various designated
service industrial locations to DLA. The complete text of this
recommendation is reprinted in enclosure II. In our 2005 report, we
stated that there was uncertainty regarding the magnitude of savings
likely to be realized in some aspects of the DLA-managed BRAC
recommendations, given assumptions regarding expected efficiency gains
from business process reengineering efforts that had not been
validated. We reported that the magnitude of the estimated savings was
uncertain because the estimates were based on assumptions that were
subject to only limited testing and had not been validated. We found
that the savings estimates for the DLA-managed BRAC recommendations,
for the most part, were based on historical documentation, which time
did not allow us to validate. We reported that this could lead to a
false sense of savings and lead to premature reductions in affected
budgets in advance of actual savings being fully realized, as has
sometimes occurred in past efforts to achieve savings through business
process reengineering efforts.
In September 2005, DLA was designated as the business manager for
implementing the SS&D recommendation within DOD. DLA is responsible for
developing and updating a business plan for this recommendation and
coordinating implementation efforts among all of the services. The
business plan is intended to provide, among other things, details on
actions and time frames, along with estimated costs and savings
associated with implementing the recommendations. The SS&D business
plan was submitted to OSD for approval on September 18, 2007. Under OSD
direction, DLA is required to update the plan semiannually in February
and August of each year until implementation actions are complete. Once
implemented as planned, the SS&D recommendation will change DLA's
wholesale storage and distribution infrastructure into four hub-and-
spoke geographical regions within the continental United States, with
each region having one hub, known as a strategic distribution
platform,[Footnote 9] and multiple spokes, known as forward
distribution points.[Footnote 10] Each strategic distribution platform
is designed to have state-of-the-art capabilities for packaging and
shipping supplies to its designated customers. Distribution depots, no
longer needed for regional supply, will be realigned as forward
distribution points and will provide dedicated receiving, storing, and
issuing functions solely in support of on-base industrial customers,
such as maintenance depots, shipyards, and air logistics centers. Under
this recommendation, forward distribution points will consolidate all
supply and storage functions supporting industrial activities, to
include those internal to depots and shipyards, and those at any
intermediate levels that may exist. Figure 1 identifies the locations
of the reconfigured SS&D depot system.
Figure 1: Locations of DLA's Planned Reconfiguration of the Supply,
Storage, and Distribution Depot System:
This figure is a map of the locations of DLA's planned reconfiguration
of the supply, storage, and distribution depot system.
[See PDF for image]
Source: DLA.
[End of figure]
There are 36 DLA and service SS&D activities, both inside and outside
of the continental United States. However, only 26 of these activities-
-13 DLA depots that are collocated with 13 of the services' industrial
facilities--are affected by the SS&D recommendation. One DLA
distribution depot, located at the Red River Army Depot in Texas, was
not mentioned by the BRAC Commission in its September 2005 report, and
thus this depot is not subject to any BRAC 2005 actions. Nine other of
the services' industrial facilities--two Army depots, one Air Force
depot, and six Navy industrial activities--would be unaffected by the
changes, because they are also not included in the BRAC recommendation.
However, in order to establish a more effective and efficient supply
chain, an administrative decision made by the Under Secretary of
Defense for Acquisition, Technology, and Logistics on June 22, 2005,
directed that the supply and storage functions and associated personnel
and facilities at these 9 service facilities should also be transferred
in place to DLA.
Beginning in October 2007, the Air Force is scheduled to be the first
service to transfer its SS&D functions to DLA at the Warner Robins Air
Logistics Center in Georgia. A draft plan of action with milestones has
been developed and the Air Force is proceeding with the implementation
of the transfer. The other two air logistics centers, located at Tinker
Air Force Base in Oklahoma and Hill Air Force Base in Utah, are
scheduled to transfer their SS&D functions to DLA after Warner Robins.
In May 2007, the Navy held pre-implementation meetings and established
pre-implementation integrated process teams with DLA to begin its
negotiations for developing a similar plan of action and milestones for
its industrial locations.[Footnote 11] DLA officials told us that
implementation of the BRAC SS&D recommendation at the Marine
Corps[Footnote 12] and Army depots[Footnote 13] will follow the Navy's
implementation.
DLA and the Services Have Taken Actions to Reach Agreement on Which
Functions Will Transfer:
DLA and the services have taken several actions in an effort to reach
agreement on which SS&D functions and related positions and inventories
are to transfer to DLA as a result of the 2005 BRAC SS&D
recommendation. As part of the process of formulating recommendations
for BRAC, the Supply and Storage Joint Cross-Service Group,[Footnote
14] which included DLA and service officials, defined supply, storage,
and distribution services in its May 2005 report as requisitioning,
receiving, storing, issuing, and distributing supplies and materiel as
well as materiel management, stock control, materiel acquisition,
disposal, and reutilization.[Footnote 15] DLA has used this definition
to guide its actions for implementing the consolidation of SS&D
functions across DOD. Following the approval of the BRAC
recommendations in November 2005, DLA and the services began the
planning process for implementing the SS&D recommendation. Initially,
as planning efforts got under way, DLA contracted with the Logistics
Management Institute (LMI) to assess the SS&D operations at all
affected depots, identify the risks to depot operations of transferring
these functions, and recommend which functions should transfer to DLA
at each site. This study included site visits to all affected
industrial sites by DLA and LMI officials as well as extensive data
gathering and analyses. Although the study's report recommended that
DLA be conservative in interpreting which functions it would assume
responsibility for, DLA and OSD officials believed that the study did
not take into consideration the language in the BRAC recommendation
requiring the transfer of "all" SS&D functions to DLA.
Furthermore, DLA officials conducted visits to affected depots and met
with key officials to better understand depot operations at each site.
These visits, in conjunction with the LMI study, helped to identify
SS&D functions. After these functions were identified in late 2006, DLA
negotiated agreements with the Air Force and Navy on which SS&D
positions would transfer and established timelines for these transfers.
DLA plans to use integrated process teams,[Footnote 16] which will
include representatives from DLA and the services, to work through
problems and concerns related to the transfer of functions at each
affected depot and identify potential solutions. For example, the SS&D
integrated process team at Warner Robins partnered with the Air Force
to conduct a manpower study that resulted in an increase of 99
positions--from 166 to 265--that would transfer to DLA from the Warner
Robins Air Logistics Center. Similar manpower studies also increased
the number of positions that are to be transferred to DLA at the Air
Force's other two air logistics centers.
The Marine Corps and the Army were more hesitant to transfer the SS&D
functions to DLA because some of the positions considered for transfer
included highly integrated production and supply functions, with the
same personnel performing both functions, and there was not a clear
distinction as to which positions should transfer. The OSD BRAC Office,
reporting to the Under Secretary of Defense for Acquisition,
Technology, and Logistics, subsequently worked with DLA and the two
services on a position-by-position analysis of jobs at affected Marine
Corps and Army depots to identify transfer candidates. This analysis
identified job series, grade, and title; the number of full-time
equivalent positions held by civilian, military, and contractor
personnel; major tasks and functions performed; the proposed
classification of the position (e.g., production, supply, storage, or
distribution); and the rationale or support for the proposed
classification. This position analysis facilitated a subsequent
agreement among the Under Secretary of Defense for Acquisition,
Technology, and Logistics; DLA; and the Marine Corps on April 30, 2007,
that supply "begins when a demand signal is generated by a production
planner or artisan in the production planning system and that all
subsequent requisition processing, expediting, local purchase, credit
card purchase, status monitoring, receive, stow, and issue functions,
etc. that take place before material hand-off into the production
stream are examples of supply, storage, and distribution activities."
As of April 2007, DLA had reached initial agreements with the Air
Force, Navy, and Marine Corps on which functions and positions are to
transfer to DLA, with the understanding that the number of positions
may increase or decrease as implementation matures. However, the Army
opposed transferring positions it considered related to its production
functions due to concerns about potential impacts on its ability to
meet maintenance production schedules. On July 20, 2007, after DLA and
the Army made several unsuccessful attempts to resolve these
differences, the Under Secretary of Defense for Acquisition,
Technology, and Logistics directed the Army to transfer 191.3 full-time
equivalent positions to DLA. These positions were identified using the
same position analysis and definition of supply agreed upon by the
Marine Corps. On July 26, 2007, the Army confirmed that it would
transfer the 191.3 full-time equivalent positions to DLA as directed.
Table 1 shows the number of full-time equivalent civilian and
contractor positions anticipated to transfer to DLA at each collocated
industrial depot as of September 2007.
Table 1: Number of Full-time Equivalent Civilian and Contractor
Positions Anticipated to Transfer to DLA at Each Collocated Depot as of
September 2007:
Service: Air Force;
Depot Location: Hill Air Force Base, UT;
Estimated number of full-time equivalent civilian position transfers:
231.00;
Estimated number of full-time equivalent contractor position transfers:
0;
Total full-time equivalent position transfers: 231.00.
Service: Air Force;
Depot Location: Robins Air Force Base, GA;
Estimated number of full-time equivalent civilian position transfers:
265.00;
Estimated number of full-time equivalent contractor position transfers:
0;
Total full-time equivalent position transfers: 265.00.
Service: Air Force;
Depot Location: Tinker Air Force Base, OK;
Estimated number of full-time equivalent civilian position transfers:
365.00;
Estimated number of full-time equivalent contractor position transfers:
0;
Total full-time equivalent position transfers: 365.00.
Service: Navy;
Depot Location: Marine Corps Air Station Cherry Point, NC;
Estimated number of full-time equivalent civilian position transfers:
88.00;
Estimated number of full-time equivalent contractor position transfers:
0;
Total full-time equivalent position transfers: 88.00.
Service: Navy;
Depot Location: Naval Air Station Jacksonville, FL;
Estimated number of full-time equivalent civilian position transfers:
29.00;
Estimated number of full-time equivalent contractor position transfers:
42.00;
Total full-time equivalent position transfers: 71.00.
Service: Navy;
Depot Location: Naval Station Norfolk, VA;
Estimated number of full-time equivalent civilian position transfers:
120.00;
Estimated number of full-time equivalent contractor position transfers:
37.00;
Total full-time equivalent position transfers: 157.00.
Service: Navy;
Depot Location: Naval Station Bremerton, WA;
Estimated number of full-time equivalent civilian position transfers:
89.00;
Estimated number of full-time equivalent contractor position transfers:
0;
Total full-time equivalent position transfers: 89.00.
Service: Navy;
Depot Location: Naval Station San Diego, CA;
Estimated number of full-time equivalent civilian position transfers:
49.00;
Estimated number of full-time equivalent contractor position transfers:
36.00;
Total full-time equivalent position transfers: 85.00.
Service: Marine Corps;
Depot Location: Marine Corps Logistics Base Albany, GA;
Estimated number of full-time equivalent civilian position transfers:
25.00;
Estimated number of full-time equivalent contractor position transfers:
34.00;
Total full-time equivalent position transfers: 59.00.
Service: Marine Corps;
Depot Location: Marine Corps Logistics Base Barstow, CA;
Estimated number of full-time equivalent civilian position transfers:
20.60;
Estimated number of full-time equivalent contractor position transfers:
43.00;
Total full-time equivalent position transfers: 63.60.
Service: Army;
Depot Location: Anniston Army Depot, AL;
Estimated number of full-time equivalent civilian position transfers:
63.11;
Estimated number of full-time equivalent contractor position transfers:
5.00;
Total full-time equivalent position transfers: 68.11.
Service: Army;
Depot Location: Corpus Christi Army Depot, TX;
Estimated number of full-time equivalent civilian position transfers:
15.53;
Estimated number of full-time equivalent contractor position transfers:
40.00;
Total full-time equivalent position transfers: 55.53.
Service: Army;
Depot Location: Tobyhanna Army Depot, PA;
Estimated number of full-time equivalent civilian position transfers:
45.66;
Estimated number of full-time equivalent contractor position transfers:
22.00;
Total full-time equivalent position transfers: 67.66.
Total;
All transfer sites;
Estimated number of full-time equivalent civilian position transfers:
1,405.90;
Estimated number of full-time equivalent contractor position transfers:
259.00;
Total full-time equivalent position transfers: 1,664.90.
Source: DLA's September 21 2007, draft SS&D business plan.
[End of table]
Services Have Several Key Concerns regarding the Transfer of Supply,
Storage, and Distribution Functions:
Although each service has agreed to transfer to DLA specific supply,
storage, and distribution functions, officials from each of the
services have expressed several key concerns regarding the transfers.
These concerns include the following: (1) DLA's involvement in depot
operations may hinder their ability to meet depot production schedules
and maintain equipment readiness, (2) uncertainty as to the pricing
mechanism for DLA services, (3) information technology interfaces with
service and DLA systems, and (4) human capital issues. The extent to
which any of these concerns may actually materialize is unknown, as
implementation has not yet begun.
Services Concerned That DLA's Insertion into Depot Operations May
Hinder Their Ability to Meet Depot Production Schedules and Maintain
Equipment Readiness:
Officials from all four services expressed concern that the insertion
of DLA into the internal operations of their depot maintenance
activities may hinder their ability to meet depot production schedules
and maintain equipment readiness. All stated that as long as they
receive the proper materiel at the correct time, they had no preference
as to who provides the materiel. However, they expressed concern that
DLA may not be able to provide the same level of service that they
currently provide for themselves. To the extent that the level of
service provided is lower under DLA, these officials believed it would
degrade their ability to meet production schedules and maintain
equipment readiness, which could potentially affect ongoing operations.
However, DLA officials told us that they have asked the services for
metrics and baseline data and found that the services may not have all
of the supply function metrics and historical data needed for DLA to
benchmark its performance against the level of service that the
services have provided for themselves. Officials from all of the
services commented that as the performance metrics are developed for
the functions transferring to DLA, it would be more beneficial if they
were tied to meeting depot maintenance production schedules instead of
those typically associated with supply performance. Development of
metrics is the focus of one of several integrated process teams
cochaired by DLA and each service. DLA officials stated that metrics
are to be jointly agreed to and are to measure support for depot
maintenance production and traditional supply effectiveness.
In addition, depot maintenance officials said that they have some
concerns that DLA may not be able to retain an appropriate staffing
level to carry out the transferred functions. Service officials said
that depot commanders currently have the flexibility and authority to
handle surge requirements or downsize the workforce, adjust operating
schedules, working hours, and take other staffing actions as needed to
adjust to varying workload levels and requirements. For example, Army
depot maintenance officials informed us that a depot can quickly
rightsize its supply function by moving personnel around to other areas
of the depot as required. They are concerned that DLA with its smaller
workforce may not be able to rightsize as quickly to meet surge
requirements or to reduce unnecessary costs when depot workloads drop
off. However, since agreements have not yet been reached to define the
command relationship between the depot commanders and DLA, depot
command officials are concerned that the depot commanders may not be
able to establish and modify the work schedules for DLA employees or
direct them to work overtime during surge periods. Depot command
officials are also concerned that the depot commanders will have little
recourse if DLA fails to perform well, and sought authority for depot
commanders to have input into the performance rating of the DLA
representative in charge of depot SS&D functions. Furthermore, when
primary sources of supply cannot be obtained in time to meet schedules,
depot commanders also have the authority to make purchases with credit
cards, even though that may not be the most cost-effective source.
Uncertainty and concern therefore exist among the services as to
whether this same flexibility would continue with DLA in charge of SS&D
functions. According to DLA officials, even though the local purchasing
function is transferring to DLA, the services are not restricted from
maintaining a purchase card as a contingency measure.
An integral part of the command and control issue pertains to a process
referred to as work in process. Work in process consists of the
components[Footnote 17] and major subassemblies[Footnote 18] removed
from weapon systems--such as tanks, ships, tracked and wheeled
vehicles, and aircraft--during disassembly, as well as the new items
purchased to support weapon system depot maintenance. During
disassembly, the components and major subassemblies are removed from
the weapon system, cleaned, and evaluated for future use. Items found
serviceable are held until they are needed for the reassembly of the
weapon system. Items needing repair are sent to the depots' back shops
or subcontractors for repair, and once repaired are held until they are
needed to support reassembly; other items may be found broken or worn
beyond repair and must be replaced with new items. In implementing the
BRAC recommendation, the OSD BRAC Office has distinguished between work-
in-process materiel that is stored within proximity to the depot
maintenance production line and that which is temporarily stored away
from the line until it is needed to support weapon system reassembly.
According to the OSD BRAC Office, the management of materiel within the
immediate production area is part of the production process and
consequently is to be retained by the service maintenance depots.
However, the OSD BRAC Office has defined the management of materiel
held and stored away from the production area prior to weapon system
reassembly as an SS&D function that should transfer to DLA.
Army officials disagree with this distinction and told us that the
implementation of the SS&D recommendation inserts DLA into the core of
the Army's depot maintenance mission and breaks the unity of command
that the depot commanders currently have over the maintenance
production process. The Army's continued reluctance over time to reach
agreement with DLA regarding the positions to be transferred stems from
concerns related to its work-in-process operations. Work in process
comprises highly integrated production and supply functions, with many
of the same personnel and equipment performing both functions. Army
officials maintained that these highly integrated positions should not
transfer to DLA because of their production functions. In particular,
the Army is concerned about transferring storage functions and
positions associated with work-in-process materiel. The Army contends
that work-in-process materiel should be retained under the depot
commander's control, regardless of whether it is held on, near, or away
from the production line. This contention is because the storage and
distribution of repairable, serviceable, and new materiel is critical
to supporting the weapon systems' programmed depot maintenance
schedules, which are ultimately the responsibility of the maintenance
depot commander. For example, using OSD's definition, depot maintenance
employees would remove the items from a tactical vehicle as it is
disassembled and evaluate whether the items require repair work. Items
not requiring repair would be sent to DLA to be stored until they are
needed for final reassembly. Items requiring repair would be sent to
the appropriate depot repair shops and, once repaired, they also would
be sent to DLA for storage. When needed for final reassembly, the
depot's production planners would recall the items from DLA for
distribution to the depot assembly line. According to the Army, these
internal movements of equipment and materiel would now involve two
separate organizations and two separate chains of command for what is
really a single mission--depot maintenance. Without direct control of
work in process, Army officials told us that a commander's ability to
make monthly and daily production decisions and rapidly shift resource
priorities in response to changing customer requirements will be
severely restricted, which could potentially adversely affect
readiness. DLA and the OSD BRAC Office disagreed with the Army because
the recommendation language requires that "all" SS&D functions are to
transfer.
The Army elevated its concerns to the Under Secretary of Defense for
Acquisition, Technology, and Logistics on several occasions, formally
disagreeing with OSD's definition of work in process and in one
instance requesting an exception from this definition for the Army.
However, on July 20, 2007, after a joint assessment of the production
functions that must transfer to DLA by the Army, DLA, and the DOD
Office of General Counsel, the Under Secretary of Defense for
Acquisition, Technology, and Logistics directed the Army to transfer to
DLA all of the SS&D functions specified in the BRAC recommendation in
accordance with the OSD definition. On July 26, 2007, the Army agreed
to comply with OSD's direction.
The Air Force, Navy, and Marine Corps also have work-in-process
materiel embedded in their production line depot maintenance
operations. The Marine Corps' work-in-process operation is very similar
to the Army's in that components and subassemblies are stored at
locations away from the production line. While the Marine Corps has
agreed to transfer all of its SS&D functions to DLA, it shares some of
the same concerns as the Army about potentially losing control of its
work in process when the SS&D functions transfer to DLA. The work-in-
process operations for the Air Force and the Navy's aviation work-in-
process operations at its fleet readiness centers are also similar to
the Army's, but their work-in-process materiel is stored in the same
general area as the production line. As a result, officials from these
two services stated that they expect to retain control over their work-
in-process materiel and not transfer this materiel to DLA.
Finally, Army and Marine Corps depot officials are concerned that
transferring the storage and distribution management of their work in
process to DLA will erode many of the gains made in recent years in
reducing repair cycle time and increasing depot capacity through
business process improvement initiatives. According to Army and Marine
Corps depot officials, one initiative that enabled them to reduce
repair cycle time was moving and temporarily storing work-in-process
materiel away from the production line until needed. These officials
believed that transferring this materiel to DLA could produce
unintended consequences. Specifically, Army and Marine Corps depot
officials are concerned that the transfer of the storage and
distribution management of work-in-process to DLA could result in depot
production managers lacking confidence in the timely return of work in
process materiel. This could potentially result in depot production
managers finding ways to avoid sending work in process materiel to
temporary storage away from the production line, thereby eroding many
of the efficiencies gained through process improvement initiatives. To
the extent that such erosion occurs, it could hinder the services'
ability to meet depot production schedules and maintain equipment
readiness.
Services Concerned That Use of DLA's Existing Pricing Structure Would
Lead to an Increase in the Overall Cost of Depot Maintenance:
Depot maintenance officials expressed concern that if the transfer of
production integrated supply functions to DLA takes place using DLA's
existing price structure, it will increase the cost of depot
maintenance operations and depots will have to pass these additional
costs on to their customers by increasing their hourly rates. Customers
would thus pay more for equipment maintenance, which, in turn, would
affect their operation and maintenance budgets. According to depot
officials, under DLA's standard schedule of supply transaction charges,
customers are charged for each transaction. As a result, they are
concerned that transferring the integrated supply functions to DLA will
substantially increase the cost to the depots and their customers if
DLA retains its current pricing practices. DLA's plans for developing a
new pricing methodology as it gains experience in managing the depots
are discussed below, in the section on performance-based agreements.
Services Concerned about Maintaining and Upgrading Depot Information
Technology Systems and Their Interfaces with DLA Systems:
Officials from each of the services expressed concern about the future
maintenance and upgrades of service information technology systems
transferring with depot maintenance supply functions to DLA, as well as
broader implications to the wider service network enterprise resource
planning systems that are dependent on depot maintenance information.
DLA's supply organizations use DLA's distribution supply information
technology system for various supply-related processing functions, such
as receipt, storage location, issue, and inventory accountability. The
manner in which DLA's information systems would interface with the
services' depot maintenance information systems is unclear. For
example, Air Force officials said that they have agreed to turn their
maintenance tracking system over to DLA and DLA has agreed to use it.
However, Air Force officials expressed concerns that when DLA is faced
with competing resource demands for improvements to information
technology in the future, DLA may not choose to maintain or upgrade the
system as the Air Force would and may over time replace the Air Force
system with DLA's own information technology system in the depot. Air
Force officials expressed concern that DLA's system might not be
interoperable with the Air Force's systems, and the Air Force could
lose its ability to track the status of reparable items, which could
impede production. In addition, according to Army depot officials,
DLA's information technology system is not compatible with the standard
depot systems used by the Army's depots for production control or
supply storage and retrieval, which are configured to interface with
the standard depot system. Moreover, the Army is in the process of
replacing its standard depot system with its major enterprise resource
planning system--the logistics management program--and is already
facing a number of challenges with that transition at the one depot
where it has been implemented thus far. Army depot officials are
concerned that if DLA replaces the Army systems with its own
distribution supply system, the transition will disrupt depot
operations and may not provide the production control and financial
management interfaces the Army needs to manage its depot maintenance
operations. Ultimately, Army officials believe that replacing their
systems with DLA's system will increase DOD's overall investment costs
for information system development.
Services Concerned about Human Capital Issues:
Depot maintenance and service officials expressed concerns about
several human capital issues, ranging from turnover among affected
employees and limited promotion potential to the possibility of
outsourcing transferred positions to the private sector. For example,
service officials told us that the pending transfers are already
leading to turnover among affected depot maintenance employees, which
poses a risk to the success of the "as-is, where-is" transfer concept.
In anticipation of the transfer, some workers are making decisions to
retire or are pursuing positions elsewhere in the depots. Tobyhanna
Army Depot officials, for instance, said that since the pending
transfer process was announced, six employees who would have been
identified to transfer to DLA have either retired or found positions in
other areas of the depot. In addition, according to Army depot
personnel officials, depot employees expressed concern that their job
prospects may be more limited in the event that DLA conducted a
reduction in force after their positions transferred. They stated that
it is unclear whether depot employees will be able to exercise the bump
and retreat rights[Footnote 19] that are normally associated with a
reduction in force within the depot workforce or if they will be
limited to exercising those rights only within DLA after they become
DLA employees. Furthermore, some Army employees told us they were
concerned that their positions would be downgraded by DLA. Employee
union representatives said that depot employees' future advancement
potential may be more limited after they are transferred to DLA, unless
they are willing to move to other DLA locations. For example, the union
representative at Tobyhanna Army Depot said that some Army employees
transferred to DLA would be limited to pay levels in wage grades 5 and
6, unless they were willing to move to DLA operations in Susquehanna,
Pennsylvania, or Columbus, Ohio. If these employees had remained as
Army depot employees, they could have potentially advanced to other
positions at higher pay grades because the Army positions focus on
multiple tasks and disciplines, whereas the DLA positions have a single-
focused career path. Union officials at Army depots also said that as
DLA employees, they will no longer be eligible for inclusion in the
depot's annual bonus awards, which they said could be as high as $1,500
per employee. These union officials expressed concern that the loss of
bonus eligibility might create disharmony between employees
transferring to DLA and the depot employees they must continue to work
with closely on a day-to-day basis. DLA officials pointed out that
there are awards and bonus programs of equal value for DLA employees
and that employee performance in DLA will be rewarded as it is in the
services. Moreover, other Army employees said they were concerned that
after becoming DLA employees they would lose the intangible feeling of
being on the depot maintenance team and the close ties they currently
feel to the warfighter as Army employees repairing major weapon
systems.
Service and depot officials also expressed concern about a goal DLA has
established for a 6.5 percent reduction in positions over time due to
expected increases in operational efficiency once they take control of
the services' SS&D operations. These officials are concerned because
the depots have instituted several efficiency initiatives and some have
also undergone A-76 competitions since the time of the 2005 BRAC
Commission's estimates. As a result, fewer service personnel are
performing all depot operations, including those SS&D functions that
will transfer to DLA, and they believe that achievement of the 6.5
percent position reduction goal could lead to understaffing of the
depots. DLA officials told us, however, that they plan to achieve this
goal over time based on their actual experiences in performing the SS&D
functions at the depots, and any elimination of positions would likely
be accomplished through attrition.
Furthermore, officials from all of the services, as well as the
affected employees and their union representatives, expressed concern
that an A-76 competition might result in the outsourcing of the depot
maintenance supply functions to the private sector.[Footnote 20]
According to union officials, private firms successful in A-76 bids
typically pay their employees a lower wage and provide fewer benefits
than would be available in the government positions they replace. Depot
maintenance officials expressed similar concerns, and added that
contracting out the functions may hinder the depot commanders' ability
to address any deficiencies in the management of work in process
because the A-76 contract would place DLA as an intermediary between
the depot commander and the contractor performing the functions.
According to Army depot maintenance officials, in previous A-76
competitions DLA organizations reduced staffing levels in their
attempts to compete as the most efficient organization, and
consequently the Army has had to augment its workforce with depot
employees to adequately support depot maintenance operations. For
example, DLA's supply operations at the Tobyhanna Army Depot were
retained as a government operation following an A-76 competition.
However, when streamlining operations to compete with the private
sector, DLA lost some experienced retrograde materiel[Footnote 21]
inspectors through attritions, and consequently the DLA warehouse
experienced a backlog of retrograded material that was needed on the
depot maintenance production line to meet warfighter requirements. To
address this problem, the depot placed two of its employees permanently
at the DLA warehouse to assist in the identification of retrograded
items.
DLA Is Developing Plans to Minimize the Risk of Disrupting Depot
Maintenance, but Faces Several Challenges:
DLA is developing plans to minimize the risk of disrupting depot
maintenance, but it faces several challenges. While no plan can
guarantee that no disruptions will occur, DLA's evolving plans
incorporate several features that we believe, if implemented as
intended, are likely to lessen the risk associated with the transfer of
functions. These features, some of which are designed to address
challenges faced by DLA and the services, include the following:
* "As-is, where-is" transfer. The transfer of SS&D positions is to
occur on an "as-is, where-is" basis, which means that employees filling
those positions will perform the same duties at the same location
during the same working hours. According to DLA officials, the only
difference will be that the employees will then work for DLA instead of
one of the services. To the extent that this construct is implemented,
there would likely be no disruptions to maintenance production
schedules because of the transfers in place. However, DLA and service
officials said that the "as-is, where-is" transfer process may
encounter some short-term difficulties due to the possibility of
current service employees deciding to leave their positions before the
transfer date. If this occurs, DLA may be challenged to quickly fill
position vacancies and maintain needed expertise to minimize production
disruptions.
* Time-phased transfers. According to DLA officials, the transfer of
SS&D distribution functions is expected to be phased across the
implementation period, which extends to September 2011. For example,
the Air Force is expected to begin transferring functions in fiscal
year 2008, followed by the Navy and Marine Corps in fiscal year 2009,
and the Army in fiscal year 2010. Additionally, within each service the
transfers are to take place sequentially at the different depots. For
example, the Air Force expects to transfer functions at Warner Robins
Air Force Base Air Logistics Center in early fiscal year 2008, followed
by Tinker Air Force Base Air Logistics Center in the second quarter of
fiscal year 2008, and concluding with Hill Air Force Base Air Logistics
Center in the third quarter of fiscal year 2008. According to DLA
officials, time phasing of transfers is intended to allow for the
focused dedication of resources for individual sites. This approach
also allows for the capture of "lessons learned" and revisions to plans
as implementation proceeds. In addition, the time-phased approach is
intended to help overcome the services' apprehension about inserting
DLA in the internal operations of their depot maintenance activities,
as discussed above.
* Integrated process teams and the plan of action and milestones. At
each transfer site, DLA and the services plan to establish seven
integrated process teams[Footnote 22] that include representatives from
DLA and the services to facilitate the detailed planning associated
with the transfer of functions. The teams are to develop a
comprehensive action plan that includes specific and detailed actions
that identify each task's duration, including start and completion
dates; percentage completed; organization and personnel assigned;
criticality of task; and milestones. For example, as of June 6, 2007,
the action plan developed by the seven teams, referred to as the Plan
of Action and Milestones, for Warner Robins Air Logistics Center
included these details for 773 organizational areas and tasks. DLA and
Air Force officials told us that as implementation progresses, they
intend to develop similar plans to guide the transfers for all other
affected depots and activities for the Air Force and the other
services, using the Warner Robins plan as a model. The teams meet
regularly to discuss implementation issues, work through problems and
concerns, and identify potential solutions and mitigating actions where
possible. For example, an early issue involved the ability of
transferred employees to access the software systems that manage the
SS&D functions in support of the production line after they transfer to
DLA. These software systems currently are only accessible by Air Force
employees. To resolve this issue, the integrated process teams have
identified a number of possible solutions, one of which is being tested
through a pilot process.
* Flexibility on numbers of positions to transfer. While DLA and the
services initially agreed to an estimated number of full-time
equivalents to transfer, the exact number of full-time equivalents and
the specific employees to be transferred at each site will not be
determined until detailed implementation planning occurs with each
service at each site. The initial number of full-time equivalents
agreed to by DLA and the service can be adjusted--either up or down--in
accordance with the current situation at each site as implementation
proceeds, if further analysis warrants it. For example, as discussed
above, based on data developed during the implementation planning
process, the Air Force is planning to transfer more full-time
equivalents than originally estimated.
* Memorandums of agreement. DLA and the services are to negotiate
memorandums of agreement to establish business rules that set forth the
requirements and responsibilities for implementation planning and
activities. As of August 2007, the Air Force was the first service that
had negotiated a draft memorandum with DLA. The draft memorandum of
agreement between DLA and the Air Force establishes the membership on
integrated process teams, leadership, points of contact to resolve
implementation issues, biweekly teleconference requirements, and the
Plan of Action and Milestones as the detailed planning document for
implementation. The memorandum is to be reviewed quarterly and updated
as necessary in a collaborative effort between DLA and the Air Force.
The other services will be negotiating similar memorandums of
agreements, using the Air Force memorandum as a model, and they plan to
incorporate lessons learned from the Air Force's experiences.
* Performance-based agreements. DLA and the services plan to negotiate
performance-based agreements[Footnote 23] that will establish the
responsibilities, metrics to measure performance, costs, and business
rules that should help minimize the risk of disrupting depot
maintenance. The overarching goal for these agreements is for DLA to
provide the same level of service at the same or less cost as is
currently provided by the services' SS&D operations. DLA and service
officials stated that reaching agreement on specific metrics to measure
the level of service DLA provides will be a challenge. These officials
also said that reaching agreement on the cost for SS&D functions and
the mechanism by which DLA will bill the services will be a challenge
because the data required for these calculations are not readily
available. At the time of our review, DLA officials told us that they
do not intend to use the same supply transaction fee schedule they now
use, although they have not yet developed an alternative price
methodology. For an unspecified interim period, DLA officials plan to
maintain the current level of performance at the same cost, operating
the integrated supply function on a cost reimbursable basis, until
sufficient information on operating cost and performance is available
to develop a new pricing methodology. DLA officials told us that they
plan to be able to offer the depots a pricing methodology that allows
them to purchase increasing levels of performance based on price.
Additionally, DLA plans to establish appropriate business rules and
processes for retail SS&D functions, such as credit card purchases,
local purchases, and overtime or shift work, which DLA and service
officials agreed may be a challenge because retail supply functions are
new to DLA. DLA and OSD officials have stated that they will work with
depot commanders to ensure that they have the same authorities that
they currently have to authorize local credit card purchases, which are
used to enable depot commanders to obtain needed supplies when primary
sources of supply will not be available in time to meet maintenance
schedules. With respect to naval shipyards, all of the credit card
buyers are transferring to DLA, so shipyard commanders will expect DLA
to acquire all materials when needed. In addition, the September 21,
2007, business plan includes a provision that the depot commanders will
provide input into the performance ratings of the DLA maintenance depot
representatives.
Estimated Costs Increased and Estimated Savings Decreased for
Transferring the Services' SS&D Functions to DLA:
Our analysis of the original BRAC Commission cost and savings
estimates[Footnote 24] and other documents shows that over the fiscal
year 2006 to 2011 BRAC implementation period, estimated costs have
increased by $45 million and estimated savings have decreased--by about
$1 billion--for transferring the SS&D functions and associated
inventories from the military services' industrial depots to DLA. We
noted estimate changes in three key areas: information technology
costs, civilian personnel savings, and inventory-related savings.
Specifically, we found that as of September 2007, integrating the
services' inventory management systems with DLA's systems is expected
to cost almost $79 million--an increase of $45 million above the
original 2005 BRAC Commission estimate. In addition, the estimated
savings associated with reducing civilian personnel are expected to be
almost $11 million--a decrease of about $13 million--due to the
elimination of fewer positions. Furthermore, all but about $31 million
of the initial estimated savings of about $1 billion for transferring
SS&D functions and associated inventories have been eliminated because
the potentially duplicative items on which the savings were based were
not duplicative. Once DLA realized that the estimated savings, which
were based on flawed data generated during the BRAC decision-making
process, would not occur, it replaced the initial savings estimate with
about $203 million in estimated savings. However, about $172 million of
that revised estimate was derived from initiatives that are not
directly a result of BRAC actions and is therefore not savings
attributable to BRAC. Finally, cost increases for certain operation and
maintenance costs may be associated with the transfer of SS&D
functions, but at the time of our review these cost data were not
available to determine the extent to which these costs are applicable
to the transfer of functions.
Estimated Information Technology Costs Have Increased:
Our analysis of the SS&D business plan shows estimated information
technology costs of transferring SS&D functions and associated
inventories have increased by $45 million compared to the 2005 BRAC
Commission estimate. Specifically, the estimated information technology
costs for integrating each of the four services' current inventory
management software systems with DLA's systems have increased to almost
$79 million, an increase of more than 130 percent. The BRAC Commission
estimate for these costs was about $34 million for the fiscal year 2006-
2011 BRAC time period. However, information technology requirements and
costs were unknown at the time the BRAC Commission developed its
estimates, and the $34 million was a placeholder amount that was
expected to change. A breakdown of the information technology estimated
cost increases by each depot is in enclosure III. According to service
officials, these costs may continue to increase once the work of
integrating DLA's systems with the services' systems actually begins.
This is because modernization of existing business systems and
integration of depot production activities have complicated the
services' ability to accurately identify their information technology
requirements, which impedes their ability to estimate information
technology costs.
Estimated Civilian Salary Savings Have Decreased:
Our analysis shows that the estimated personnel savings for
transferring SS&D functions and associated inventories from the
services' depots to DLA have decreased about $13 million from the
original 2005 BRAC Commission estimate due to a decrease in estimated
civilian salary savings. There are no savings associated with the
immediate transfer of positions from the services to DLA because the
transfers are being made on an "as-is, where-is" basis, which means
that transferred employees will perform the same duties at the same
locations. Instead, the estimate for civilian salary savings was based
on the expectation that DLA would eliminate in the future 6.5 percent
of the positions that transferred from the services' industrial depots
to DLA, beginning in fiscal year 2007. The 6.5 percent factor was used
by the BRAC Commission to estimate eliminations and personnel savings,
and DLA has used this same factor to project personnel savings in its
business plan. DLA officials told us that they plan to achieve this
goal over time based on actual experiences in performing the SS&D
functions at the depots, and any elimination of positions would be
accomplished through attrition. The 2005 BRAC Commission based its
civilian salary savings estimate of about $24 million on the projected
elimination of 114 positions sometime after the transfers had taken
place. However, based on agreements reached between DLA and each of the
services as of September 2007, only 92 positions--22 fewer positions
than originally estimated--are expected to be eliminated or
transferred, which is a reduction of 19 percent. Furthermore, these
transfers and eliminations will begin later than fiscal year 2007 as
originally estimated, which reduces the time period in which the
associated savings can accrue. As of September 2007, no positions have
been eliminated and no civilian salary savings have occurred because
implementation of the transfers is not expected to begin until October
2007. The September 21, 2007, draft business plan estimates that
civilian salary savings will now be almost $11 million, which is a
decrease of about $13 million from the original BRAC Commission
estimate--a reduction of 55 percent. A breakdown of the changes in
planned eliminations of civilian positions at each of the services'
industrial depots appears in enclosure III. One of the reasons for
fewer eliminations is that since the time of the 2005 BRAC Commission's
estimates, the services' industrial depots have instituted several
efficiency initiatives and some have also undergone A-76 competitions.
These actions together have resulted in fewer people performing all
depot operations, including those SS&D functions that will transfer to
DLA.
Estimated Inventory Reduction Savings Mostly Have Been Eliminated:
Our analysis of the September 21, 2007, SS&D business plan shows that
all but about $31 million of the BRAC Commission's estimated inventory
reduction savings of about $1 billion[Footnote 25] have been eliminated
for the fiscal year 2006-2011 time period. The BRAC Commission's
estimate for transferring SS&D functions and associated inventories
from the services' industrial depots to DLA was based on the belief
that eliminating duplicate inventory--inventory stored by both the
services and the DLA depots--would produce both onetime and recurring
savings.[Footnote 26] However, after further review of the potentially
duplicative items, DLA and the services found that data generated by
DOD during the BRAC decision-making process were flawed. For example,
war reserve materiel, materiel held for other customers, and materiel
stored at the Red River Army Depot were incorrectly included in the
BRAC estimating model. These items were not actually duplicative and
thus could not be eliminated. As a result, the savings associated with
these items will not occur. In addition, the original savings estimate
included service depots that were either not collocated with DLA depots
or were outside the continental United States, and therefore these
items also could not be considered duplicative.
Once DLA realized that the estimated savings from duplicate inventory
would not occur as originally planned, it replaced the $1 billion
initial savings estimate in its business plan with estimated savings
from four inventory reduction initiatives.[Footnote 27] These four
initiatives are expected to produce about $203 million in savings
during the fiscal year 2006-2011 BRAC implementation period.[Footnote
28] While these initiatives are inventory related and may produce
savings, we believe that three of these initiatives, totaling about
$172 million, are not the direct result of BRAC actions and therefore
are not BRAC savings. However, we believe that the $31 million from a
DLA initiative is related to eliminating duplicate inventory and thus
may be appropriately counted as estimated BRAC savings. Furthermore, to
further reduce the anticipated inventory savings loss, the draft SS&D
business plan states that a June 21, 2006, Infrastructure Steering
Group[Footnote 29] decision allowed the inclusion in the SS&D business
plan of an additional $61 million in savings that occurred in fiscal
years 2004 and 2005--which was prior to the effective date of the BRAC
SS&D recommendation. Although the draft SS&D business plan notes that
these savings are not reflected in the financial displays for the
fiscal year 2006-2011 BRAC implementation period, we believe that the
inclusion of these savings in the business plan presents a false
impression of the estimated savings that are attributable to the BRAC
SS&D recommendation.
Additional Cost Increases May Be Associated with the Transfer of SS&D
Functions as Implementation Proceeds:
Cost increases in several other areas may be associated with the
transfer of SS&D functions as implementation proceeds. While the
business plan shows about $243 million in increased operation and
maintenance costs, at the time of our review, implementation had not
proceeded to the point where we could determine how much, if any, of
these costs could be attributed to the transfer of SS&D functions and
how much should be attributed to other changes associated with
reconfiguring DLA's distribution depot network. Currently, the business
plan shows increased costs of about $115 million to rewarehouse and
redistribute inventories among the DLA distribution depots. As
implementation continues it is likely that costs will continue to
change and, depending on the agreements reached between DLA and the
services, it is possible that additional costs could be associated with
the transfer of SS&D functions.
Concluding Observations:
In the 2005 BRAC round, the BRAC Commission made several
recommendations that involve reengineering of business processes
affecting many activities and installations across DOD. The transfer of
SS&D functions and consolidation of associated inventories required as
part of the 2005 BRAC SS&D recommendation represent significant
transformational actions and changes in the manner in which both the
military services and DLA carry out SS&D functions at various depot
maintenance locations. These actions have the potential to improve the
department's supply-related operations, provide better support to the
warfighter, and save money. However, they also have the potential to
adversely affect depot maintenance operations, at least temporarily, as
new business processes are put in place during a time of higher
maintenance demands in a wartime environment. This has led to the
military services expressing concerns about meeting depot maintenance
production schedules and maintaining equipment readiness and support to
the warfighter. DLA and the services are in the early stages of
implementing these required actions, so it is too early to tell whether
the department's goals will be fully met and the services' concerns
eased. As of September 2007, DLA and the services have worked together
to study, analyze, and reach agreement on the applicable SS&D positions
that will transfer to DLA. While DLA's planning process incorporates
several key elements that are intended to provide for a smooth
transition and mitigate the risk of disrupting depot operations, a
plan, in and of itself, cannot guarantee success. Therefore, continued
collaboration between the services and DLA and periodic monitoring by
OSD is critical to ensure that implementation actions are on track and
that issues that may arise and adversely affect depot operations are
resolved as implementation proceeds.
Moreover, while implementation of the transfer of SS&D functions has
the potential to improve supply-related operations and save money, our
analyses show that the estimated costs for implementing the transfer
actions have increased from those put forth by the BRAC Commission and
that estimated savings have decreased. Furthermore, the current savings
estimate includes projected savings from several service inventory
reduction initiatives that were not a direct result of the BRAC
recommendation, but that were included in the draft business plan to
reflect potential savings that DOD contends are attributable to BRAC.
Although further recurring savings may accrue over time as
implementation proceeds, the magnitude of the actual savings as DLA
assumes the SS&D functions at specified service depot maintenance
locations remains to be seen. Because achieving savings is one of
several BRAC goals and the magnitude of the expected savings under the
SS&D recommendation is uncertain at this point in time, it is critical
that the estimated savings attributable to BRAC be monitored, and
adjusted as necessary, as implementation proceeds so that Congress and
DOD decision makers have the best data possible to gauge to what extent
the BRAC savings goal is met.
Agency Comments and Our Evaluation:
In comments on a draft of this report, DOD stated that it concurred in
principle with our findings and conclusions. DOD's comments are
reprinted in enclosure IV. DOD also provided technical comments, which
we have incorporated into this report as appropriate.
DOD further provided comments that were intended to provide clarity to
the projected savings that it believes are attributable to the BRAC
SS&D recommendation. We had noted in the report that DLA had replaced
the initial estimated savings of about $1 billion with about $203
million in projected savings, of which about $172 million were derived
from inventory reduction initiatives put forth by the military services
that are not directly a result of BRAC actions. DOD stated that it
considered these estimated savings to be "enabled by the BRAC
recommendation and therefore should be attributable to the
recommendation." We disagree and continue to believe that the $172
million in expected savings resulting from the services' initiatives
should not be counted as BRAC savings. As we stated in our draft
report, while these initiatives are inventory related and may produce
savings, we believe that they are not the direct result of BRAC actions
and therefore are not BRAC savings. These particular savings
initiatives respond to ongoing regulatory requirements[Footnote 30] to
identify and dispose of obsolete inventory, or were initiated prior to
November 2005 when the BRAC recommendations became effective.[Footnote
31] As a result, because we believe that the associated expected
savings are not the result of a BRAC action and would have occurred
regardless of BRAC, we do not believe that these savings should be
counted as BRAC savings.
We are sending copies of this report to other congressional committees
and members; 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 GAO's Web site at [hyperlink,
http://www.gao.gov].
If you or your staff have any questions regarding this report, please
contact me at (202) 512-4523 or leporeb@gao.gov. Contact points for our
Offices of Congressional Relations and Public Affairs may be found on
the last page of this report. GAO staff who made key contributions to
this report are listed in enclosure V.
Signed by:
Brian J. Lepore:
Director, Defense Capabilities and Management:
Enclosures - 5:
List of Congressional Addressees:
The Honorable Carl Levin:
Chairman:
The Honorable John McCain:
Ranking Member:
Committee on Armed Services:
United States Senate:
The Honorable Daniel K. Inouye:
Chairman:
The Honorable Ted Stevens:
Ranking Member:
Subcommittee on Defense:
Committee on Appropriations:
United States Senate:
The Honorable Tim Johnson:
Chairman:
The Honorable Kay Bailey Hutchison:
Ranking Member:
Subcommittee on Military Construction,
Veterans Affairs, and Related Agencies:
Committee on Appropriations:
United States Senate:
The Honorable Saxby Chambliss:
United States Senate:
The Honorable Ike Skelton:
Chairman:
The Honorable Duncan L. Hunter:
Ranking Member:
Committee on Armed Services:
House of Representatives:
The Honorable John P. Murtha:
Chairman:
The Honorable C.W. Bill Young:
Ranking Member:
Subcommittee on Defense:
Committee on Appropriations:
House of Representatives:
The Honorable Chet Edwards:
Chairman:
The Honorable Roger F. Wicker:
Ranking Member:
Subcommittee on Military Construction,
Veterans Affairs, and Related Agencies:
Committee on Appropriations:
House of Representatives:
The Honorable Solomon O. Ortiz:
Chairman:
Subcommittee on Readiness:
Committee on Armed Services:
House of Representatives:
The Honorable Walter B. Jones:
The Honorable Mike Rogers:
House of Representatives:
Scope and Methodology:
[End of section]
Enclosure I:
Scope and Methodology:
To identify the efforts to determine which supply, storage, and
distribution (SS&D) functions will transfer to the Defense Logistics
Agency (DLA), we analyzed pertinent documents and reports and
interviewed officials from the Office of the Secretary of Defense
(OSD), DLA, and the military services. We also discussed the efforts to
delineate SS&D functions to be transferred to DLA with service
officials at affected industrial depots, which are listed below. In
addition, we obtained and reviewed documentation from OSD's Base
Realignment and Closure (BRAC) Office and the Army Materiel Command
concerning the disagreement between DLA and the Army on the definition
of SS&D and the number of Army positions to be transferred to DLA. We
also obtained the results of the Air Force's, Army's, and Marine Corps'
position-by-position analyses of their SS&D functions that were
considered for transfer to DLA. In particular, we analyzed and reviewed
the efforts on the part of DLA and Warner Robins Air Logistics Center
to finalize the number of full-time equivalent positions to be
transferred to DLA. Furthermore, we reviewed OSD documentation
concerning the agreements reached between DLA and the Air Force, Navy,
and Marine Corps regarding the number of positions to be transferred.
To determine the military services' key concerns in implementing the
transfer of functions, we reviewed pertinent documents and reports and
interviewed officials from OSD, DLA, and the military services.
Additionally, we discussed challenges with service officials and union
representatives and observed the supply and support operations at some
of the affected industrial depots listed below. In determining the
military services' key concerns, there are two specific limitations
regarding our work. First, no actual "implementation"--that is,
personnel moves, military construction, or infrastructure reduction--
has occurred on the BRAC SS&D recommendation. Actual implementation is
scheduled to be carried out in a time-phased manner beginning with
Warner Robins Air Logistics Center in October 2007. Second, the extent
to which any of the concerns expressed by the military services may
actually materialize is unknown, as implementation has not yet begun.
To determine the extent to which DLA's plans establish a transfer
process that minimizes disruptions in depot maintenance, we analyzed
pertinent documents and interviewed officials from OSD, DLA, and the
military services. Further, we discussed with these officials actions
ongoing or planned to mitigate the risks associated with the transfer
of SS&D functions to DLA. There are a number of limitations in
determining the extent to which DLA's plans establish a transfer
process that minimizes disruptions in depot maintenance. First, there
have been numerous draft versions of the business plan on SS&D
management reconfiguration, with the most recent dated September 21,
2007. DLA submitted the SS&D business plan to OSD for approval on
September 18, 2007. Because most of the SS&D functions are supposed to
transfer from fiscal year 2008 to fiscal year 2011, we reviewed DLA's
planning actions regarding the transfer of SS&D functions virtually as
they were occurring. Second, as of August 2007, only the Air Force and
Navy had begun detailed implementation planning with DLA at the depot
level. DLA and the Air Force plan to transfer SS&D functions at Warner
Robins Air Logistics Center in October 2007. The Navy was in the
initial stages of similar planning for the transfer of its functions.
However, the Marine Corps and Army had not begun conducting any
implementation planning at the depot level. Third, the implementation
planning process is referred to by DLA as a living process, in which
strategies, approaches, milestones, and management controls are
constantly in flux. Thus, the process is fluid and not yet complete.
Fourth, due to the incomplete nature of the implementation process, we
relied heavily on testimonial evidence as to actions that are planned
to occur in the future because little other evidence existed at the
time of our review. Specifically, because the implementation planning
process is not yet complete and no SS&D functions are expected to
transfer until October 2007, little documentary evidence was available
to assess DLA and the services' planning and implementation efforts.
Fifth, sound implementation planning on the part of DLA and the
services cannot guarantee a transfer process that minimizes disruptions
in depot maintenance. Only after the BRAC SS&D recommendation is fully
implemented can the precise effects on depot maintenance of the
transfer of SS&D functions to DLA be determined.
To determine the estimated costs and savings associated with
implementing this transfer of functions, we compared the estimates in
DLA's draft business plan of September 21, 2007, to the estimates
approved by the BRAC Commission. Because the BRAC Commission uses
fiscal year 2005 constant dollars and the business plan contains then-
year dollars,[Footnote 32] we converted the BRAC Commission's fiscal
year 2005 constant dollars to then-year dollars to facilitate the
comparison between the two sets of numbers. We compared these estimates
by reviewing and analyzing source data and methodology used to generate
the estimates and calculated projected changes in costs and savings. We
discussed the reasons for the variances with DLA, service, and
contractor officials. To assess the reliability of the data and the
validity of underlying assumptions used to generate estimates of costs
and savings, we reviewed pertinent Under Secretary of Defense for
Acquisition, Technology, and Logistics; Supply and Storage Joint Cross-
Service Group; and DLA regulations and instructions for reporting data
and interviewed officials at these locations as well as representatives
from each of the military services knowledgeable about the data and the
assumptions underlying estimated costs and savings. Based on this, we
believe that the data used were sufficiently reliable for the purposes
of this report. It should be noted that the business plans are
considered "living" documents and the data presented therein represent
a point in time as plans are subject to change as implementation
proceeds. Moreover, since this report contains figures from the draft
business plan for the SS&D recommendation, the data used in this report
could change if the business plan numbers change when it is approved.
According to OSD policy, until the SS&D business plan is approved, no
funds may be obligated for implementation of this recommendation.
Since this review only focused on the facilities included in the BRAC
recommendation, we did not include in our review nine other service
SS&D facilities that were not included in the BRAC recommendation but
that were required by OSD to transfer their supply and storage
functions and associated personnel to DLA. The transfer of functions at
these nine facilities was directed by a June 22, 2005, Under Secretary
of Defense for Acquisition, Technology, and Logistics administrative
decision in order to establish a more effective and efficient supply
chain.
During the course of our review, we contacted the following offices
with responsibility for oversight, management, and implementation of
the SS&D recommendation, and industrial depots specifically affected by
the transfers:
Department of Defense:
* Office of the Under Secretary of Defense for Acquisition, Technology,
and Logistics, Arlington, Virginia:
* Office of the Secretary of Defense Base Realignment and Closure
Office, Arlington, Virginia:
* Defense Logistics Agency headquarters, Fort Belvoir, Virginia:
Army:
* Office of Deputy Chief of Staff--Army Logistics, Arlington, Virginia:
* United States Army Materiel Command, Fort Belvoir, Virginia:
* Anniston Army Depot, Anniston, Alabama:
* Corpus Christi Army Depot, Corpus Christi, Texas:
* Tobyhanna Army Depot, Tobyhanna, Pennsylvania:
Navy:
* Office of Chief of Naval Operations, Arlington, Virginia:
* Naval Sea Systems Command, Washington Naval Yard, Washington, D.C.
* Naval Supply Systems Command, Mechanicsburg, Pennsylvania:
* Fleet and Industrial Supply Center, Norfolk Naval Base, Norfolk,
Virginia:
* Fleet Readiness Center-East, Naval Aviation Depot, Cherry Point,
North Carolina:
* Fleet and Industrial Supply Center, Naval Aviation Depot, Cherry
Point, North Carolina:
* Norfolk Naval Shipyard, Portsmouth, Virginia:
Air Force:
* Air Force Materiel Command, Wright-Patterson Air Force Base, Ohio:
* Warner Robins Air Logistics Center, Warner Robins, Georgia:
Marine Corps:
* Marine Corps Logistics Command, Albany, Georgia:
* Marine Corps Maintenance Center Albany, Albany, Georgia:
We conducted our work from June 2007 through September 2007 in
accordance with generally accepted government auditing standards.
[End of section]
Enclosure II:
Text of the BRAC Commission's Approved Supply, Storage, and
Distribution Management Reconfiguration Recommendation Supply, Storage,
and Distribution Management Reconfiguration (BRAC 2005 Round
Recommendation):
Realign Defense Supply Center Columbus, OH, by disestablishing the
Defense Distribution Depot Columbus, OH. Relocate the storage and
distribution functions and associated inventories to the Defense
Distribution Depot Susquehanna, PA, hereby designated the Susquehanna
Strategic Distribution Platform.
Realign Tobyhanna Army Depot, PA, by consolidating the supply, storage,
and distribution functions and associated inventories of the Defense
Distribution Depot Tobyhanna, PA, with all other supply, storage, and
distribution functions and inventories that exist at Tobyhanna Army
Depot to support depot operations, maintenance, and production. Retain
the minimum necessary supply, storage, and distribution functions and
inventories required to support Tobyhanna Army Depot, and to serve as a
wholesale Forward Distribution Point. Relocate all other wholesale
storage and distribution functions and associated inventories to the
Susquehanna Strategic Distribution Platform.
Realign Naval Station Norfolk, VA, by consolidating the supply,
storage, and distribution functions and associated inventories of the
Defense Distribution Depot Norfolk, VA, with all other supply, storage,
and distribution functions and inventories that exist at Norfolk Naval
Base and at Norfolk Naval Shipyard to support shipyard operations,
maintenance, and production. Retain the minimum necessary supply,
storage, and distribution functions and inventories required to support
Norfolk Naval Shipyard operations, maintenance and production, and to
serve as a wholesale Forward Distribution Point. Relocate all other
wholesale storage and distribution functions and associated inventories
to the Susquehanna Strategic Distribution Platform.
Realign Defense Supply Center Richmond, VA, by relocating the storage
and distribution functions and associated inventories of the Defense
Distribution Depot Richmond, VA, to the Susquehanna Strategic
Distribution Platform. Retain the minimum necessary storage and
distribution functions and associated inventories at Defense
Distribution Depot Richmond, VA, to serve as a wholesale Forward
Distribution Point.
Realign Marine Corps Air Station, Cherry Point, NC, by consolidating
the supply, storage, and distribution functions and associated
inventories of the Defense Distribution Depot, Cherry Point, NC, with
all other supply, storage, and distribution functions and inventories
that exist at Naval Aviation Depot Cherry Point, NC, to support depot
operations, maintenance and production. Retain the minimum necessary
supply, storage, and distribution functions and inventories required to
support Naval Air Depot Cherry Point, and to serve as a wholesale
Forward Distribution Point. Relocate all other wholesale storage and
distribution functions and associated inventories to the Defense
Distribution Depot Warner Robins, GA, hereby designated the Warner
Robins Strategic Distribution Platform.
Realign Robins Air Force Base, GA, by consolidating the supply,
storage, and distribution functions and associated inventories
supporting depot operations, maintenance, and production at the Warner
Robins Air Logistics Center with the supply, storage, and distribution
functions at the Warner Robins Strategic Distribution Platform.
Realign Marine Corps Logistics Base, Albany, GA, by consolidating the
supply, storage, and distribution functions and associated inventories
of the Defense Distribution Depot Albany, GA, with all other supply,
storage, and distribution functions and inventories that exist at the
Maintenance Center Albany, GA, to support depot operations,
maintenance, and production. Retain the minimum necessary supply,
storage, and distribution functions and inventories required to support
the Maintenance Center Albany, GA, and to serve as a wholesale Forward
Distribution Point. Relocate all other wholesale storage and
distribution functions and associated inventories to the Warner Robins
Strategic Distribution Platform.
Realign Naval Air Station Jacksonville, FL, by consolidating the
supply, storage, and distribution functions and associated inventories
of the Defense Distribution Depot, Jacksonville, FL, with all other
supply, storage, and distribution functions and inventories that exist
at the Naval Aviation Depot, Jacksonville, FL, to support depot
operations, maintenance, and production. Retain the minimum necessary
supply, storage, and distribution functions and inventories required to
support the Naval Aviation Depot, Jacksonville, FL, and to serve as a
wholesale Forward Distribution Point. Relocate all other wholesale
storage and distribution functions and associated inventories to the
Warner Robins Strategic Distribution Platform.
Realign Anniston Army Depot, AL, by consolidating the supply, storage,
and distribution functions and associated inventories of the Defense
Distribution Depot Anniston, AL, with all other supply, storage, and
distribution functions and inventories that exist at the Anniston Army
Depot, AL, to support depot operations, maintenance, and production.
Retain the minimum necessary supply, storage, and distribution
functions and inventories required to support Anniston Army Depot, AL,
and to serve as a wholesale Forward Distribution Point. Relocate all
other wholesale storage and distribution functions and associated
inventories to the Warner Robins Strategic Distribution Platform.
Realign Corpus Christi Army Depot, TX, by consolidating the supply,
storage, and distribution functions and associated inventories of the
Defense Distribution Depot, Corpus Christi, TX, with all other supply,
storage, and distribution functions and inventories that exist at
Corpus Christi Army Depot, TX, to support depot operations,
maintenance, and production. Retain the minimum necessary supply,
storage, and distribution functions and inventories required to support
Corpus Christi Army Depot, TX, and to serve as a wholesale Forward
Distribution Point. Relocate all other wholesale storage and
distribution functions and associated inventories to the Defense
Distribution Depot Oklahoma City, hereby designated the Oklahoma City
Strategic Distribution Platform.
Realign Tinker AFB, OK, by consolidating the supply, storage, and
distribution functions and associated inventories supporting depot
operations, maintenance, and production at the Air Logistics Center,
Oklahoma City, OK, with the supply, storage, and distribution functions
and inventories at the Oklahoma City Strategic Distribution Platform.
Realign Hill AFB, UT, by consolidating the supply, storage, and
distribution functions and associated inventories of the Defense
Distribution Depot, Hill, UT, with all other supply, storage, and
distribution functions and inventories that exist at the Ogden Air
Logistics Center, UT, to support depot operations, maintenance, and
production. Retain the necessary supply, storage, and distribution
functions and inventories required to support the Ogden Air Logistics
Center, UT, and to serve as a wholesale Forward Distribution Point.
Relocate all other wholesale storage and distribution functions and
associated inventories to the Defense Distribution Depot, San Joaquin,
CA, hereby designated the San Joaquin Strategic Distribution Platform.
Realign Naval Station Bremerton, WA, by consolidating the supply,
storage, and distribution functions and associated inventories of the
Defense Distribution Depot, Puget Sound, WA, with all other supply,
storage and distribution functions and inventories that exist at Puget
Sound Naval Shipyard, WA, to support shipyard operations, maintenance,
and production. Retain the minimum necessary supply, storage, and
distribution functions and inventories required to support Puget Sound
Naval Shipyard, WA, and to serve as a wholesale Forward Distribution
Point. Relocate all other wholesale storage and distribution functions
and associated inventories to the San Joaquin Strategic Distribution
Platform.
Realign Naval Station, San Diego, CA, by consolidating the supply,
storage, and distribution functions and associated inventories of the
Defense Distribution Depot, San Diego, CA, with all other supply,
storage, and distribution functions and inventories that exist at Naval
Aviation Depot, North Island, CA, to support depot operations,
maintenance, and production. Retain the minimum necessary supply,
storage, and distribution functions and inventories required to support
Naval Aviation Depot, North Island, CA, and to serve as a wholesale
Forward Distribution Point. Relocate all other wholesale storage and
distribution functions and associated inventories to the San Joaquin
Strategic Distribution Platform.
Realign Marine Corps Logistics Base, Barstow, CA, by consolidating the
supply, storage, and distribution functions and associated inventories
of the Defense Distribution Depot Barstow, CA, with all other supply,
storage, and distribution functions and inventories that exist at the
Maintenance Center Barstow, CA, to support depot operations,
maintenance, and production. Retain the minimum necessary supply,
storage, and distribution functions and inventories at Defense
Distribution Depot Barstow, CA, that are required to support the
Maintenance Center Barstow, CA, and to serve as a wholesale Forward
Distribution Point. Relocate all other wholesale storage and
distribution functions and associated inventories to the San Joaquin
Strategic Distribution Platform.
Source: Extract from the 2005 Defense Base Closure and Realignment
Commission Report to the President, Volume 2 Appendix Q (Commission's
Final Recommendations).
[End of section]
Enclosure III:
Changes in Costs and Savings Estimates at Each Collocated Maintenance
Depot:
Our analysis of the original BRAC Commission estimates and other
documents shows that transferring the SS&D functions and associated
inventories from the military services' industrial depots to DLA has
resulted in an increase in estimated costs and a significant decrease
in estimated savings. We noted changes in three areas: information
technology costs, civilian personnel savings, and inventory
savings.[Footnote 33] Specifically, the estimated information
technology costs for connecting each of the four services' current
inventory management software systems with DLA have increased to almost
$79 million, an increase of more than 130 percent. A breakdown of the
information technology cost increases by each depot is shown in table
2.
Table 2: Changes in Information Technology Cost Estimates for Fiscal
Years 2006 through 2011 (as of September 2007):
Dollars in thousands.
Location: Tobyhanna Army Depot (AD);
BRAC Commission cost estimate[A]: $1,646;
Revised cost estimate[A]: $9,413;
Difference [A]: $7,767.
Location: Corpus Christi AD;
BRAC Commission cost estimate[A]: 4,740;
Revised cost estimate[A]: 12,506;
Difference [A]: $7,766.
Location: Anniston AD;
BRAC Commission cost estimate[A]: 5,660;
Revised cost estimate[A]: 13,427;
Difference [A]: $7,767.
Location: Tinker Air Force Base (AFB)[B];
BRAC Commission cost estimate[A]: 5,549;
Revised cost estimate[A]: 8,049;
Difference [A]: $2,500.
Location: Robins AFB[B];
BRAC Commission cost estimate[A]: 3,787;
Revised cost estimate[A]: 6,287;
Difference [A]: $2,500.
Location: Hill AFB[B];
BRAC Commission cost estimate[A]: 1,820;
Revised cost estimate[A]: 4,320;
Difference [A]: $2,500.
Location: Marine Corps Logistics Base (MCLB) Albany;
BRAC Commission cost estimate[A]: 1,062;
Revised cost estimate[A]: 3,662;
Difference [A]: $2,600.
Location: MCLB Barstow;
BRAC Commission cost estimate[A]: 1,703;
Revised cost estimate[A]: 4,303;
Difference [A]: $2,600.
Location: Naval Station (NAVSTA) Bremerton;
BRAC Commission cost estimate[A]: 1,041;
Revised cost estimate[A]: 5,541;
Difference [A]: $4,500.
Location: NAVSTA Norfolk;
BRAC Commission cost estimate[A]: 1,851;
Revised cost estimate[A]: 1,851;
Difference [A]: 0.
Location: NAVSTA San Diego;
BRAC Commission cost estimate[A]: 1,372;
Revised cost estimate[A]: 5,872;
Difference [A]: $4,500.
Location: Naval Air Station (NAS) Jacksonville;
BRAC Commission cost estimate[A]: 1,861;
Revised cost estimate[A]: 1,861;
Difference [A]: 0.
Location: Marine Corps Air Station (MCAS) Cherry Point;
BRAC Commission cost estimate[A]: 1,646;
Revised cost estimate[A]: 1,646;
Difference [A]: 0.
Total;
BRAC Commission cost estimate[A]: $33,738;
Revised cost estimate[A]: $78,738;
Difference [A]: $45,000.
Source: GAO analysis of data provided by DLA.
[A] Figures are presented in then-year dollars for comparative
purposes. Commission estimates were originally presented in constant
dollars, but we converted them to then-year dollars to facilitate
equitable comparisons.
[B] We divided the total increase of $7.5 million evenly among Tinker,
Robins, and Hill Air Force Bases, because the Air Force had not
identified amounts by depot location.
[End of table]
In addition, our analysis shows that the estimated savings for
transferring SS&D functions and associated inventories from the
services' depots to DLA are expected to be about $13 million less than
the original 2005 BRAC Commission estimate due to a decrease in
estimated civilian salary savings. A breakdown of the changes in
planned eliminations of civilian positions at each of the services'
industrial depots appears in table 3.
Table 3: Planned Civilian Position Eliminations and Recurring Savings
for the Transfer of SS&D Functions from the Services' Industrial Depots
to DLA (as of September 2007):
Dollars in thousands.
Location: Tobyhanna AD;
BRAC Commission eliminations: 6;
Revised eliminations: 3;
Difference: -3;
BRAC Commission estimated savings[A: $1,130;
Revised estimated savings[A]: $516;
Difference[A]: -$614.
Location: Corpus Christi AD;
BRAC Commission eliminations: 17;
Revised eliminations: 1;
Difference: - 16;
BRAC Commission estimated savings[A: 3,202;
Revised estimated savings[A]: 421;
Difference[A]: -$2,781.
Location: Anniston AD;
BRAC Commission eliminations: 22;
Revised eliminations: 4;
Difference: -18;
BRAC Commission estimated savings[A: 4,143;
Revised estimated savings[A]: 718;
Difference[A]: -$3,425.
Location: Tinker AFB;
BRAC Commission eliminations: 26;
Revised eliminations: 24;
Difference: -2;
BRAC Commission estimated savings[A: 4,897;
Revised estimated savings[A]: 1,734;
Difference[A]: -$3,163.
Location: Robins AFB;
BRAC Commission eliminations: 9;
Revised eliminations: 17;
Difference: 8;
BRAC Commission estimated savings[A: 1,693;
Revised estimated savings[A]: 2,278;
Difference[A]: $585.
Location: Hill AFB;
BRAC Commission eliminations: 7;
Revised eliminations: 15;
Difference: 8;
BRAC Commission estimated savings[A: 2,318;
Revised estimated savings[A]: 1,088;
Difference[A]: -$1,230.
Location: MCLB Albany;
BRAC Commission eliminations: 3;
Revised eliminations: 2;
Difference: -1;
BRAC Commission estimated savings[A: 565;
Revised estimated savings[A]: 355;
Difference[A]: -$210.
Location: MCLB Barstow;
BRAC Commission eliminations: 4;
Revised eliminations: 1;
Difference: -3;
BRAC Commission estimated savings[A: 1,434;
Revised estimated savings[A]: 34;
Difference[A]: -$1,400.
Location: NAVSTA Bremerton;
BRAC Commission eliminations: 4;
Revised eliminations: 6;
Difference: 2;
BRAC Commission estimated savings[A: 1,375;
Revised estimated savings[A]: 947;
Difference[A]: -$428.
Location: NAVSTA Norfolk;
BRAC Commission eliminations: 5;
Revised eliminations: 8;
Difference: 3;
BRAC Commission estimated savings[A: 942;
Revised estimated savings[A]: 2113;
Difference[A]: $1,171.
Location: NAVSTA San Diego;
BRAC Commission eliminations: 2;
Revised eliminations: 3;
Difference: 1;
BRAC Commission estimated savings[A: 692;
Revised estimated savings[A]: 170;
Difference[A]: -$522.
Location: NAS Jacksonville;
BRAC Commission eliminations: 2;
Revised eliminations: 2;
Difference: 0;
BRAC Commission estimated savings[A: 332;
Revised estimated savings[A]: 136;
Difference[A]: -$196.
Location: MCAS Cherry Point;
BRAC Commission eliminations: 7;
Revised eliminations: 6;
Difference: - 1;
BRAC Commission estimated savings[A: 1,319;
Revised estimated savings[A]: 408;
Difference[A]: -$911.
Total;
BRAC Commission eliminations: 114;
Revised eliminations: 92;
Difference: -22;
BRAC Commission estimated savings[A: $24,042;
Revised estimated savings[A]: $10,918;
Difference[A]: -$13,124.
Source: GAO analysis of data provided by DLA.
[A] Figures are presented in then-year dollars for comparative
purposes. Commission estimates were originally presented in constant
dollars, but we converted them to then-year dollars to facilitate
equitable comparisons.
[End of table]
[End of section]
Enclosure IV:
Comments from the Department of Defense:
Deputy Under Secretary Of Defense For Logistics And Materiel Readiness:
3500 Defense Pentagon:
Washington, DC 20301-3500:
October 18, 2007:
Mr. Brian Lepore:
Director, Defense Capabilities and Management:
U. S. Government Accountability Office:
441 G Street, N. W.:
Washington, DC 20548:
Dear Mr. Lepore:
This is the Department of Defense (DOD) response to the GAO draft
report, GAO-08-121R, "Military Base Realignments And Closures: Transfer
of Supply, Storage, and Distribution Functions from Military Services
to Defense Logistics Agency," dated September 27, 2007 (GAO Code
351056).
The Department concurs in principle with the draft report's findings
and conclusions. We have attached two comments that add clarity in
regards to the projected savings that are attributable to the BRAC
recommendations.
The Department appreciates the opportunity to comment on the draft
report. For further questions concerning this report, please contact
Colonel Dennis Crimiel, 703-695-6188.
Sincerely,
Signed by:
Jack Bell:
Enclosure:
As stated:
GAO Draft Report - Dated September 27,2007 GAO Code 351056/GAO-08-121R:
"Military Base Realignments And Closures: Transfer of Supply, Storage,
and Distribution Functions from Military Services to Defense Logistics
Agency":
Department Of Defense Comments On The Draft Report:
Issue 1: Page 7 of the report states "Once DLA realized this, it
replaced the initial estimated savings with about $203 million in
projected savings of which almost $172 million were derived from
inventory reduction initiatives that are not directly a result of BRAC
actions."
Issue 2: Page 28 of the report states "Once DLA realized that the
estimated savings, which were based on flawed data generated during the
BRAC decision making process, would not occur, it replaced the initial
savings estimate with about $203 million in estimated savings. However,
about $172 million of that revised estimate was derived from
initiatives that are not directly a result of BRAC actions and is
therefore not savings that are attributable to BRAC."
Response to Issues 1 & 2: The Department considers the savings
reflected by DLA as a savings enabled by the BRAC recommendation and
therefore should be attributable to the recommendation. Only those
savings that occur during the implementation period (2006- 2011) are
included in the financial displays of the business plan.
Overall comment on inventory savings: Regarding inventory savings, the
AF is further along in projecting inventory savings as they have been
using an inventory optimization tool (COLT) for a number of years.
[End of section]
Enclosure V:
GAO Contact and Staff Acknowledgments:
GAO Contact: Brian J. Lepore, (202) 512-4523 or leporeb@gao.gov:
Acknowledgments: In addition to the individual named above, James R.
Reifsnyder, Assistant Director; John R. Beauchamp; Renee S. Brown; John
C. Bumgarner; Larry J. Junek; Julia Matta; Charles W. Perdue; Dudley C.
Roache, Jr; and Virginia M. Saavedra also made significant
contributions to this report.
Defense Infrastructure: Challenges Increase Risks for Providing Timely
Infrastructure Support for Army Installations Expecting Substantial
Personnel Growth. GAO-07-1007. Washington, D.C.: September 13, 2007.
Military Base Realignments and Closures: Plan Needed to Monitor
Challenges for Completing More Than 100 Armed Forces Reserve Centers.
GAO-07-1040. Washington, D.C.: September 13, 2007.
Military Base Realignments and Closures: Observations Related to the
2005 Round. GAO-07-1203R. Washington D.C.: September 6, 2007.
Military Base Closures: Projected Savings from Fleet Readiness Centers
Likely Overstated and Actions Needed to Track Actual Savings and
Overcome Certain Challenges. GAO-07-304. Washington, D.C.: June 29,
2007.
Military Base Closures: Management Strategy Needed to Mitigate
Challenges and Improve Communication to Help Ensure Timely
Implementation of Air National Guard Recommendations. GAO-07-641.
Washington, D.C.: May 16, 2007.
Military Base Closures: Opportunities Exist to Improve Environmental
Cleanup Cost Reporting and to Expedite Transfer of Unneeded Property.
GAO-07-166. Washington, D.C.: January 30, 2007.
Military Bases: Observations on DOD's 2005 Base Realignment and Closure
Selection Process and Recommendations. GAO-05-905. Washington, D.C.:
July 18, 2005.
Military Bases: Analysis of DOD's 2005 Selection Process and
Recommendations for Base Closures and Realignments. GAO-05-785.
Washington, D.C.: July 1, 2005.
Military Base Closures: Updated Status of Prior Base Realignments and
Closures. GAO-05-138. Washington, D.C.: January 13, 2005.
Military Base Closures: Assessment of DOD's 2004 Report on the Need for
a Base Realignment and Closure Round. GAO-04-760. Washington, D.C.: May
17, 2004.
Military Base Closures: Observations on Preparations for the Upcoming
Base Realignment and Closure Round. GAO-04-558T. Washington, D.C.:
March 25, 2004.
[End of section]
Footnotes:
[1] In this context, supply, storage, and distribution refers to
various actions to provide repair parts to depot maintenance personnel
who perform repairs and upgrades on equipment that is needed to
maintain readiness and support ongoing military operations.
[2] Anniston Army Depot, Alabama; Corpus Christi Army Depot, Texas;
Naval Aviation Depot, Cherry Point, North Carolina; Norfolk Naval Base,
Virginia; Marine Corps Maintenance Center Albany, Georgia; Norfolk
Naval Shipyard, Virginia; Tobyhanna Army Depot, Pennsylvania; and
Warner Robins Air Logistics Center, Georgia.
[3] The nine sites are Davis-Monthan Air Force Base, Arizona;
Letterkenny Army Depot, Pennsylvania; Naval Air Warfare Center
Lakehurst, New Jersey; Naval Undersea Warfare Center Keyport,
Washington; Naval Weapons Station Seal Beach, California; Pearl Harbor
Naval Shipyard, Hawaii; Portsmouth Naval Shipyard, Maine; Rock Island
Arsenal, Illinois; and Weapon Station Charleston, South Carolina.
[4] The BRAC Commission estimates are based on DOD's use of the Cost of
Base Realignment Actions model, which is not intended to and does not
present budget quality estimates. Consequently, the costs and savings
calculated by the model are likely to be different from the costs and
savings that will actually materialize. The estimates as presented in
this report are shown in then-year dollars to provide for equitable
comparative purposes between Commission estimates and current
estimates.
[5] Pub. L. No. 101-510, Title XXIX (1990) as amended by Pub. L. No.
107-107, Title XXX (2001); 10 U.S.C. § 2687 note.
[6] GAO, Military Bases: Analysis of DOD's 2005 Selection Process and
Recommendations for Base Closures and Realignments, GAO-05-785
(Washington, D.C.: July 1, 2005).
[7] Business process engineering can be generally defined as an
approach for redesigning the way work is done to better support an
organization's mission and reduce costs. In this context, these
recommended actions are intended to transform existing distribution and
procurement processes to increase savings and more efficiently support
the warfighter.
[8] National Defense Authorization Act for Fiscal Year 2002, Pub. L.
No. 107-107, Title XXX (2001).
[9] A strategic distribution platform provides distribution and storage
support to designated customers.
[10] Forward distribution points provide storage and distribution
support to on-base industrial customers, and selected other local
customers, and support for reimbursable end items, hard-to-handle
items, and hazardous items at that location.
[11] The Navy locations where the SS&D recommendation will be
implemented are Marine Corps Air Station Cherry Point, Cherry Point,
North Carolina; Naval Air Station Jacksonville, Jacksonville, Florida;
Naval Station San Diego, San Diego, California; Naval Station Norfolk,
Norfolk, Virginia; and Naval Station Bremerton, Bremerton, Washington.
[12] The Marine Corps locations where the SS&D recommendation will be
implemented are Marine Corps Logistics Base, Albany, Georgia, and
Marine Corps Logistics Base, Barstow, California.
[13] The Army locations where the SS&D recommendation will be
implemented are Anniston Army Depot, Anniston, Alabama; Corpus Christi
Army Depot, Corpus Christi, Texas; and Tobyhanna Army Depot, Tobyhanna,
Pennsylvania.
[14] Because of the interest in pursuing transformation and fostering
more jointness across the various defense components, seven joint cross-
service groups addressing education and training, headquarters and
support activities, industrial, intelligence, medical, supply and
storage, and technical activities were established early in the BRAC
decision-making process to formulate potential recommendations to
achieve these goals. The Supply and Storage Joint Cross-Service Group
pursued logistics economies to reduce the number of sites and related
excess capacity across various defense components.
[15] The Supply and Storage Joint Cross-Service Group report also
includes requirements determination in its definition, but that was
subsequently removed from the definition by DLA and the OSD BRAC
Office. As a result, the services are expected to continue with
determining requirements, but DLA is also expected to participate as a
collaborative partner in the requirements determination process.
[16] DLA plans to establish seven integrated process teams to work
through problems and concerns and, where possible, identify solutions
at each transfer site during implementation of the SS&D BRAC
recommendation. The seven teams are Human Performance, Information
Technology, Facilities and Equipment, Financial Management, Change
Management, Supply and Distribution, and Metrics. As of July 2007,
these seven teams have only been established with the Air Force and
Navy.
[17] Components include items such as hydraulics, landing gear, and
electronics.
[18] Major subassemblies include items such as engines, transmissions,
and airframes.
[19] When an agency conducts a reduction in force, some employees are
allowed to bump other employees or retreat into other positions.
"Bumping" means displacing an employee in the same competitive area who
is in a lower-tenure group (type of appointment category)."Retreating"
means displacing an employee in the same competitive area who has fewer
years of service within
the same tenure group.
[20] Under the A-76 process, otherwise known as competitive sourcing,
the military services and other defense components conduct a public/
private competition for a commercial activity currently performed by
government personnel to determine whether it would be cost-effective to
contract with the private sector for that activity's performance. As of
fiscal year 2006, DLA had conducted approximately 16 competitive-
sourcing A-76 reviews, covering 5,019 full-time equivalent government
positions, with about half of the operations staying with the
government as the most efficient organization and about half going to
the private sector.
[21] Retrograde materiel is broken repairable components from combat
areas that are returned to depots for repair.
[22] The seven teams are Human Performance, Information Technology,
Facilities and Equipment, Financial Management, Change Management,
Supply and Distribution, and Metrics.
[23] Performance-based agreements are defined as the negotiated
agreements between the major stakeholders that formally document the
performance and support expectations and resources to achieve the
desired outcome.
[24] As in all previous BRAC rounds, the BRAC Commission estimates are
based on DOD's use of the Cost of Base Realignment Actions (COBRA)
model, which provides a standard quantitative approach to compare
estimated costs and savings across various proposed recommendations.
The COBRA model relies to a large extent on standard factors and
averages but is not intended to and consequently does not present
budget quality estimates. As a result, the costs and savings calculated
by the model are likely to be different from the costs and savings that
will actually materialize.
[25] In then-year (current) dollars.
[26] Recurring savings would result from avoiding the costs associated
with storing inventory.
[27] These four initiatives were provided by the Army, Air Force,
Marine Corps, and DLA. They were designed to create efficiencies
through reducing and phasing out obsolete inventory and improving
procurement practices.
[28] The September 2007 draft SS&D business plan states that inventory
savings associated with four service and DLA inventory reduction
initiatives were being substituted for the original inventory savings.
According to DLA officials, this decision was not documented.
[29] The Infrastructure Steering Group is the governing body that
oversees implementation and approval of business plans for the 2005
BRAC round recommendations.
[30] DOD Supply Chain Materiel Management Regulation, DOD 4140.1-R,
Section C2.9 Item Reductions (May 23, 2003).
[31] Of the $172 million, almost $119 million in savings was associated
with several military services' initiatives that implemented ongoing
annual regulatory requirements to identify and dispose of obsolete or
unneeded inventory. Another $53 million in savings during the BRAC
implementation period was associated with an Air Force inventory
reduction initiative that was initiated prior to November 9, 2005, when
the BRAC recommendations became effective.
[32] Then-year dollars, sometimes called current dollars, reflect the
level of prices or expected prices at the time of measurement. Constant
dollars reflect the purchasing power of dollars in a given base year.
[33] The business plan also indicated that some costs associated with
disposing of and rewarehousing inventory increased by $115 million.
However, data were not available to determine how much, if any, of this
estimated cost increase should be attributed to the transfer of SS&D
functions, and how much should be attributed to other changes
associated with reconfiguring the depot system.
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