Depot Maintenance
Navy Has Revised Its Estimated Workforce Cost for Basing an Aircraft Carrier at Mayport, Florida Gao ID: GAO-11-257R March 3, 2011This report responds to House Report 111-491 to accompany a bill for the National Defense Authorization Act for Fiscal Year 2011 (H.R. 5136). The House Report noted that according to the environmental impact statement for the proposed homeporting of additional ships at Naval Station, Mayport, Florida, homeporting of a nuclear-powered aircraft carrier would result in temporary surges of maintenance employees associated with the 3-year depot-level maintenance cycle for the aircraft carrier. The homeporting of the aircraft carrier at Mayport is projected to begin in fiscal year 2019. Also, the House report raised questions about the potential impact that the additional depot-level workload would have on the sustainability, efficiency, capabilities, and stability of the maintenance employees who would travel from Navy depots to Mayport to perform the maintenance. To examine these issues, the House report directed GAO to provide an assessment of the readiness and cost impacts of the aircraft carrier homeporting and maintenance at Mayport on the Navy's traveling workforce. In response, our objectives were to determine the extent to which (1) the Navy has identified potential workforce-related costs associated with the planned move and used cost-estimating best practices to do so and (2) the readiness of the traveling workforce may be affected by having an aircraft carrier homeported in Mayport, and any mitigation measures the Navy has planned and implemented to address any potential impact.
In 2010, the Navy revised its original (2008) estimate of annualized workforce-related costs from about $18 million to $8.2 million. The Navy revised its estimate as a result of discussing its estimate with us and identifying more correct and complete assumptions than had been used to develop the original estimate. For example, the original estimate used the more expensive travel rates for San Diego instead of Mayport. To assess the validity of the revised estimate, we also developed an independent cost estimate. Our independent, risk-adjusted, annualized estimate for the workforce-related recurring costs is about $10.6 million at the 65 percent confidence interval, which means that there is a 65 percent probability the actual cost will be $10.6 million or less. We also estimated that these risk-adjusted costs could range from $5.5 million to $14.1 million. The difference is attributable in part to our estimate being based on a risk analysis while the Navy's was not. Our assessment of the Navy's cost-estimating procedures found that the Navy's procedures met best practices to various degrees. For example, the Navy's procedures met the requirements to comprehensively include both types of workforce-related costs (traveling and permanently stationed employees' costs) involved in the move. However, the Navy's procedures minimally met the credible criteria because they did not, among other things, include risk and sensitivity analyses or an independent cost estimate. The Navy has not begun to identify or document potential effects on readiness that might occur as a result of the proposed move nor has it identified workforce-related mitigation strategies because the move is years away. However, Navy officials indicated that the "U.S. Navy Depot Maintenance Strategic Plan" outlines strategies that will be used to address potential risks to readiness. Also, they indicated that they will begin to implement these strategies 4 to 5 years before moving the aircraft carrier to Mayport. We found that the Navy has processes to manage the workforce that include depot workers traveling to other locations to perform aircraft carrier maintenance. While the move to Mayport will result in increased travel for the workforce, Navy officials told us that they currently meet workforce travel requirements while staffed almost entirely by workers who voluntarily elect to travel. Navy officials do not anticipate any challenges in identifying a sufficient number of workers with the appropriate skills to perform maintenance work at Mayport. Further, Navy officials have indicated that the performance of the traveling workforce conducting remote aircraft carrier depot maintenance slightly exceeds that of workers requiring no travel. We are not making any recommendations in this report because we are issuing another report in March 2011 that addresses and makes recommendations to improve the Navy's overall costs of moving an aircraft carrier to Mayport.
GAO-11-257R, Depot Maintenance: Navy Has Revised Its Estimated Workforce Cost for Basing an Aircraft Carrier at Mayport, Florida
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GAO-11-257R:
United States Government Accountability Office:
Washington, DC 20548:
March 3, 2011:
Congressional Committees:
Subject: Depot Maintenance: Navy Has Revised Its Estimated Workforce
Cost for Basing an Aircraft Carrier at Mayport, Florida:
This report responds to House Report 111-491 to accompany a bill for
the National Defense Authorization Act for Fiscal Year 2011 (H.R.
5136). The House Report noted that according to the environmental
impact statement for the proposed homeporting of additional ships at
Naval Station, Mayport, Florida, homeporting of a nuclear-powered
aircraft carrier would result in temporary surges of maintenance
employees associated with the 3-year depot-level maintenance cycle for
the aircraft carrier.[Footnote 1] The homeporting of the aircraft
carrier at Mayport is projected to begin in fiscal year 2019. Also,
the House report raised questions about the potential impact that the
additional depot-level workload would have on the sustainability,
efficiency, capabilities, and stability of the maintenance employees
who would travel from Navy depots to Mayport to perform the
maintenance.
To examine these issues, the House report directed GAO to provide an
assessment of the readiness and cost impacts of the aircraft carrier
homeporting and maintenance at Mayport on the Navy's traveling
workforce. In response, our objectives were to determine the extent to
which (1) the Navy has identified potential workforce-related costs
associated with the planned move and used cost-estimating best
practices to do so and (2) the readiness of the traveling workforce
may be affected by having an aircraft carrier homeported in Mayport,
and any mitigation measures the Navy has planned and implemented to
address any potential impact. The related GAO products section at the
end of the report identifies our other recent efforts examining issues
related to the proposed homeporting of an aircraft carrier at Mayport.
To conduct this work, we reviewed the Navy's workforce-related cost
estimates and maintenance plans for the aircraft carrier move. We
compared the Navy's estimates and supporting documentation against
both criteria identified in cost-estimating best practices and our
independent cost estimate. A a high quality cost estimate meets the
following four characteristics: (1) comprehensive - estimates should
include all possible costs structured in sufficient detail to help
ensure that costs are neither omitted nor doubled-counted; (2) well-
documented - estimates should be supported by detailed documentation
that describes the process, sources, and methods used to create the
estimates; (3) accurate - estimates should be based on the assessment
of the costs most likely to be incurred and should not be overly
conservative or too optimistic; and (4) credible - estimates should be
cross-checked with an independent cost estimate, the level of
confidence should be identified through a risk and uncertainty
analysis, and a sensitivity analysis has been conducted.[Footnote 2]
We also analyzed Department of Defense (DOD) and Navy guidance and
planning documents to identify requirements for the traveling
workforce, as well as workforce-performance and capabilities
information obtained for similar travel from depots to maintain
aircraft carriers homeported in San Diego, California. For both
objectives, we interviewed DOD and Navy officials about the proposed
move to solicit their views and supplement information obtained from
documents.
We conducted this performance audit from June 2010 through March 2011
in accordance with generally accepted government auditing standards.
Those standards require that we plan and perform the audit to obtain
sufficient, appropriate evidence to provide a reasonable basis for our
findings and conclusions based on our audit objectives. We believe
that the evidence obtained provides a reasonable basis for our
findings and conclusions based on our audit objectives.
Summary:
In 2010, the Navy revised its original (2008) estimate of annualized
workforce-related costs from about $18 million to $8.2 million. The
Navy revised its estimate as a result of discussing its estimate with
us and identifying more correct and complete assumptions than had been
used to develop the original estimate. For example, the original
estimate used the more expensive travel rates for San Diego instead of
Mayport. To assess the validity of the revised estimate, we also
developed an independent cost estimate. Our independent, risk-
adjusted, annualized cost estimate for the workforce-related recurring
costs is about $10.6 million at the 65 percent confidence interval,
which means that there is a 65 percent probability the actual cost
will be $10.6 million or less. We also estimated that these risk-
adjusted costs could will range from $5.5 million to $14.1 million.
[Footnote 3] The difference is attributable in part to our estimate
being based on a risk analysis while the Navy's was not. Our
assessment of the Navy's cost-estimating procedures found that the
Navy's procedures met best practices to various degrees. For example,
the Navy's procedures met the requirements to comprehensively include
both types of workforce-related costs (traveling and permanently
stationed employees' costs) involved in the move. However, the Navy's
procedures minimally met the credible criteria because they did not,
among other things, include risk and sensitivity analyses or an
independent cost estimate.
The Navy has not begun to identify or document potential effects on
readiness that might occur as a result of the proposed move nor has it
identified workforce-related mitigation strategies because the move is
years away. However, Navy officials indicated that the U.S. Navy Depot
Maintenance Strategic Plan outlines strategies that will be used to
address potential risks to readiness. Also, they indicated that they
will begin to implement these strategies 4 to 5 years before moving
the aircraft carrier to Mayport. We found that the Navy has processes
to manage the workforce that include depot workers traveling to other
locations to perform aircraft carrier maintenance. While the move to
Mayport will result in increased travel for the workforce, Navy
officials told us that they currently meet workforce travel
requirements while staffed almost entirely by workers who voluntarily
elect to travel. Navy officials do not anticipate any challenges in
identifying a sufficient number of workers with the appropriate skills
to perform maintenance work at Mayport. Further, Navy officials have
indicated that the performance of the traveling workforce conducting
remote aircraft carrier depot maintenance slightly exceeds that of
workers requiring no travel.
We are not making any recommendations in this report because we are
issuing another report in March 2011 that addresses and makes
recommendations to improve the Navy's overall costs of moving an
aircraft carrier to Mayport.[Footnote 4]
The enclosure contains briefing slides that provide additional details
regarding our findings and the scope and methodology used to prepare
this report.
Agency Comments and Our Evaluation:
We provided a draft of this product to DOD for review and agency
comments. DOD did not submit written agency comments, but the Navy
provided a technical and an oral comments. We incorporated the
technical comment that clarified the length of the maintenance cycle
as 32 months into our report.
In oral comments, the Navy's Director, Fleet Readiness Division,
stated that the Navy's workforce cost estimate was based on approved
models used in the Planning, Programming, Budgeting, and Execution
process and that these models are validated every 3 years by an
outside organization. The Navy's Director also of its Fleet Readiness
Division stated that the Navy will not seek an independent estimate
for each of the thousands of estimates it produces because it would be
time and cost prohibitive.
Our report acknowledges that the Navy's cost estimates were based on
validated models. However, we also identified problems in the
application of those models. Among other things, we noted that the
Navy's estimate minimally met the criteria for a credible estimate
because: (1) cost drivers were not checked to determine whether
alternative methods produced similar results, (2) the estimate did not
include a sensitivity risk analysis, and (3) the estimate did not
provide evidence to indicate that the Navy's estimate was compared to
an independent estimate from an outside organization. We recognize
that resource constraints limit the Navy's ability to obtain
independent estimates for all of its cost estimates, but we continue
to believe that cost issues raised about homeporting an aircraft
carrier at Mayport warrant the production of an independent cost
estimate--an industry and a government cost-estimating best practice
that we noted should be included in credible estimates--to facilitate
informed decisions.
We are sending copies of this report to the appropriate congressional
committees. We are also sending copies to the Secretary of Defense;
the Deputy Secretary of Defense; the Under Secretary Of Defense
(Acquisition, Technology and Logistics); and the Secretary of the
Navy. This report also is available at no charge on the GAO Web site
at [hyperlink, http://www.gao.gov].
Should you or your staff have questions concerning this report, please
contact me at (202) 512-8246 or edwardsj@gao.gov. Contact points for
our Offices of Congressional Relations and Public Affairs may be found
on the last page of this report. Key contributors to this report were
Carleen Bennett, Assistant Director; Allen Westheimer; Jennifer
Echard; Dave Hubbell; Carol Petersen; Cheryl Weissman; and Michael
Willems.
Signed by:
Jack E. Edwards:
Director, Defense Capabilities and Management:
Enclosure:
[End of section]
List of Committees:
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 Thad Cochran:
Ranking Member:
Subcommittee on Defense:
Committee on Appropriations:
United States Senate:
The Honorable Howard P. McKeon:
Chairman:
The Honorable Adam Smith:
Ranking Member:
Committee on Armed Services:
House of Representatives:
The Honorable C. W. Bill Young:
Chairman:
The Honorable Norman D. Dicks:
Ranking Member:
Subcommittee on Defense:
Committee on Appropriations:
House of Representatives:
[End of section]
Enclosure:
Depot Maintenance: Navy Has Revised Its Estimated Workforce Costs on
Basing an Aircraft Carrier at Mayport, Florida:
Briefing for Congressional Committees:
March 03, 2011:
Contents:
* Introduction:
* Congressional Direction:
* Objectives:
* Scope and Methodology:
* Summary of Findings:
* Objective 1: Potential Cost-Related Effects:
* Objective 2: Potential Effect on Readiness:
* Agency Comments and Our Evaluation:
* Related GAO Products:
Introduction:
Decisions and Actions Taken Regarding the Planned Relocation of an
Aircraft Carrier:
The 2001 Quadrennial Defense Review recommended that the Navy provide
more warfighting assets more quickly to multiple locations.
The Navy subsequently took actions to homeport additional surface
ships at Naval Station, Mayport, Florida. For example:
* 2008: The Navy prepared an environmental impact statement to
evaluate a range of options for homeporting Navy ships at Mayport.
[Footnote 5]
* 2009: The Navy announced its plan to homeport an aircraft carrier at
Mayport.
In the 2010 Quadrennial Defense Review, the Department of Defense
(DOD) confirmed the Navy's decision to base an aircraft carrier at
Mayport. The Navy plans to begin homeporting an aircraft carrier at
Mayport in 2019.
Aircraft Carrier Homeporting:
The homeports for the Navy's 11 aircraft carriers are as follows:
* Seven at Naval shipyards or Naval bases located near shipyards:
- Norfolk Naval Station, Norfolk, Virginia--5 aircraft carriers;
- Naval Base Kitsap Bremerton, Washington--1 aircraft carrier;
- Everett Naval Station, Everett, Washington--1 aircraft carrier;
* Four at locations not near Naval shipyards:
- North Island Naval Air Station, San Diego, California--3 aircraft
carriers;
- Yokosuka Naval Base, Japan--1 aircraft carrier.
Mayport served as a homeport to a conventionally powered aircraft
carrier until 2007.
All current Navy aircraft carriers are nuclear powered. The nuclear
power plant is used to create the steam and electricity that power the
ship's propulsion and other operating systems, such as the catapults
for launching aircraft and the generation of fresh water. Maintenance
of the aircraft carrier therefore involves both:
* the nuclear power plant and,
* the nonnuclear systems.
Levels of Ship Maintenance:
The Navy identifies three levels of ship maintenance:
* Organizational – The ship's crew performs as-needed, routine tasks,
such as replacing minor parts, lubricating machinery, and preventive
inspections.
* Intermediate – Navy and civilian personnel from designated
facilities use specialized skills to conduct more extensive work on a
schedule of periodic cycles.
* Depot – Civilians at Naval and private shipyards perform maintenance
that requires skills, facilities, or capacities normally beyond those
of the organizational and intermediate levels, including ship
overhauls, alterations, refits, restorations, and nuclear refueling.
Maintenance for an aircraft carrier differs from that for other
surface ships in that aircraft carriers are the only surface ships
with nuclear propulsion systems, and all maintenance on nuclear
propulsion systems is performed by Naval shipyard workers.
Norfolk and Puget Sound Naval Shipyards are primarily responsible for
maintaining the Navy's aircraft carriers. Workers from the Navy's
other two shipyards”Pearl Harbor Naval Shipyard, Honolulu, Hawaii, and
Portsmouth Naval Shipyard, Portsmouth, New Hampshire”also perform
minimal carrier work.
Naval Shipyard Maintenance Workforce:
The current workforce for the four Naval shipyards totals about 26,500.
Naval Sea Systems Command:
* establishes and shapes the overall size of the Naval shipyard
workforce based on expected workload and;
* manages the maintenance of Navy ships and submarines.
Naval Sea Systems Command's "One Shipyard" concept is intended to
mitigate imbalances resulting from a Naval shipyard's having a
workload that exceeds or falls short of its available workforce. A
resolution may require borrowing workers from other Naval shipyards or
loaning workers out.
* Maintenance performed by shipyard workers at a Naval shipyard is "on
shipyard."
* Maintenance performed by shipyard workers at a homeport or other
locations that are not at a Naval shipyard is "off shipyard."
The number of Naval shipyard workers performing off shipyard
maintenance on aircraft carriers varies, depending on the phase of an
aircraft carrier's maintenance cycle.
* To facilitate planning for carrier maintenance, the Navy has
developed a general maintenance model that spans the expected 50 years
of a carrier's lifespan in the active inventory.
* Scheduled aircraft carrier maintenance periods are known as
availabilities.
- Aircraft carrier maintenance, scheduled for periods of 6 months or
less, is ordinarily performed in the ship's homeport area.
- Most of a carrier's maintenance is performed at the homeport.
[End of Introduction]
Congressional Direction:
The House Armed Services Committee, in House Report 111-491 to
accompany a bill for the National Defense Authorization Act for Fiscal
Year 2011 (H.R. 5163),
* noted that the environmental impact statement for the proposed
homeporting of an aircraft carrier and additional ships at Mayport
would result in temporary surges of workers traveling to Mayport;
* raised questions about the potential impact that additional depot-
level workload would have on the sustainability, efficiency,
capabilities, and stability of the traveling workforce under the
Navy's "One-Shipyard" concept; and;
* directed GAO to provide an assessment by February 15, 2011, of the
readiness and cost impacts of aircraft carrier homeporting and
maintenance at Mayport on the Navy's traveling workforce.[Footnote 6]
This report is one of three GAO products that respond to the House
Report 111-491. A second report assesses the full life cycle costs to
be incurred by the federal government by the proposed homeporting,
[Footnote 7] and a third future report will assess the infrastructure
needed to support the aircraft carrier move to Mayport.
[End of Congressional Direction]
Objectives:
Our objectives were to determine the extent to which:
1. the Navy has identified potential workforce-related costs
associated with the planned move and used cost-estimating best
practices to do so and;
2. the readiness of the traveling workforce may be affected by having
an aircraft carrier homeported in Mayport, and any mitigation measures
the Navy has planned and implemented to address any potential impact.
[End of Objectives]
Scope and Methodology:
Objective 1 - Potential Cost-Related Effects:
For objective 1, we took the following steps:
* Reviewed the original (2008) and revised (2010) cost estimates for
aircraft carrier homeporting at Mayport.
* Interviewed DOD and Navy officials to identify the segment of the
overall costs that are workforce related. We also interviewed these
officials to obtain an understanding of any issues that could affect
these costs in the future.
* Assessed the Navy's original and revised cost estimate by using
criteria for developing high-quality cost estimates as outlined in the
GAO Cost Estimating and Assessment Guide.[Footnote 8]
* Developed an independent cost estimate by following best practices
as stated in the GAO Cost Estimating Guide. Specifically, we developed
a risk-adjusted range of estimates (at an 80 percent confidence
interval) of workforce-related recurring costs. We also compared the
Navy's point estimate (which represents the most likely value for the
cost estimate) with our estimates to determine whether the Navy's
estimate was within our risk-adjusted range. For a direct element-by-
element comparison between our estimate and the Navy's, we compared
the Navy's point estimate to our estimate at the 65 percent confidence
level, which the guide considers appropriate for decision making.
* Reviewed our preliminary findings with Navy officials to solicit
their views on any differences between our findings and those of the
Navy.
Objective 2 - Potential Effect on Readiness:
For objective 2, we took the following steps:
* Analyzed Navy policies and instructions to understand the traveling
workforce requirements.
* Compared workforce performance and capabilities data on aircraft
carrier availabilities at San Diego with data on Puget Sound and
Norfolk Naval Shipyards' availabilities to understand how the
traveling workforce currently conducts aircraft carrier maintenance.
* Reviewed GAO's guidance on strategic workforce planning elements and
compared it with Navy's workforce plans to determine the extent to
which the plans contain or lack strategic elements.
* Interviewed Navy officials regarding any potential impact on
readiness and their rationale and assumptions in developing their
mitigation strategies.
We conducted this performance audit from June 2010 through March 2011
in accordance with generally accepted government auditing standards.
For both objectives, we interviewed officials at the Office of the
Chief of Naval Operations and Naval Sea Systems Command. The
government auditing standards require that we plan and perform the
audit to obtain sufficient, appropriate evidence to provide a
reasonable basis for our findings and conclusions based on our audit
objectives. We believe that the evidence obtained provides a
reasonable basis for our findings and conclusions based on our audit
objectives.
[End of Scope and Methodology]
Summary of Findings:
Objective 1: In 2010, the Navy revised its original (2008) estimate of
annualized workforce-related costs from about $18 million to $8.2
million. The Navy revised its estimate as a result of discussing its
estimate with us and identifying more correct and complete assumptions
than had been used to develop the original estimate. For example, the
original estimate used the more expensive travel rates for San Diego
instead of Mayport. To assess the validity of the revised estimate, we
also developed an independent cost estimate. Our independent, risk-
adjusted, annualized estimate for the workforce-related recurring
costs is about $10.6 million at the 65 percent confidence interval,
which means that there is a 65 percent probability the actual cost
will be $10.6 million or less. We also estimated that these risk-
adjusted costs could range from $5.5 million to $14.1 million.
[Footnote 9] The difference is attributable in part to our estimate
being based on a risk analysis while the Navy's was not. Our
assessment of the Navy's cost-estimating procedures found that the
Navy's procedures met best practices to various degrees. For example,
the Navy's procedures met the requirements to comprehensively include
both types of workforce-related costs (traveling and permanently
stationed employee costs) involved in the move. However, the Navy's
procedures minimally met the credible criteria because they did not,
among other things, include risk and sensitivity analyses or an
independent cost estimate.
Objective 2: The Navy has not begun to identify or document potential
effects on readiness that might occur as a result of the proposed move
nor has it identified workforce-related mitigation strategies because
the move is years away. However, Navy officials indicated that the
U.S. Navy Depot Maintenance Strategic Plan outlines strategies that
will be used to address potential risks to readiness. Also, they
indicated that they will begin to implement these strategies 4 to 5
years before moving the aircraft carrier to Mayport. We found that the
Navy has processes to manage the workforce that include depot workers
traveling to other locations to perform aircraft carrier maintenance.
While the move to Mayport will result in increased travel for the
workforce, Navy officials told us that they currently meet workforce
travel requirements while staffed almost entirely by workers who
voluntarily elect to travel. Navy officials do not anticipate any
challenges in identifying a sufficient number of workers with the
appropriate skills to perform maintenance work at Mayport. Further,
Navy officials have indicated that the performance of the traveling
workforce conducting remote aircraft carrier depot maintenance
slightly exceeds that of workers requiring no travel.
We are not making any recommendations in this report because we are
issuing another report in March 2011 that addresses and makes
recommendations to improve the Navy's overall costs of moving an
aircraft carrier to Mayport.
[End of Summary of Findings]
Objective 1: Potential Cost-Related Effects:
Correcting Assumptions in the Navy's Original Cost Estimates Resulted
in Smaller Revised Estimated Workforce Costs:
The Navy's revised annualized cost estimate is lower-”$8.2 million
versus $17.9 million”-than its original estimate for workforce-related
costs associated with moving an aircraft carrier to Mayport.
As a result of our discussions with Navy officials, the Navy revised
its original estimate and the three assumptions that did not correctly
or fully represent future planned conditions.
* The Navy originally used the more expensive per diem for San Diego,
California, rather than the one of Mayport, Florida.
* The original estimate included an overstated amount of workload to
be performed at Mayport and therefore overstated the amount of travel
costs. Specifically, an assumption used in the original estimate did
not take into account a projected 39-month drydocking that must be
performed at Norfolk.
* The Navy originally estimated that 50 workers rather than 12 workers
would be permanently stationed at Mayport. In its revised estimate,
the Navy did not include travel and per diem costs for 38 workers it
had incorrectly assumed would be permanently based at Mayport.
The lack of documentation for the original estimate made it difficult
for us to identify assumptions and errors. Navy officials stated that
the constrained deadlines caused them to not generate supporting
documentation for the cost estimates.
Table 1. Recurring, Annualized Workforce-related Costs of Moving a
Carrier to Mayport:
Source: Original November 2008 estimate;
Costs: Travel: $12.9 million;
Costs: Permanently stationed employees: $5.0 million;
Costs: Total: $17.9 million.
Source: Revised August 2010 estimate;
Costs: Travel: $7.0 million;
Costs: Permanently stationed employees: $1.2 million;
Costs: Total: $8.2 million.
Decrease in estimated costs:
Costs: Travel: $5.9 million;
Costs: Permanently stationed employees: $3.8 million;
Costs: Total: $9.7 million.
Source: GAO analysis of DOD data.
[End of table]
The Navy's Revised Estimate Does Not Account for Cost Risks:
Our independent, risk-adjusted, annualized estimate for the workforce-
related recurring costs is about $10.6 million at the 65 percent
confidence interval, which means that there is a 65 percent
probability the actual cost will be $10.6 million or less.[Footnote 10]
We also estimated that these risk-adjusted costs could range from $5.5
million to $14.1 million at the 80 percent confidence interval, which
means that there is a 80 percent probability that the actual cost will
be within that range. The Navy's non-risk adjusted estimate of $8.2
million falls within our range.
The differences between the estimating methods are as follows:
* Our estimate is based on actual expenses incurred for the USS Ronald
Reagan planned incremental availability in 2009 in San Diego because
this availability is the one most similar to the ones expected to
occur at Mayport. In addition, we used a risk analysis, which
evaluates each cost estimate variable for uncertainty, to estimate a
range of costs.
* The Navy based its estimate on estimated expenses, for example, the
total number of shipyard workers and the number of person-days for the
traveling workforce. The Navy developed its estimate with a general
cost-estimating model that had been validated by an independent entity
at a university, but the Navy had not had its original or revised cost
estimate independently validated before we developed our estimate.
Moreover, the Navy's estimate did not include a risk analysis.
Both methods factored in the total number of maintenance person-days
over an aircraft carrier's life cycle and calculated a life cycle and
an annualized estimate.
Characteristics of a High-Quality Cost Estimate That Can Be Used for
Making Informed Decisions:
Using industry and government cost-estimating best practices, we
identified the characteristics of a high-quality cost estimate that
management can use for making informed decisions:[Footnote 11] A cost
estimate is:
* comprehensive when it accounts for all possible costs associated
with a project and is structured in sufficient detail to ensure that
costs are neither omitted nor double-counted, and the estimating
teams' composition is commensurate with the assignment;
* well-documented when supporting documentation is accompanied by a
narrative explaining the process, sources, and methods used to create
the estimate and contains the underlying data used to develop the
estimate;
* accurate when it is based on an assessment of the costs most likely
to be incurred and is not overly conservative or too optimistic; and;
* credible when it has been cross-checked with an independent cost
estimate, the level of confidence associated with the point estimate
has been identified through a risk and uncertainty analysis, and a
sensitivity analysis has been conducted”that is, the project has
examined the effect of changing one assumption related to each project
activity while holding all other variables constant in order to
identify which variable most affects the cost estimate.
The Navy's Procedures Used for the Revised Estimate Met Cost-
estimating Best Practices to Various Degrees:
In its original (2008) estimate of annualized, recurring workforce
costs, the Navy did not fully follow cost-estimating best practices.
Among other things, that estimate lacked supporting documentation.
For the revised estimate, we determined that the Navy followed the
best practices to various degrees:[Footnote 12]
* Comprehensive: Met ” The Navy's procedures met the requirements to
comprehensively include both types of workforce-related costs
(traveling and permanently stationed employees' costs) involved in the
move.
* Well-documented: Partially met ” The Navy's documentation provided
the formula to calculate travel costs but did not supply source data
and assumptions for the workers projected to be permanently stationed
at Mayport. The Navy documented travel and per diem costs in a
spreadsheet. However, we could not independently trace the cost
information back to source documentation.
* Accurate: Partially met ” For the revised estimate, the Navy
accounted properly for inflation, changed the previously cited
incorrect assumptions, and based costs on a validated cost model. The
Navy's travel and permanent on-site labor costs were not based on an
assessment of the most likely costs as the Navy did not perform a risk
analysis.
* Credible: Minimally met ” The Navy identified cost drivers, but the
cost drivers were not checked to determine whether alternative methods
produce similar results. The Navy's estimate does not include
sensitivity or risk and uncertainty analyses. Also, the Navy did not
compare its estimate to an independent cost estimate conducted by a
group outside the acquiring organization.
The Navy Did Not Fully Follow Cost-Estimating Best Practices for the
Overall Revised Estimated Costs Associated with the Move:
In another March 2011 report that examined the overall revised
estimated costs associated with the move, we found that the Navy did
not fully follow cost-estimating best practices.[Footnote 13]
* In that report, we recommended that the Navy improve future
revisions to its Mayport aircraft carrier homeporting cost estimate as
part of the annual budgetary process or in response to future
congressional requests.
We are not making a separate recommendation in this report on
following cost-estimating best practices because the recommendation in
the other report encompasses workforce costs.
[End of Objective 1]
Objective 2: Potential Effect on Readiness:
The Navy Has Not Identified Effects on Readiness or Mitigation
Strategies Because the Move Is Years Away:
Because the move is still 8 years away, the Navy has not begun to
identify and document potential workforce readiness effects associated
with the move. However, Navy officials indicated that the U.S. Navy
Depot Maintenance Strategic Plan outlines strategies that will be used
to address potential risks to readiness. Also, they indicated that
they will begin to implement these strategies 4 to 5 years before
moving the aircraft carrier to Mayport.
A Naval Sea Systems Command instruction states that the workforce
management goal is to ensure the right person, with the right skills,
is assigned to the right task at the right time.[Footnote 14] To help
meet this goal, the Navy:
* uses a resource strategic planning strategy that provides for an
adequately trained workforce of sufficient size, based on goals for
hiring that reflect skill needs and attrition, that corrects for
workload imbalances and;
* collects workforce status information such as the size of the
available workforce, the amount of overtime, the percentage of workers
in each of the trades that are experienced journeyman, and the numbers
of workers loaned from one Naval shipyard to another to balance the
workload across shipyards.
DOD's Risk Management Guide for DOD Acquisition[Footnote 15] and GAO's
risk management framework[Footnote 16] address the importance of
evaluating alternatives to address risk and selecting and implementing
the appropriate alternatives to mitigate potential risks.
Navy Uses Routine Strategies to Manage the Workforce:
Although the Navy does not report Naval shipyard workforce status in
readiness terms-”the sustainability, efficiency, capability, and
stability of the workforce as cited in the House report”-the Navy does
collect data and monitor conditions that are related to these issues.
We found that Navy shipyards collect data such as the shipyard
workforce's total travel and the turnaround rate (the frequency with
which its workers travel); however, they are not required to regularly
collect and report this information.
The Navy's shipyard workforce managers routinely consider balancing
workloads among shipyards to avoid the risk of not meeting ship
maintenance schedules.
Navy documents and officials state that the Navy is taking steps to
address current and future attrition.
* Each shipyard will hire a minimum of 100 apprentices every year, as
previously directed by the Senate Committee on Appropriations,
[Footnote 17] and it will hire entry-level workers.
* The Puget Sound Naval Shipyard and Norfolk Naval Shipyard plan to
hire over 200 apprentices every year, per shipyard.
Shipyard Workforce Travels to Perform Aircraft Carrier Maintenance:
Navy officials told us that the "One Shipyard" concept and workforce-
shaping procedures ensure that the Navy will have the required number
of workers and skill sets to meet current and planned maintenance
requirements, such as those for Mayport.
* On any given day, each shipyard has workers traveling to other
locations to perform aircraft carrier maintenance. For example, during
fiscal year 2010, the Puget Sound Naval Shipyard workforce averaged
more than 600 workers per day on travel.
* Navy officials stated that they typically get almost all volunteers
to travel, and thus have to compel only a small number of workers to
travel.
* The traveling workforce has skills and experience similar to those
of the overall workforce.
As shown in figure 1, a recurring 8-year aircraft carrier maintenance
cycle at Mayport would include two 6-month maintenance availabilities
and other shorter maintenance efforts. Approximately 650 workers per
day would be on temporary duty travel during each 6-month availability.
Figure 1: 50-Year Aircraft Carrier Maintenance Cycle:
[Refer to PDF for image: illustrated timeline]
32 months:
Planned Incremental Availability:
* 6 months, 269,000 person-days[A];
* performed in the Homeport area;
* 60% public/40% private;
* approximately 800 personnel (at the peak) from public
shipyards;
* 12 occurrences throughout the 50 year ship lifecycle.
32 months:
Carrier Incremental Availability:
* 1 month, 10,000 person-days[A];
* performed in the Homeport area;
* 60% public/40% private;
* approximately 200 personnel (at the peak) from public shipyards;
* 32 occurrences throughout the 50 year ship lifecycle.
8 years:
Docking Planned Incremental:
* 10.5 months, 444,000 person-days[A];
* performed at the a Naval shipyard;
* 80% public/20% private;
* 4 occurrences throughout the 50 year ship lifecycle.
50 years:
Refueling Complex Overhaul:
* 39 months, 3,267,000 person-days[A];
* performed at a private shipyard;
* 60% public/40% private;
* accomplished at about 23 years service;
* 1 occurrence throughout the 5D year ship lifecycle.
[A] Estimated number of person-days-”Actual number of person-days
required will be dependent on the aircraft carrier's maintenance needs.
Note: In addition to these availability maintenance periods, aircraft
carriers have other periods of scheduled maintenance performed in the
homeport area.
Source: U.S. Navy]
[End of figure]
Performance of Traveling Workforce is Slightly Better Than That of the
Workforce at the Shipyards:
According to Naval Sea Systems Command officials, the traveling
workforce's performance rate for aircraft carrier availabilities”-
measuring the actual number of person-days needed to complete an
availability against the number of person-days planned”-is slightly
better than that for the carrier availabilities performed at Naval
shipyards, where no travel is required.
According to Navy officials, better performance is achieved by the
traveling workforce because that workforce:
* is assigned for a specified period and works as part of the same
team performing scheduled maintenance tasks on a single Navy ship;
* is working away from the home shipyard, reducing the likelihood of
workers (1) being reassigned to perform tasks on other ships or at
other shipyards or (2) attending to personal and family-related
responsibilities typically experienced while at home; and;
* is working more overtime, which in turn improves performance rates.
Savings achieved through the slightly better performance must be
considered against the costs of overtime and travel (cited in our
answer to objective 1) associated with conducting maintenance away
from the shipyards.
The Navy Has Not Identified Workforce-Related Mitigation Strategies
for the Aircraft Carrier Move Because the Move Is Years Away:
Naval Sea Systems Command officials told us that they have not
identified workforce-related risk mitigation strategies because it
would be speculative to discuss any mitigation strategies at this
time. They also said:
* The U.S. Navy Depot Strategic Plan outlines risk-mitigation steps
that the service has used successfully in the past.
* The Navy will begin to implement relevant strategies about 4 to 5
years before the planned move.
* The specific aircraft carrier assigned to Mayport will not be
identified until around 2 years prior to the move, and additional
adjustments might need to be made to mitigate potential workforce-
related effects.
* The aircraft carrier's homeport location is not a factor in
workforce planning. This planning is based on such factors as the
number of aircraft carriers and their maintenance condition.
[End of Objective 2]
Agency Comments and Our Evaluation:
In oral comments on a draft of this report, the Navy's Director, Fleet
Readiness Division, stated that the Navy's workforce cost estimate was
based on approved models used in the Planning, Programming, Budgeting,
and Execution process and that these models are validated every 3
years by an outside organization. The Navy stated that it will not
seek an independent estimate for each of the thousands of estimates it
produces because it would be time and cost prohibitive.
Our report acknowledges that the Navy's cost estimates were based on
validated models. However, we also identified problems in the
application of those models. Among other things, we noted that the
Navy's estimate minimally met the criteria for a credible estimate
because:
* cost drivers were not checked to determine whether alternative
methods produced similar results,
* the estimate did not include a sensitivity risk analysis, and,
* the estimate did not provide evidence to indicate that the Navy's
estimate was compared to an independent estimate from an outside
organization.
We recognize that resource constraints limit the Navy's ability to
obtain independent estimates for all of its cost estimates, but we
continue to believe that cost, workforce, and other concerns raised
about homeporting an aircraft carrier at Mayport warrant the
production of an independent cost estimate-”an industry and a
government cost-estimating best practice-”to facilitate informed
decisions.
[End of Agency Comments and Our Evaluation]
Related GAO Products:
Defense Infrastructure: Navy Can Improve the Quality of Its Cost
Estimate to Homeport an Aircraft Carrier at Naval Station Mayport.
[hyperlink, http://www.gao.gov/products/GA0-11-309]. Washington, D.C.:
March 3, 2011.
Depot Maintenance: Improved Strategic Planning Needed to Ensure That
Navy Depots Can Meet Future Maintenance Requirements. [hyperlink,
http://www.gao.gov/products/GA0-10-585]. Washington, D.C.: June 11,
2010.
Defense Infrastructure: Opportunities Exist to Improve the Navy's
Basing Decision Process and DOD Oversight. [hyperlink,
http://www.gao.gov/products/GA0-10-482]. Washington, D.C.: May 11,
2010.
Human Capital: Key Principles for Effective Strategic Workforce
Planning. [hyperlink, http://www.gao.gov/products/GAO-04-39].
Washington, D.C.: December 11, 2003.
DOD Civilian Personnel: Improved Strategic Planning Needed to Help
Ensure Viability of DOD's Civilian Industrial Workforce. [hyperlink,
http://www.gao.gov/products/GAO-03-472]. Washington, D.C.: April 30,
2003.
[End of Briefing Slides}
Footnotes:
[1] While the Navy's final environmental impact statement notes a 3-
year depot-level maintenance cycle for the aircraft carrier, the Navy
stated in its oral comments that the maintenance cycle is 32 months.
[2] GAO, GAO Cost Estimating and Assessment Guide: Best Practices for
Developing and Managing Capital Program Costs, [hyperlink,
http://www.gao.gov/products/GAO-09-3SP] (Washington, D.C.: March 2009).
[3] The range is based on the 80 percent confidence level, which means
that there is an 80 percent probability that the actual cost will fall
within the stated range.
[4] GAO, Defense Infrastructure: Navy Can Improve the Quality of Its
Cost Estimate to Homeport an Aircraft Carrier at Naval Station
Mayport, Florida, [hyperlink, http://www.gao.gov/products/GAO-11-309]
(Washington, D.C.: Mar. 3, 2011).
[5] Department of the Navy, Final Environmental Impact Statement for
the Proposed Homeporting of Additional Surface Ships at Naval Station
Mayport, Florida, November 2008.
[6] We provided the draft report to DOD and the House Armed Services
Committee on January 21, 2011 and agreement was made that we will
issue this report at a later date.
[7] GAO, Defense Infrastructure: Navy Can Improve the Quality of Its
Cost Estimate to Homeport an Aircraft Carrier at Naval Station
Mayport, Florida, [hyperlink, http://www.gao.gov/products/GAO-11-309]
(Washington, D.C.: Mar. 3, 2011).
[8] GAO, GAO Cost Estimating and Assessment Guide: Best Practices for
Developing and Managing Capital Program Costs, [hyperlink,
http://www.gao.gov/products/GAO-09-3SP] (Washington, D.C.: March 2009).
[9] The range is based on the 80 percent confidence interval, which
means that there is an 80 percent probability that the actual cost
will fall within the stated range.
[10] In accordance with the principles outlined in the GAO Cost
Estimating and Assessment Guide, the 65 percent confidence interval is
appropriate for decision making.
[11] [hyperlink, http://www.gao.gov/products/GAO-09-3SP].
[12] Met: The Navy provided complete evidence that satisfies the
entire criterion. Substantially met: The Navy provided evidence that
satisfies a large portion of the criterion. Partially met: The Navy
provided evidence that satisfies about half of the criterion.
Minimally met: The Navy provided evidence that satisfies a small
portion of the criterion. Not met: The Navy 17 provided no evidence
that satisfies any of the criterion.
[13] [hyperlink, http://www.gao.gov/products/GA0-11-309].
[14] Naval Sea Systems Command Instruction 4850.11 (Jan. 15, 2010).
[15] DOD, Risk Management Guide for DOD Acquisition, Sixth Edition,
August 2006.
[16] GAO, Risk Management Further Refinements Needed to Assess Risks
and Prioritize Protective Measures at Ports and Other Critical
Infrastructure, [hyperlink, http://www.gao.gov/products/GAO-06-91],
(Washington, D.C.: Dec. 15, 2005).
[17] Senate Report 110-155 to accompany the bill that later became the
Department of Defense Appropriations Act, 2008 (H.R. 3222) (Sept 14,
2007); Senate Report 111-74 to accompany the bill that later became
the Department of Defense Appropriations Act, 2010 (H.R. 3326) (Sept
10, 2009).
[End of section]
