oversight

Savings Available by Consolidating Certain Reserve Fleet Activities

Published by the Government Accountability Office on 1971-11-18.

Below is a raw (and likely hideous) rendition of the original report. (PDF)

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        I



I




            REPORT TO THE CONGRESS




            Savings Available
            By Consolidating Certain
            Reserve Fleet Activities 8-l687oo

            Department of Commerce
            Department of Defense




            BY THE COMPTROLLER   GENERAL
            OF THE UNITED STATES
                               COMPTROLLER     GENERAL      OF      THE   UNiTED   STATES
                                             WASHINGTON.     D.C.     20548




            To the     Fresident   of the Senate  and the
        6   Speaker      of the House of Representatives

                      This is our report       on savings      available  by consolidating
            certain     reserve  fleet   activities     of the Department      of Com-
I   ^
            merce      and the Department          of Defense.

                      Our review was made pursuant     to the Budget                         and Ac-
            counting    Act, 1921 (31 U.S.C.  53), and the Accounting                           and Au-
            diting   Act of 1950 (31 U.S.C.  67).

                      Copies    of this report     are being sent to the Director,
            Office     of Management        and Budget;    the Secretary   of Commerce;
            the Secretary        of Defense;    the Secretary    of the Army;    and the
            Secretary       of the Navy.




                                                           Comptroller             General
                                                           of the United           States




                                     50 TH ANNIVERSARY t92t - t 971
COMPTROLLERGENERAL'S                             SAVINGS AVAILABLE BY CONSOLIDATING                CERTAIN
REPORTTO THE CONGRESS                            RESERVE FLEET ACTIVITIES
                                                 Department of Commerce
                                                 Department of Defense  B-168700


DIGEST
---.---


h%Y THE REVIEW WASMADE

         The Maritime     Administration,         the Department    of the Navy, and--to         a lesser
         extent--the     Department       of the Army maintain      inactive
                                                                        _--      vessels  at   reserve
         fleet     sites on the east,       west,    and gulf coasts.        The agencies   have a com-
         mon-mission     of preserving       the reserve     fleets   in the best condition         pos-
         sible     with available      funds in case they are needed for commercial               or na-
         tional defense purposes.
         Becausethe reserve fleet          activities       of these agencies    are similar     and be-
         cause the fleet     sites    are close       to each other,    the General   Accounting      Of-
         fice   (GAO) reviewed     the situation        to see if it would be practicable          to
         consol idate tfiZZii%nagement      of Maritiliie;~      Navy, and Army fleet    sites   in the
         Beaumont,   Texas,    and San Francisco,         California,     areas.


FINDINGS AND CONCLUSIONS

         After    the first    year annual   savings   of about $664,000      could be realized
         by having Maritime        assume the function    of preserving     the Army and Navy
         inactive     vessels    in the Beaumont and San Francisco       areas.     Because of
         certain     costs at the start,     savings   the first   year would be about
         $392,000.        (See p. 11.)

         The most     advantageous    method of consolidation        is to leave           the vessels
         at their     respective   reserve   fleet  sites     and have Maritime            assume respon-
         sibility     for the maintenance      and preservation      and related           administrative
         functions.

         In the San Francisco      area,   however,    the watercraft      in wet storage    at the
         Army Rio Vista   site   should    be physically    consolidated       with the watercraft
         at the Navy Vallejo     site    or placed   in dry storage.         The Navy Stockton
         berthing   area should    be closed    and its vessels       moved to Vallejo    and Mari-
         time's   Suisun Bay site.       (See p. 34.)

         At Vallejo      Maritime        would be able to assume the maintenance                and preserva-
         tion function         more economically         than the Navy because Maritime            uses ex-
         perienced      civilian       personnel,     whereas     the Navy uses relatively         inexpe-
         rienced    military        employees.      Additionally,      fewer administrative          employees
         would be needed by Maritime              at both Orange,        Texas,     and Vallejo    because
         some of the Navy administrative                 tasks would be absorbed         by the administra-
         tive    employees       located     at Maritime     reserve   fleet    sites.     (See p. 15.)


  Tear
  --      Sheet
                                                                                                                  .   I

                                                                                                              '       I
    Specifically,         GAO found    that:                                                                          I

       --In the Beaumont      area Maritime         could   assume the maintenance    and preser-                     i
          vation  and related     administrative         functions   for the vessels    at the                        I
                                                                                                                      I
          Navy Orange facility      and save        about $251,000     annually  in manpower                          I
          costs . (See p. 18.)                                                                                        I
                                                                                                                      I
       --In the San Francisco              area Maritime        could assume the maintenance      and
          preservation         and related       administrative         functions for the vessels    at
          Vallejo--which          includes     the Stockton,         California,  site--at annual
          manpower       savings     of about $308,000.            (See p. 22.)
                                                                                                                      I
       --Annual    savings    of about $105,000      in security     manpower costs could re-                         I
          sult  by consolidating        watercraft   berthed     in wet storage   at the Army
          Rio Vista     site  with watercraft      at the Navy Vallejo       site or placing
          these watercraft        in dry storage.      (See p. 26.)


RECOf@lENDATIONS
             OR SUGGESTIONS
    GAO recommends    that     the     Secretary    of    Defense     and the   Secretary     of   Commerce               i
    make arrangements      to:                                                                                            I
                                                                                                                          I
       --Have       the Maritime  Administration           assume    the maintenance       and preserva-                  I
          tion      and related  administrative          functions      for the Navy     inactive    ves-
          sels      at Orange and Vallejo.

       --Close       the Army wet storage    facility         at Rio Vista   and move the          water-
          craft      in wet storage  to Vallejo       or     place the watercraft    in dry         stor-
          age.
                                                                                                                          I
       --Close   the Navy Stockton   berthing area               and move the      vessels    to Vallejo                  I
          and Suisun  Bay.   (See pp. 34 and 35.)                                                                         I
                                                                                                                          I

    GAO recommends      also that      the Secretary         of Defense       and the Secretary    of                     I
                                                                                                                          I
    Commerce have a study made to ascertain                    the feasibility,        including the ef-                      I
    feet  on costs,     of consolidating         functions        for other      Army, Navy, and Mari-                        I
                                                                                                                              I
    time Administration       inactive     fleet      sites.        (See p. 35.)                                              I


                                                                                                                              I
AGENCY
     ACTIONSANDUNRESOLVED
                       ISSUES                                                                                                 I


   Maritime   was receptive      to the idea of working        with the Navy and the Army
   to achieve   the proposed       consolidation    of reserve     fleet     functions.     Mari-
   time advised      GAO that  it would be appropriate         to make a concurrent         study
   of the feasibility       of consolidating     other   reserve     fleets.        (See p. 27.)

   The Navy concurred           in the intent      of the GAO proposals  but strongly               recom-
   mended that partial            consolidation     be avoided.   (See p. 28.)

   The Navy agreed   to         have   Maritime    assume     responsibility       for   the inactive
   vessels at Orange,           subject to a Navy decision             to redesignate       Orange as a


                                                   2                                                                              I
                                                                                                                                  I
I   .

                  ship and craft      storage    site only.    The Navy also stated      that it                  was pos-
                  sible     to have the Army watercraft      berthed   in wet storage      at Rio                 Vista
                  transferred      to Vallejo    and agreed  to close    the Stockton    berthing                  area and
                 inove the vessels       to Vallejo   and Suisun Bay.       (See pa 28.)

                 The Navy, however,       was opposed      to having        Maritime       assume the maintenance
                 and preservation      and related       administrative          functions      at Vallejo    because
                 of the Navy's    concern     over the ability          of Maritime          to preserve   unfamiliar
                 combat ships and the ability            of Vallejo       to carry       out the Navy's military
                 responsibilities      should    Maritime     assume the maintenance               and preservation
                 responsibility     for the inactive         vessels.        (See pp. 29 and 30.)

I
                 The Navy did not consider         that additional       study was required       concerning
                 consolidation     of functions      for other    Army, Navy, and Maritime          reserve
                 fleet    sites because it believed        that the factors      relative      to the proposed
                 consolidation     of functions      at its Vallejo      fleet site     would be applicable
I                to any consolidation        of vessels    at other    reserve   fleet    sites.      (See p. 32.)

                 The Army concurred           in   the   GAO recommendations.           (See    p.   33.)


        MATTERS
              FORCONSIDERATION
                            BY THECONGRESS
                 This report    informs        the Congress      of   the substantial          savings      possible   by
                 consol idating     certain       reserve  fleet      activities.




        Tear   Sheet
                          Contents
                                                                 Page

DIGEST                                                             1

CHAPTER

   1       INTRODUCTION                                            4
               Maritime Administration                             5
               Department of the Navy                              8
               Department of the Army                             10

   2       SAVINGS AVAILABLE BY CONSOLIDATING CERTAIN
             RESERVEFLEET ACTIVITIES                              11
               Navy and Maritime preservation         methods     12
               Alternative     consolidation     methods con-
                  sidered                                         14
               Consolidation      of maintenance and pre-
                  servation    functions     for Texas fleets     18
                     Labor costs                                  20
                     Impact costs                                 21
               Consolidation      of maintenance and pre-
                  servation    functions     for San Francisco
                  area fleets                                     22
                     Impact costs                                 25
                     Army craft    at Rio Vista                   25

   3       AGENCYCOMMENTS                                         27

   4       CONCLUSIONSAND RECOMMENDATIONS                         34
              Conclusions                                         34
              Recommendations to the Secretaries          of
                Defense and Commerce                              34

APPENDIX

       I   Letter   dated July 1, 1971, from the Assis-
              tant Secretary   of Defense, Installations
             and Logistics,    to the General Accounting
             Office                                               37
  II       Letter  dated July 7, 1971, from the Depart-
             ment of Commerce to the General Account-
              ing Office                                          43
APPENDIX                                                   Page

 III       Principal   officials   of Departments of De-
              fense, Army, Navy, and Commerce respons-
              ible for administration    of activities
              discussed in this report                      46

                            ABBREVIATIONS

GAO        General   Accounting   Office

DOD        Department   of Defense
COMPTROLLERGENERflL'S                         SAVINGSAVAILABLE BY CONSOLIDATING                 CERTAIN
REPORTTO THE CONGRESS                         RESERVE FLEET ACTIVITIES
                                              Department of Commerce
                                              Department of Defense  B-168700


DIGEST
------


WHYTHE REVIEW WASMADE

     The Maritime         Administration,         the Department    of the Navy, and--to        a lesser
     extent--the        Department        of the Army maintain      inactive     vessels  at reserve
     fleet     sites    on the east,        west,    and gulf coasts.        The agencies   have a com-
     mon mission        of preserving        the reserve     fleets   in the best condition       pos-
     sible     with available          funds in case they are needed for commercial              or na-
     tional      defense    purposes.

     Because the reserve        fleet   activities       of these agencies     are similar    and be-
     cause the fleet      sites     are close      to each other,     the General  Accounting      Of-
     fice    (GAO) reviewed     the situation        to see if it would be practicable          to
     consolidate     the management      of Maritime,         Navy, and Army fleet    sites   in the
     Beaumont,    Texas,    and San Francisco,         California,      areas.


FINDINGS AND CONCLUSIONS

     After    the first    year annual   savings    of about $664,000      could be realized
     by having Maritime        assume the function     of preserving     the Army and Navy
     inactive     vessels    in the Beaumont     and San Francisco    areas.     Because of
     certain     costs at the start,     savings    the first   year would be about
     $392,000.        (See p. 11.)

     The most     advantageous    method of consolidation        is to leave           the vessels
     at their     respective   reserve   fleet  sites     and have Maritime            assume respon-
     sibility     for the maintenance      and preservation      and related           administrative
     functions.

     In the San Francisco       area,    however,     the watercraft      in wet storage    at the
     Army Rio Vista    site   should     be physically     consolidated       with the watercraft
     at the Navy Vallejo      site    or placed    in dry storage.          The Navy Stockton
     berthing    area should    be closed     and its vessels        moved to Vallejo    and Mari-
     time's   Suisun  Bay site.       (See p. 34.)

     At Vallejo       Maritime       would be able to assume the maintenance                and preserva-
     tion function         more economically          than the Navy because Maritime           uses ex-
     perienced      civilian       personnel,     whereas      the Navy uses relatively        inexpe-
     rienced     military       employees.       Additionally,      fewer administrative         employees
     would be needed by Maritime              at both Orange,         Texas,     and Val lejo because
     some of the Navy administrative                  tasks would be absorbed         by the administra-
     tive    employees       located     at Maritime      reserve   fleet    sites.     (See p. 16.)


                                                    1
    Specifically,         GAO found    that:

       --In     the Beaumont area Maritime           could   assume the maintenance    and preser-
           vation   and related    administrative         functions   for the vessels    at the
           Navy Orange facility      and save        about $251,000     annually  in manpower
           costs.     (See p. 18.)

       --In the San Francisco        area Maritime        could assume the maintenance      and
          preservation   and related       administrative         functions for the vessels    at
          Vallejo--which    includes     the Stockton,         California,  site--at annual
          manpower savings     of about $308,000.            (See p. 22.)

       --Annual    savings    of about $105,000       in security     manpower costs    could re-
          sult  by consolidating        watercraft   berthed      in wet storage   at the Army
          Rio Vista     site  with watercraft      at the Navy Vallejo        site or placing
          these watercraft        in dry storage.       (See p. 26.)


RECOM&'ENDATIONS
              OR SUGGESTIONS

    GAO recommends    that     the     Secretary     of Defense        and         the   Secretary    of   Commerce
    make arrangements      to:

       --Have       the Maritime  Administration          assume      the         maintenance      and preserva-
          tion      and related  administrative         functions           for      the Navy    inactive    ves-
          sels      at Orange and Vallejo.

       --Close       the Army wet storage    facility      at Rio Vista  and move the water-
          craft      in wet storage  to Vallejo       or place the watercraft   in dry stor-
          age,

       --Close   the Navy Stockton   berthing area                  and move the           vessels    to Vallejo
          and Suisun  Bay.   (See pp. 34 and 35.)

    GAO recommends      also that      the Secretary         of Defense       and the Secretary   of
    Commerce have a study made to ascertain                    the feasibility,       including the ef-
    fect  on costs,     of consolidating         functions        for other     Army, Navy, and Mari-
    time Administration       inactive     fleet      sites.        (See p. 35.)


AGEiK'Y ACTIONS AND UNRESOLVED
                             ISSUES

    Maritime   was receptive      to the idea of working        with the Navy and the Army
    to achieve    the proposed      consolidation    of reserve     fleet     functions.     Mari-
    time advised      GAO that  it would be appropriate         to make a concurrent         study
    of the feasibility       of consolidating     other   reserve     fleets.        (See p. 27.)

    The Navy concurred          in the intent       of the GAO proposals  but strongly                      recom-
    mended that  partial          consolidation       be avoided.  (See p. 28.)

    The Navy agreed   to have Maritime assume responsibility       for                           the inactive
    vessels at Orange,   subject to a Navy decision    to redesignate                               Orange as a


                                                    2
    ship and craft      storage    site only.    The Navy also stated    that it                   was pos-
    sible     to have the Army watercraft     berthed    in wet storage    at Rio                  Vista
    transferred      to Vallejo    and agreed  to close the Stockton     berthing                   area and
    move the vessels       to Vallejo   and Suisun Bay.     (See pe 28.)

    The Navy, however,        was opposed      to having       Maritime       assume the maintenance
    and preservation       and related      administrative          functions      at Vallejo    because
    of the Navy's     concern     over the ability         of Maritime          to preserve   unfamiliar
    combat ships     and the ability         of Vallejo      to carry       out the Navy's      military
    responsibilities       should    Maritime     assume the maintenance              and preservation
    responsibility      for the inactive         vessels.       (See pp. 29 and 30.)

    The Navy did not consider         that additional      study was required       concerning
    consolidation     of functions      for other   Army, Navy, and Maritime          reserve
    fleet    sites because it believed        that the factors     relative      to the proposed
    consolidation     of functions      at its Vallejo     fleet site     would be applicable
    to any consolidation        of vessels    at other   reserve   fleet    sites.      (See p. 32.)

    The Army concurred         in   the   GAO recommendations.            (See    p.   33.)


MATTERSFOR CONSIDERATIONBY THE CONGRESS

    This report      informs     the Congress      of   the substantial          savings      possible   by
    consolidating        certain    reserve  fleet      activities.




                                                    3
                                 CHARTER1

                              INTRODUCTION

        Our review of the feasibility        of consolidating       activi-
ties for maintaining       and preserving      the inactive     vessel
fleets    of the Maritime Administration,          the Department of
the Navy, and the Department of Army was conducted at Mari-
time and Navy sites in the Beaumont area and at Army, Navy,
and Maritime fleet      sites in the San Francisco area.             We
limited    our review to these two areas because the fleets                 in
these areas were close to each other and because they ap-
peared to offer the most potential           for consolidation.         Our
review was directed      primarily    toward comparing the manpower
required    to accomplish     similar   activities     at the fleet
sites of the respective       agencies.     We    did not   evaluate the
effectiveness     of the programs at these fleet          sites.

       Maritime,    Navy, and Army, on a much smaller scale,
maintain reserve fleet        sites on the east, west, and gulf
coasts of the United States.          These agencies have a common
requirement      of maintaining    the vessels in their reserve
fleets   in the best possible condition        with available funds
in the event that the vessels are needed for commercial or
national     defense requirements.

      The vessels in the reserve fleets       are divided into two
main categories--  retention   and nonretention.       It is the
vessels in the retention     category and the manpower required
to maintain these vessels that are discussed in this report.
The vessels in the nonretention      category generally     are being
held for sale for scrapping,      and very little    manpower is re-
quired to maintain    them.

      The similarities     and differences in maintaining     the
agencies'  fleets     are discussed in the following   sections.




                                      4
MARITIME ADMINISTRATION

      The Maritime Administration's    National Defense Reserve
Fleet was established     pursuant to section 11(a) of the Mer-
chant Ship Sales Act of 1946 (50 U.S.C. App. 1744).          The re-
serve fleet primarily     comprises (1) vessels owned by Mari-
time on the date that the reserve fleet was established         and
(2) military-type    ships having commercial characteristics
which are being preserved for the Navy.

        Maritime is responsible    for the maintenance and preser-
vation of vessels in the reserve fleet that are considered
to have sufficient       value for commercial and national   defense
purposes in the event of a national        emergency.   For example,
from 1965 through 1967 a total of 161 vessels were withdrawn
from the fleet to assist in carrying         supplies in support of
military      activities  in Southeast Asia.

       On September 30, 1970, a total          of 962 vessels,     most of
which were designed and built during World War II, were in
the reserve fleets      and were located at six anchorages on the
east, west, and gulf coasts.          Included were 555 commercial-
type vessels and 398 military-type            vessels with commercial
characteristics     (military   auxiliaries).        The following    table
shows the fiscal     year 1970 operating        costs and the number of
retention     and nonretention   vessels at each of the reserve
fleet    sites as of September 30, 1970.

                                           Number of vessels
                                   Reten-        Nonre-                 Operating
        Fleet site                  tion         tention       Total      costs
Hudson River, New York
  (noteRiver,
James    a)   Virginia               143            42           42    $ 367,000
                                                   172          315     1,449,ooo
Mobile,
Beaumont,Alabama
           Texas                       1
                                      59           109
                                                    72          110
                                                                131       330,000
Suisun Bay, California               172                                  802,000
                                                    97          269     1,862,OOO
Olympia, Washington                 48             38            86       676,000
      Total                         423        -530            -953b   $5,486,000
ake    Hudson River fleet   site    was closed effective       April 30, 1971.
bDoes not include nine vessles which were berthed at the fleet sites
 pending Maritime or Navy action on disposition  of the vessels.

                                           5
        Of the total    reserve fleet operating      cost of $5,486,000
for fiscal     year 1970, $1,792,000 was for reimbursable         work
performed by-Maritime        for the Military    Sealift  Command, De-
partment of the Navy. This work related            to preparing Mari-
time vessels,      which had been operating      in support of military
activities     in Southeast Asia and which recently        had been re-
turned,    for storage in the fleet.         The remaining $3,694,000
was for the maintenance and preservation           and related   admin-
istrative     and security     functions  for vessels in the fleet
that might be needed in the event of a national             emergency.

        The Maritime fleets     are located in relatively          isolated
 areas having very few land facilities--usually             a headquarters
and supply unit located in a building           or on a barge.         At the
Maritime facilities      the vessels are anchored in open water,
whereas, at the Navy facilities,         most of the vessels are
moored at piers.       Vessels in the Maritime fleets          are, for
the most part, cargo-carrying        merchant vessels compared with
vessels in the Navy fleets which are warships--such                  as de-
 stroyers,   destroyer   escorts,   and minesweepers.        Also most of
the vessels in the Maritime fleets          are much larger than
those in the Navy fleets        and therefore     require   greater ef-
fort to preserve.       For example, Maritime's        predominant ves-
sel types--Liberty      and Victory    ships--are     about 450 feet
long and 60 feet wide and have drafts of about 28 feet com-
pared with the Navy destroyers         and destroyer      escorts,     which
range from 306 to 376 feet in length and from 36 to 40 feet
in width and have drafts        of 9 to 12 feet.

       The Maritime fleet at Beaumont is anchored in open wa-
ter, and the shore facilities       cover a land area of about
4 acres.     Beaumont has a berthing     capacity for approximately
350 Victory-type    ships.   Berthing capacity    is stated for a
specific   type of vessel because it can vary significantly
depending upon the type and size of vessel.          For example,
for vessels smaller than Victory       ships, the capacity   at
Beaumont could be greatly     in excess of 350 vessels.

       As of September 30, 1970, Beaumont had 131 vessels in
the fleet   and a work force of 115 employees.      Of these, 58
were involved in vessel maintenance and preservation,         includ-
ing related   administrative   and security functions,    and the
remaining 57 employees were engaged in preparing       Maritime
vessels recently    returned from the Southeast Asia sealift
for storage in the fleet.
                                     6
       Haritime’s      only berthing     site in the San Francisco area
is at Suisun Bay, which has a berthing               capacity  for 350
Victory-type       ships.     As of September 30, 1970, Suisun Bay
had a total       of 269 vessels in the fleet and a work force of
239 employees.         Of these, 113 were involved in vessel main-
tenance and preservation,           including   related    administrative
and security       functions,     and the remaining 126 were engaged
in preparing Maritime vessels recently              returned from the
Southeast Asia sealift          for storage in the fleet.
DEPARTMENT OF THE NAVY

         The mission of the Navy inactive          ship maintenance fa-
cilities     is to provide for the inactivation,             security,     main-
tenance, and activation         of naval ships and craft.             Although
they generally      are attached to larger naval installations,
the facilities      are under the direction         of the Inactive        Ship
Division     of the Naval Ship Systems Command, As of Septem-
ber 30, 1970, a total         of 802 vessels (539 ships and 263
craft)     were located at seven inactive          ship maintenance fa-
cilities.       The location    of the facilities       and the number of
retention      and nonretention     vessels at each facility           at that
date and the operating         costs for the fleet        sites     for fiscal
year 1970 are shown in the following             table.
                                    Number of vessels           ,
                                Reten-    Nonre-                  Operating
Inactive     ship facility       tion     tention       Total         costs

Bremerton, Washington             84           4           88    $ 1,622,OOO
San Diego, California            133          17          150      2,432,OOO
Vallejo,    California            94          30          124      1,674,OOO
Pearl Harbor, Hawaii              53          15           68         851,000
Norfolk,    Virginia              65           5           70      1,888,OOO
Philadelphia,      Pennsyl-
  vania                          119          17          136      3,227,OOO
Orange, Texas                    150          16          166      2,121,ooo
     Total                       698        104          802    $13,815,000
      The Navy inactive    fleets,    with the exception of the
Orange fleet,    are parts of larger naval installations,               such
as shipyards or Navy bases.         In general,     the inactive      fleets
have much more extensive      shore facilities        than do the Mari-
time fleets,    which is attributable      primarily      to the increased
fleet  responsibilities    that the Navy sites have.             Since the
vast majority    of Navy ships are moored at piers,            they are
more easily accessible     than Maritime ships for normal main-
tenance and preservation      work,    Also the piers permit easier
access to remove equipment and to inactivate              the vessels.

     The Navy fleet     at Orange is located about 20 miles from
the Maritime fleet    at Beaumont.      This fleet,   unlike other
Navy fleets   which are parts of larger Navy installations,         is
a separate self-sustaining     activity     and as such must provide
for services,   such as base security       and warehousing.

                                       8
       Most of the 166 vessels at Orange as of September 30,
1970, were berthed at piers.        The Orange facility     has a
berthing    capacity for about 250 destroyer-type       ships.    As
of August 31, 1970, Orange had 168 employees, of which 122
were civilian     and 46 were military.

       The Navy's inactive           fleet   in the San Francisco area is
at the Vallejo        Inactive     Ship Maintenance Facility,     which con-
sists of two berthing           areas about 60 miles apart:       (1) Mare
Island,     Vallejo,     California,       and (2) Rough and Ready Island,
Stockton,     California.         Both berthing    areas are parts of
larger Navy installations              and receive support services,   such
as facility       security,     communications,     and supply, from other
Navy facilities        in the area.

      The Mare Island site is the main berthing            area and is
located about 20 miles from Maritime's            Suisun Bay fleet,
All phases of an inactive         fleet  operation,    such as inactiva-
tion and maintenance and preservation,            can be performed at
Mare Island, whereas work at the Stockton site is limited
primarily     to vessel storage and certain         phases of preserva-
tion.     The   Mare  Island site    has a berthing    capacity  for 73
destroyer-type       ships, whereas the Stockton site has a berth-
ing capacity      for 57 such vessels.

     As of September 30, 1970, a total   of 124 ships and craft
were located at Vallejo's  two berthing  areas.  As of March 1,
1970, Vallejo  had 225 employees of which 189 were military
and 36 were civilian.




                                      9
QEPARTMENT OF
           -- THE ARMY
       In terms of number of fleet    sites and.the sizes and num-
ber of vessels,   the Army marine operations     are much smaller
than those of Maritime and Navy. Because the Army operation
was smaller and because Department of Defense (DOD) officials
advised us in December 1969 that consolidation        of the Army
Rio Vista watercraft   storage facility     with the Navy site at
Stockton might be economically     advantageous,    our review of
Army operations   was much more limited     than our review of the
Maritime and Navy reserve fleets.

      The Army stores watercraft       at two Army depots located at
Lathrop, California,      and Charleston,   South Carolina,    The ma-
rine operations    of the Sharpe Army Depot in Lathrop actually
are conducted at Rio Vista, about 37 miles distant.           The Rio
Vista facility    consists of a marine repair facility       and a wet
storage area.     The repair facility     consists  of several build-
ings and about 32 acres of land, including         space for dry
storage of amphibious craft.

         Effective    June 30, 1970, the facility*s       repair and re-
building       mission for watercraft     was terminated.       Since
June 30, 1970, the facility's           mission has been receipt,     stor-
age, and preparation       of watercraft     for shipment, and any re-
quired repair of watercraft          has been provided under con-
 tracts.
       The wet storage     area has a berthing   capacity  for about
200 to 250 watercraft,        such as barges, tugs, and patrol
craft,    In September     1970 about 25 watercraft    were in wet
storage.    Except for    moorings the wet storage area anchorage
has no permanent or      temporary structures.

      Fiscal year 1970 costs related to wet storage operations
were about $161,000, of which about $56,000 was for mainte-
nance and the remaining $105,000 was for 24-hour security    pa-
trols performed by 14 employees.




                                     10
                                 CHAPTER2

                SAVINGS AVAILABLE BY CONSBLIDATINC

                 CERTAIN    RESERVE    FLEET   ACTIVITIES

        Cur review showed that, after the first      year, annual
savings of about $664,000 could be realized         by having the
Maritime Administration      assume the function    for preserving
certain    Army and Navy inactive   vessels.     Cur savings are
predicated     upon leaving the Navy and Maritime inactive       ves-
sels at their present sites in the Beaumont and San Francisco
areas.     But we concluded   that, in the San Francisco area,
the watercraft     in wet storage at the Army Rio Vista site
should be moved to the Navy Vallejo       site or placed in dry
storage and that the vessels at the Navy berthing          area at
Stockton should be moved to the Navy Vellejo          site and Mari-
time's Suisun Bay site.

       Savings during the year that Maritime would assume
maintenance and preservation     responsibility      would amount to
about $392,000 because of certain      nonrecurring     impact costs,
such as towing, corrective    preservation      steps, and site
preparation,   that would be incurred      in effecting   the con-
solidation.
        Although our work was limited           to fleets      in the Beaumont
and San Francisco areas and although our computations                      of
possible       savings apply to those areas, a potential               may exist
for additional         savings by consolidating          maintenance and
preservation        activities    at other Army, Navy, and Maritime
fleet    sites located in the same geographical                areas.    We be-
lieve,     for example, that potential          for additional        savings
may be available          by consolidation     of the Navy fleet        at
Norfolk,      the Maritime fleet at James River, and the Army
fleet    at Charleston.        Consolidation      of the Navy fleet        at
Bremerton and the Maritime fleet              at Olympia should also be
considered.         In terms of missions,       facilities,       and overall
operation,       the fleets    covered by our review generally             are
typical      of the other fleets        of the respective       agencies,

     Our estimate of possible  savings is based on (1) the
number of naval personnel that no longer would be required
to maintain and preserve the vessels at the Orange and

                                       11
Vallejo    inactive    fleet    sites,   (2) the number of employees
necessary for Maritime          to assume the responsibili-ty     for
preserving     the Navy vessels at the two sites,          (3) an allow-
ance for certain       impact costs which would be incurred,          and
(4) the reduced security           costs that would result    from moving
the Army watercraft         berthed in wet storage at Rio Vista to
the Navy fleet      site.

NAVY AND MARITIME PRESERVATIONMETHODS

       The Navy and Maritime have a common mission of maintain-
ing and preserving     vessels in their reserve fleets      in the
best condition   possible with the funds available.        Maritime's
reserve fleet vessels are primarily     merchant vessels,     whereas
the Navy reserve fleet consists    primarily   of military    combat-
type ships.

       An important    factor    that must be considered      in any
proposed consolidation        is the difference    in the preservation
methods used by the two agencies.           Navy officials      contend
that significant     differences      exist between Navy and Maritime
methods and requirements        for the preservation       of vessels.
Our review of the preservation          methods used by the Navy and
Maritime    showed that, although some differences           did exist,
the differences     were not significant       enough to affect      the
feasibility    of consolidation.

       With the exception of the Navy requirement         for periodic
dry-docking,     Maritime and Navy preservation      methods basically
are the same. The Maritime preservation           and maintenance
program, however, consists      of a number of periodically       re-
curring    work steps requiring   varying preestablished      numbers
of workdays depending upon the type of ship.           On the other
hand the Navy preservation      system is conducted on an as-
needed basis except for a vessel's       interior    and the part
of the hull below the waterline,       which are maintained     at
specified    intervals.

        Both Maritime and the Navy protect        the part of a vessel's
hull below the waterline        by a system which passes an electric
current     between anodes and the hull of the vessel to prevent
underwater      rusting  and pitting.    Maritime    officials      believe
that this system, for the most part, eliminates                hull dete-
rioration      on vessels in inactive    status and that, therefore,

                                    12
vessels need not be dry-docked.             The Navy, however, period-
ically    dry-docks     thin-hulled    and heavier hulled vessels
every 8 years and 15 years, respectively.               Dry-docking es-
sentially     involves removing the vessel from the water for
inspecting,      cleaning,     and painting   the hull.

      The Navy and Maritime protect   the deck and that part
of the hull of a vessel that is above the water by applying
paint or other preservative    compounds, Maritime performs
this work periodically,    whereas the Navy performs the work
on an as-needed basis.

        Both Maritime and the Navy have used similar              dehumidi-
fication     systems to preserve the vessels'       interiors.       De-
humidification      is used because corrosion      of metals can be
reduced greatly       or stopped completely   in confined spaces by
reducing the water vapor.          The Navy dehumidifies       the entire
interior     of the vessel, whereas Maritime only partially             de-
humidifies     the interior    of a vessel because it believes           that
it is not necessary to dehumidify cargo holds on merchant-
type vessels.       Maritime   only recently  began using the de-
humidification      method on its own vessels entering           the re-
serve fleet;      however,it   has been preserving     Navy ships with
dehumidification       since early in 1962. In fact, many of the
Navy ships under Maritime's         care have dehumidification         sys-
tems that were installed        by Maritime.

       Although Maritime        is familiar     with the Navy procedures
and does have a large number of Navy vessels in its reserve
fleet,    the interiors     of most of the vessels in the Maritime
fleet were still       preserved under Maritime's          earlier   preserva-
tion method, which consisted            of coating the vessel"s        interior
with contact preservatives          --basically     grease and oil.       This
method requires       a significantly       higher man-day expenditure
than does the dehumidification             method.     For example, on two
Victory-type     ships in the fleet,          one under contact preser-
vation and the other under the dehumidification                  method, the
annual man-day requirements            to preserve the interiors         of
the vessels are 48 man-days and 15 man-days, respectively.




                                       13
ALTERNATIVE CGNSCLIDATIGN PIETBGDSCONSIDERED

       Because of differences         in impact costs, labor costs,
and the uncertainty        over how long the vessels would be left
in the fleet,      we considered two alternative          methods of con-
solidation:       (1) administrative      consolidation,     that is, leav-
ing the vessels at their respective            fleet   sites and having
either    Maritime or the Navy assume the preservation            function
and (2) physical        consolidation    of the vessels at one site
under either      Maritime or Navy control.

       We ruled out the alternative      of having the Navy assume
responsibility       for either physical  or administrative   consol-
idation,     because a comparison of Navy and Maritime manpower
required     to perform the same functions      showed that Maritime
would require      fewer additional   employees.    Also the Navy
fleet    sites covered by our review do not have adequate berth-
ing capacity     to accommodate all the vessels from the nearby
Maritime fleets.         Therefore the remaining possible alterna-
tives for consolidation         are

      --administrative    consolidation,    leaving the vessels at
         their respective   fleet    sites and having Maritime per-
         form the maintenance and preservation       function, or

      --placement    of all   vessels    at Maritime   sites.

        Although we had considered both of these alternatives,
discussion      with Navy officials,      subsequent to their review
of a draft of our report,         showed that, although placing all
vessels at Maritime sites would provide greater economic
benefits      to the Government during the fourth year of consol-
idation     in the San Francisco area and during the seventh
year of consolidation      in the Beaumont area, certain       adminis-
trative     problems and Navy mission responsibilities        could
make such a consolidation         impractical.

      According to Navy officials,      the Navy must retain     con-
trol over its inactive    vessels,   including  freedom of access
to the vessels for equipment removal, equipment validation,
inspection,   supply overhaul,    and the expeditious   identifica-
tion of material    to be removed from reserve ships to meet
active fleet   requests.


                                    14
         In view of the Navy responsibility,        the more desirable
method of consolidation        appears to be for the Navy vessels
to remain at Orange and Vallejo and for Maritime to perform
the maintenance and preservation          function.     This alternative
would allow the Navy to retain         the vessels at its own fa-
cilities      for performance of its military       responsibilities.
Both alternatives,       however, are discussed in the following
sections of this report to show the contrast              between a phys-
ical consolidation       and a consolidation      of the maintenance
and preservation       and related administrative       functions     only.

       To arrive    at a comparison of Maritime and Navy manpower
requirements      to perform the same work, we compared manpower
information     furnished    by Maritime employees with Navy man-
power utilization       reports  for the fleet   sites covered by our
review.     Analysis of Navy manpower utilization        reports for
the Orange and Vallejo inactive         fleets  showed that a total
of about 161 man-years of effort          were being expended annu-
ally in support of the maintenance and preservation             func-
tion.

      On the basis of the numbers of vessels being preserved
at Orange and Vallejo at the time of our review and the Mar-
itime standards of man-day requirements    for vessel preserva-
tion, we estimate that a total of 88 man-years of effort
would be required by Maritime annually to maintain and pre-
serve the Navy vessels.    This would enable about 161 Navy
personnel (84 at Orange and 77 at Vallejo),    having an annual
labor cost of about $1,294,000,   to be released or reassigned,
while Maritime would assume their work with 88 employees at
an annual labor cost of about $735,000, a resulting    annual
saving of about $559,000.

       Maritime's    ability    to perform the maintenance and pre-
servation     and related    administrative      functions    more economi-
cally appears to be related           to its use of experienced        civil-
ian employees at Suisun Bay in contrast               to the Navy use of
relatively     inexperienced     military    personnel at Vallejo and
also to the absorption        of certain     administrative     functions
at both Orange and Vallejo by administrative                employees lo-
cated at the Maritime reserve fleet            sites.

          A significant part of the difference   in the labor costs
results      from the smaller number of administrative    employees
which would be needed by Maritime.               As shown in the tables
on pages 18 and 22 of this report,             we estimated that work
requiring    41.8 man-years of Navy effort           that was allocated
to the administrative        function      in support of the mainte-
nance and preservation         function     could be assumed by Mari-
time.     On the basis of estimates by Maritime officials,              Mar-
itime would require        on1 y 16 man-years of effort        to assume
the administrative       function,      provided the Maritime opera-
tions at the Navy fleet          sites were conducted as satellite
operations     receiving    some administrative        support from em-
ployees at Haritime's        Beaumont and Suisun Bay sites.

       We obtained estimates        from Maritime officials     of the
number of additional        administrative     employees needed to as-
sume responsibility       for the maintenance and preservation         and
related    administrative     functions    for the Navy Orange and
Vallejo    fleet   sites because there were no standards which
could have been used for this purpose.             The Maritime esti-
mates were based on the number of additional            administrative
employees needed to manage the number of vessels and employ-
ees which would be added to its maintenance and preservation
responsibilities.

      We did not perform a manpower utilization          review to
determine the reasons Maritime would require fewer preserva-
tion workers than the Navy was utilizing.            We believe,     how-
ever, that this difference       was explained,    at least partially,
by the fact that most of the difference          was at Vallejo where
the Navy was using mostly relatively         inexperienced     military
personnel,    generally   assigned for only 2 years, to perform
the preservation     work, whereas the Maritime work force was
composed of civilians,      most of which had many years of ex-
perience.     The Navy work force at Orange was composed mostly
of civilians.

       As previously     discussed,  the work force at Vallejo as
of March 31, 1970, was composed of 225 employees, of whom
189 were military       and 36 were civilian.      Of the 36 civilians,
20 were temporary or intermittent          and eight had
administrative-type       duties.   Maritime and Navy officials       ad-
vised us that an experienced,        stable work force was an im-
portant    factor   for most phases of ship preservation.



                                    16
      Re did not find any evidence during our review that the
Navy use of a greater number of preservation    man-days for
each vessel than Fikritime resulted  in more effective   preser-
vation of the vessels in the Navy fleet    than that provided
by Maritime for vessels in the Maritime fleet.




                               17
CONSOLIDATION OF MAINTENANCEAND PRESERVATION
FUNCTIONS FOR TEXAS FLEETS

       We estimate    that $251,000 could be saved annually after
the first   year by Maritime's     assuming responsibility       for
the maintenance and preservation       and related    administrative
functions    at the Navy Orange fleet     site.   These savings
would result    from the reduced number of man-years required
by Maritime to perform the same functions         that the Navy is
performing.     We estimate   that work requiring     84 man-years
of Navy effort     at a labor cost of $698,000 could be per-
formed by Maritime with 57 man-years of effort          at a labor
cost of $447,000.

      Savings during the year in which Maritime would assume
maintenance and preservation    responsibility  would amount to
only $86,000 because of certain     corrective preservation
measures which Maritime officials     believe would be necessary
if Maritime were to assume these functions     for the Navy
vessels,

        The following    table shows (1) the man-years expended
by major function       at Orange on the basis of the number of
personnel on board as of August 31, 1970, and a manpower
utilization      schedule as of that date and (2) our man-year
estimates    of those functions    that should be retained   by the
Navy and those that would be assumed by Maritime if it were
to assume responsibility       for preserving  the Navy vessels.
                                                                   GAO estimate                     Estimated
                                                               of Navy man-years                   man-years
                                                             for functions      to be              needed by
                                                  Total        Retained     Assumed by      Maritime     to assume
                Function                        man-years   bv the Navy       Maritime        Navy functions
Maintenance          and preservation             48.6                        48.6                      49
Inactivation          and activation              13.2           13.2
Ship disposals                                     1.9            1.9
Inspections          other   than   those
   related      to    maintenance      and
   preservation                                    3.7            3.7
Administration                                    51.2           28.1         2i.l                       8
Security                                          24.9           24.9
Leave,     special      liberty,        sick-
   ness                                          A 24 5          12.3         12.2                     (a>
        Total                                                                                          57
aThe     estimate    for leave   for the Maritime    work force was taken            into    consideration     in
  the    computation     of man-years   required  for the other  functions.




                                                            18
      Our allocation   of man-years between Maritime and the
Navy is based upon Maritime's      taking over only the mainte-
nance and preservation    and related administrative        functions.
The other functions --specifically      activation,   inactivation,
inspection,   and ship disposal-- are of the types that the
Navy should have a continuing      knowledge of and capacity to
perform at an inactive    ship facility     and which, therefore,
we believe should be retained      by Navy.

     The security   function is not included among those                      to
be assumed by Maritime because (1) part of the security
provided by the Navy for Orange, about 12.8 man-years, re-
lates to the Orange facility             itself    because Orange is not
part of a larger Navy installation               like the other inactive
vessel facilities       which receive facility             security    from the
host organization       and (2) the balance, or 12.1 man-years,
of security     relates    to vessel security          to guard the vessels
against unauthorized        access.        Even though this security            is
similar   to  that    provided    by   Maritime     at   its  own   fleet    sites,
it is not among those functions               to be assumed by Maritime
because of administrative           problems that would result             from
having a nonmilitary        agency with its own security               force
located on a military         installation.

       The basis for our estimate of man-years required          by
Maritime to assume the preservation         and maintenance and
related   administrative    functions    at Orange was discussed
with Maritime officials.        Maritime officials     stressed that
this estimate was based on the assumption that the Navy ves-
sels would be in relatively        good condition    and that the
Orange operation      would be conducted as a satellite       opera-
tion to the Beaumont fleet which would provide assistance
in the areas of administration,         supervision,   and supply.

       As pointed out on page 14, we considered two alterna-
tive methods of consolidation:        (1) administrative      consoli-
dation,   leaving the vessels at their respective        fleet    sites
and having Maritime perform the maintenance and preserva-
tion function,    or (2) placement of all vessels at Maritime's
Beaumont site.     As shown in the following      table,   leaving the
Navy ships at Orange and having Maritime perform the main-
tenance and preservation     function    would be more economical
for the first    year of consolidation,     whereas moving all the
vessels to Beaumont would be more economical in subsequent
years.
                                         19
       During the first year leaving the Navy vessels at
Orange would save about. $86,100, whereas first-year      addi-
tional   costs of about $560,400 would be incurred    if all the
vessels were moved to Beaumont, a difference      of about
$646,500 be tween the two alternatives,     In subsequent years,
however, having the vessels at Beaumont would result       in
annual savings of about $118,200 in labor costs.        It would
take about 7 years, however, to offset    these greater savings
against the first-year   $646,500 cost difference    between the
two alternatives.
                                                           First   alternative--   Second alternative--
                                                             ships at Beaumont         all ships at
                                                                 and Orange               Beaumont

                  First      year

 Navy labor cost of personnel
   no longer required  at Orange                                 $698,300                 $816,486
 Less Maritime  labor cost                                        447,171                  447.171

     First-year            labor     savings                      251.129                   369.315

 Less nonrecurring    impact                 costs:
     Mooring and corrective
        preservation                                              165,000                   457,017
     Site preparation                                                                       216,000
     Towing                                                                                 256.700

          Total           impact     costs                        165.000                   929,717

                   First-year              savings    or
                      deficit(-)                                 $ 85.129                -$560.402

           Subsequent              years

 Navy labor cost of personnel
   no longe% required  at
   Orange                                                        $698,300                  $816,486
 Less Maritime  labor cost                                        447.171                   447.171

     Subsequent-years'                 savings                   $251.129                  $369.315


      The bases for the costs shown in the above table                                               are
explained in the following   sections,

Labor costs

       The labor costs relate   to the employees used in the
maintenance and preservation     function,  including  related ad-
ministrative    and security  employees.   These costs are the


                                                            20
same under either alternative    except that the Navy would
not have to provide about 14.2 security       man-years,   including
related leave, for a security    force to provide protection
for the vessels if all the vessels were moved from Orange
to Beaumont, which would result     in additional    labor savings
of about $118,200 a year.     The basis for the number of man-
years was discussed on page 15,

Impact   costs

       The impact costs are nonrecurring      expenses that would
be incurred    if the reserve fleets   were consolidated.        As is
shown in the table on page 20, most of these costs would be
incurred if the Navy vessels were to be moved to Beaumont
and would cover rearranging     vessel berthing     locations    and
preparing   vessels to be moored at another site.          A cost of
about $165,000 would be incurred for corrective          preservation
measures regardless    of whether the Navy vessels remained at
Orange or were moved to Beaumont.       These measures are nec-
essary, according to Maritime officials,        to bring Navy ves-
sels in line with Maritime preservation        standards.     The
amount is based upon Maritime's      experience with Navy vessels
previously   placed in the Maritime fleets      for storage.

       Site preparation   costs would be incurred mainly for
increasing     the power supply at Beaumont and for installing
Maritime's    underwater hull protection     system on the Navy
vessels if the Navy vessels were moved to Beaumont.         The
estimates    of the site preparation    costs were made by Mari-
time officials.

        The towing costs are based upon rates quoted by of-
ficials    of local commercial towing companies for moving the
Navy vessels from Orange to Beaumont. Navy officials      at
Orange advised us that they were not aware of any Navy tugs
in the area that could be used.




                                  21
CONSOLIDATION OF MAINTE_NANCEAND PRESERVATION
FUNCTIONS FOR SAN FRANCISCO AREA FLEETS

       We estimated that $308,000 could be saved annually
after the first      year if Maritime were to assume responsi-
bility    for the maintenance and preservation      and related     ad-
ministrative     functions   for the vesse4.s at the Navy Vallejo
fleet.      These savings would result     because Maritime would
require fewer employees to perform the same function           that
the Navy was performing,        We estimated that work requiring
77 man-years of Navy effort        at a labor cost of $596,000
could be performed by Maritime with 31 man-years of effort
at a labor cost of $288,000.

      Savings during the year in which Maritime would assume
maintenance and preservation    responsibility    would amount to
only $207,000 because of certain     nonrecurring   impact costs.
We estimate additional    annual savings of $105,000 if the
Army watercraft   berthed in wet storage at Rio Vista were
moved to the Navy fleet    site at Vallejo.

     The average number of personnel at Vallejo during fis-
cal year 1970 was 203, On the basis of a manpower utiliza-
tion report,    we estimate that 77 man-years of effort               were
being expended in support of the maintenance and preserva-
tion function,     including     related     administration.       The follow-
ing table shows the man-years expended by major function                    at
the Vallejo    inactive    fleet    site during fiscal         year 1970 and
our estimate of those functions            that should be retained        by
the Navy and those that could be assumed by Maritime if it
were to assume responsibility           for preserving       the Navy vessels.
                                                                           GAO estimate                        Estimated
                                                                        of Navy man-years                     --ye.WS
                                                                      for functions      to be                 needed     by
                                                        Total        Retained        Assumed    by      Maritime       to assume
                       Function                       man-years     by the Navy        Maritime            Navy functions

       Maintenance          and preservation              50.5                            50.5                          23
       Inactivation           and activation              48.3             48.3
       Ship disposals                                     14.7             14.7
       Inspections          other       than those
          related        to maintenance         and
          preservation                                      6.0             6.0
       Administration                                     49.4             30.7           18.7                          -a
       Security                                           14.0             14.0
       Leave,       suecial       liberty.
          sickness                                      20.1             x.-5             7.6                      (a)

              Total                                     20332            =126.2           76.8                          21
       %e      estimate      of   leave  for the Maritime           work force  was taken        into   consideration        in
        the    computation        of man-years   required         for the other    functions,




                                                                    22
       Cur allocation        of man-years in the above table between
Maritime and the Navy is 'based-upon Maritime's              assuming
only the maintenance and -preservation            and related    administra-
tive functions,       whereas Navy would retain,        as at Orange, the
inactivation,       activation,    ship dis$osal,    inspection,
                                                         1          and
security     functions.

       We estimate,    on the basis of thenumber          and sizes of
ships and craft being preserved at Vallejd as of April 1,
1970, that it would require a total of 31'man-years of Mari-
time effort     to provide for the maintenance and preservation
and related     administrative    functions      for these vessels.      The
estimate is predicated,        in part, upon closing one of the two
Navy berthing     areas at Vallejo--Stockton--and          distributing
the 40 ships and craft berthed there between the Navy Mare
Island berthing      area and Maritime's       Suisun Bay facilities.
Maritime would provide maintenance and preservation                 at Mare
Island,    along with its current       function    at the Suisun Bay
fleet   site, and thereby receive administrative            and super-
visory support from Suisun Bay.

       In evaluating    the feasibility      of consolidating       the in-
active fleets     in the San Francisco area, as in the Beaumont
area, we considered the possibility           of placing all vessels
at Suisun Bay, But, due to certain            problems involving        the
Navy military     responsibility     regarding    the inactive      vessels,
the high impact costs of placing all vessels at Suisun Bay,
the uncertainty      of how long the Navy vessels would be re-
tained in the reserve fleet,         and the unsuitability        of Suisun
Bay for storage of the smaller Army watercraft,               the more de
sirable method of consolidation          appears to be for the Navy
vessels to remain at Vallejo and for Maritime to assume the
maintenance and preservation         and related     administrative       func-
tions

       A factor    in favor of placing all vessels at Suisun Bay
is that the security       force maintained    by the Navy to provide
protection     at Vallejo would not be necessary because the
vessels would not be at Vallejo and because the present
guard foroe at Suisun Bay could provide protection            for the
additional     vessels.    Under the split    operation alternative,
the Navy would still       retain  a security   force of 15.5 men
at Vallejo at an estimated annual cost of $120,30O,including
related    leave,    Considering   this cost the alternative      of

                                     23
placing all vesels      at Suisun Bay would become more attrac-
tive from a purely economic standpoint        during the fourth
year following    consolidation,    at which time the $120,300
higher annual savings of placing all vessels at Suisun Bay
would offset   the $304.,500 first-year     cost difference  between
the two alternatives.

      As explained on page 14, however, the physical       consoli-
dation could cause administrative       problems which could make
a physical  consolidation  impractical.

     The two alternatives,     their impact costs, and first-
and subsequent-year    savings are shown in the following     table.

                                                                            First    alternative--
                                                                            ships    at Suisun       and   Second alternative--
                                                                                     Valla                  all ships at Suisun

                           First     year
Navy labor cost of personnel                       no longer     re-
   quired  at Vallejo                                                               $595,968                     $716,248
Less Maritime    labor cost                                                          288,062                      288,062
     First-year         labor      savings                                           307,906                      42S lP6
                                                                                                                  -L
Less nonrecurring      impact              costs:
    Mooring     and corrective                preservation                            81,975                      222,269
     Site preparatcon                                                                                             275,000
    Towing                                                                            19,032                       28,4F5
           Total      impact       costs                                             101,007                      525,754
                   First-year        savings         or deficit(-)                  $206,899
                                                                                     __-                         s-97,568
                      Subssequent          years

Navy labor cost of personnel                       no longer     re-
  quired   at Vallejo                                                               $595,968                     $716,248
Less Maritime    labor cost                                                          288,062                      288,062
     Subsequent-years'              savings                                         $307,906                     $428,186




                                                                       24
Impact   costs

        The impact costs are the nonrecurring       expenses that
would be incurred    to effect   the consolidation.       The costs are
based primarily    on estimates   provided by Maritime      and Navy
officials.     The mooring and corrective     preservation    costs re-
late to rearranging     vessel rows to accomodate additional        ves-
sels, incidental    work on the vessels to prepare them for
mooring at the fleet     site, and preservation      work on the Navy
vessels to bring them up to Maritime's        preservation    stan-
dards.

       The costs of mooring, corrective   preservation,    and tow-
ing would be greater if all vessels were moved to Suisun Bay
simply because of the larger number of vessels that would be
moved. Thus, if the vessels berthed at Stockton were to be
moved to the Navy Mare Island and Maritime's       Suisun Bay
sites,   the towing costs would be about $19,000.       If all the
Navy vessels were moved to Suisun Bay, however, the towing
costs would be about $28,000.     The towing costs are based
upon using Navy tugs at Navy billing    rates.

        Site preparation      costs are for additional    electric  power
 and installation       of Maritime's    underwater hull protection
 system on Navy vessels.          The cost was estimated    to be
 $180,000 if all vessels were moved to Suisun Bay because
 power would have to be provided for about 100 additional            ves-
 sels.     In addition,    $95,000 would be required     to install  Mar-
itime'sunderwater        hull protection    system if all the vessels
 were moved to Suisun Bay.

Army craft   at Rio Vista

       The Army watercraft       at the Rio Vista storage facility
are much smaller than those in the Navy and Maritime            fleets.
Since the security        costs for watercraft     berthed in wet stor-
age at Rio Vista are relatively          high, these watercraft
should be considered         in any consolidation    plans for Navy and
Maritime fleets.        Because the maintenance and preservation
work performed on these watercraft           at Rio Vista seemed to be
relatively    insignificant,       we did not consider the cost of any
preservation     work that might be necessary if these watercraft
were transferred       to Vallejo.



                                  25
         Both Navy and Maritime officials   advised us     that Suisun
Bay generally      is not suitable as a site for small      watercraft,
such as those berthed at Rio Vista's       wet storage     facility     be-
cause of the strong winds and severe wave action.             A Maritime
official     advised us that it might be possible     to   alter    the
Suisun Bay site and make it suitable       for berthing      the small
craft.

       DOD officials    advised us by letter    dated December 8,
1969, that a review of the Army Rio Vista storage function
indicated    that consolidation     of the watercraft   at Rio Vista
site with those at the Navy site at Stockton might be econom-
ically    advantageous.     We believe,  however, that consideration
should be given instead to consolidating          the watercraft  in
wet storage at the Rio Vista site with those at Vallejo's
Mare Island berthing      area.    Mare Island would be more suit-
able than Stockton because Mare Island

     --is the main berthing    area where all phases of mainte-
        nance and preservation    can be performed, whereas at
         Stockton only limited  work is performed,  and

     --is much closer to Suisun Bay than Stockton,        which
         would make it easier for Maritime      to carry out its re-
         sponsibilities   if it were to assume the maintenance
         and preservation    function at Vallejo.

      We believe that, if the watercraft    berthed in wet stor-
age at Rio Vista were transferred    to Vallejo's   Mare Island
site, Rio Vista's   security costs, which amounted to about
$105,000 in fiscal   year 1970, could be eliminated.     Savings
during the first   year would be only about $99,000 because of
the nonrecurring   costs of towing the Army watercraft     in wet
storage at Rio Vista to Vallejo.




                                 26
                              CHAPTJZR3

                           AGENCYCOM?%NTS
                                      -
       In April 1971 we brought our findings      to the attention
of the Secretary     of Commerce and the Secretary of Defense and
proposed that they make arrangements       to (1) transfer       the
maintenance and preservation     and related    administrative        and
security   functions   for the Navy inactive    vessels at Orange
and Vallejo    to the Maritime Administration,     (2) move the Army
craft at Rio Vista to Vallejo,     and (3) close the Stockton
berthing   area and move the vessels to Vallejo        and Suisun Bay.
We proposed also that a study be made to ascertain            the feasi-
bility   and effect   on costs of consolidating     functions     of
other Army, Navy, and Maritime Administration          inactive     fleet
sites.

       After consideration      of Navy comments and a subsequent
discussion     with Navy and DOD officials          on July 28, 1971, we
no longer are suggesting         that Maritime assume the security
function     at both Orange and Vallejo because of administrative
problems which could arise by-having Maritime assume the se-
curity    function  at a military     installation.        The comments of
Navy and DOD officials        obtained at this meeting are discussed
in the following      sections.

       In commenting on our draft report,   the Assistant    Secre-
tary of Commerce for Maritime Affairs     advised us by letter
dated June 2, 1971 (see app. II>,    that Maritime     was most re-
ceptive   to the idea of working with the Department of the
Navy and the Department of the Army in the achievement of the
proposed consolidation   of reserve fleet   functions.

       Maritime   stated that it did not believe that any of the
organizational     or technical     problems which had been mentioned
would be insurmountable        but was of the view that funding dur-
ing the transitional       phase of consolidation       would be the most
sensitive     and critical   factor    in the proposal.

       Maritime   stated further  that it would be unable to as-
sume any expense of the consolidation       within  its present and
projected     budgets and that it would be necessary for the Army
and the Navy, as appropriate,       to bear the costs of the con-
solidation.      Such assistance  would have to continue until

                                    27
Maritime  could    adequately budget       funds   to finance    its   ex-
panded reserve     fleet role.

       We believe that any arrangements which are made to ef-
fect the consolidation      of Army, Navy, and Maritime reserve
fleets   by the Secretaries    of Defense and Commerce should pro-
vide for the transfer     of funds to Maritime until Maritime
could budget funds to finance its expanded reserve fleet
role.

         Maritime advised us also that it believed            that it would
be appropriate       that a study be made concurrently          of the fea-
sibility       of consolidating  other reserve fleets.

       The Assistant       Secretary of Defense, Installations            and
Logistics,      by letter    dated July 1, 1971 (see app. I>, advised
us that, in general,         the Navy concurred in the intent of our
proposals but strongly          recommended that partial         consolidation
be avoided.        The Navy agreed with our proposal that the main-
tenance and preservation           and related    administrative     and se-
curity     functions    for the inactive       vessels at Orange be as-
sumed by the Maritime Administration              but was opposed to Mari-
time's assuming the same functions              at Vallejo.

       The Navy agreed also to the closing of the Stockton
berthing   area but, in the event of future need, wanted to re-
tain the option to berth inactive    vessels at Stockton because
it was the only Navy freshwater   site on the west coast.       The
Navy stated that it was possible    to have the Army watercraft
berthed in wet storage at Rio Vista transferred     to Vallejo.

       The Navy commented that it was considering               redesignating
the Orange facility       to a ship and craft         storage site only.
This would eliminate        the requirements       for activation      and in-
activation    of vessels and would permit effectuating               our pro-
posal relative     to Orange.       The Navy commented also that,
subject to such a decision,            the Navy would recommend that
Maritime    assume all responsibility           for the vessels at
Orange-- either    to administer         the entire Orange facility       as
an annex of Beaumont or to physically              consolidate    Orange with
Beaumont, as Maritime         saw fit.      The Navy believed      that es-
sential    Navy functions      could be handled by about two officers
and 10 enlisted      personnel if it redesignated           the facility     as
a storage site only.


                                     28
      We consider the Navy comments on its Orange facility     to
have merit,    Should the ultimate  decision by the Navy be to
redesignate   the Orange facility  to a ship and craft storage
site only, the Government could obtain savings in addition
to those previously    identified.

       The Navy, with respect to Vallejo,    was concerned with
MaritimeIs   capability  to care for (1) category B combat
ships-- those ships maintained   in a higher state of readiness
than other retention    ships in the fleet   (classified     as cate-
gory C ships),    (2) Navy combat ships in general,      with which,
according   to the Navy, Maritime employees are unfamiliar,         and
(3) Navy combat ships having unique requirements,         such as
submarines, or ships requiring     specially   trained personnel,
such as those having nuclear power,

       We had previously  discussed the maintenance of category
B ships with Navy officials     who informed us that, in theory,
more maintenance should be provided to category B ships than
for category C ships but that, because funds were not avail-
able, no added maintenance had been provided to category B
ships.

      In a subsequent discussion     Navy officials told us that,
during the past few years, there had been little       difference
in the maintenance given category B and C ships because of
the mass inactivations    by the Navy. They stated, however,
that, when the inactivations     slowed down, the Navy expected
to again provide added maintenance to category B ships.

       We believe that the willingness      of the Navy tQ turn
their facility     at Orange over to Maritime     indicates    that the
Navy recognizes      that Maritime has the ability      to care for
Navy reserve fleet       ships.   We noted that only six of 75 re-
tention    ships in the Vallejo     fleet as of April 1, 1970, were
classified     as category B ships.

       Regarding special requirement       vessels,     such as subma-
rines,   Maritime officials      told us that Maritime employees
would have to acquire the necessary experience but did not
see any problem in Maritime employees' learning              to care for
that type of vessel.        They explained   that the Maritime em-
ployees, having many years of experience            in caring for inac-
tive merchant vessels,       were ship oriented       and indoctrinated

                                    29
in working with inactive        ships.    The Navy does not have any
nuclear-powered      vessels in its reserve fleet at Vallejo,      but
we were advised that the Navy did expect to place a submarine
tender capable of caring for nuclear-powered          vessels at
Vallejo.     Maritime officials      advised us that they expected
to have a nuclear-powered        merchant ship in the Maritime
fleet    in the near future.

       In addition,    Maritime officials      told us that the princi-
ples of maintaining       the Navy combat vessels,        particularly
that principle      of using dehumidification,        were little      differ-
ent from those used on Maritime's         merchant vessels and that
Maritime currently      was preserving    military-type       merchant ves-
sels which had an even more complicated             superstructure      than
the combat vessels.

         A second concern of the Navy was the ability          of the
Vallejo      facility     to perform its mission should Maritime as-
sume maintenance and preservation           responsibility   for the in-
active vessels.           Factors presented by the Navy in this regard
consisted      of cl> a need for control       over the vessels to allow
freedom of access for inspection,           equipment removal and vali-
dation,      and supply overhaul,      (21 adequate geographical    dis-
persal of its reserve vessels, and (3) qualifications              and
availability          of Maritime employees for the expeditious     iden-
tification       of material     to be removed from reserve vessels to
meet active fleet          requests.

       The consolidation      we proposed would involve leaving most
of the Navy vessels at their present locations           and moving
only those Navy vessels at Stockton to the Navy Mare Island
site or Maritime's       Suisun Bay fleet    site.  Therefore  the con-
solidation   would not affect       the dispersal  of the vessels or
the freedom of access to the vessels required          by the Navy in
the performance of its duties.          Also, during the time covered
by our review, equipment removal, equipment validation,            and
supply overhaul were limited.

       The Navy contends that the present reserve            fleet opera-
tion provides flexibility    and a sufficient      work      force to take
care of increases in other functions.         According        to the Navy
the consolidation    and the resulting   decrease in         its work
force would remove this flexibility      and hinder         activation,
inactivation,    and other duties.


                                     30
       The proposed consolidation       involves only functions       in
support of maintenance and preservation.            We recognize    that
other Navy functions,        such as vessel activation     and inactiva-
tion,    should be retained      by the Navy.   Because the Navy would
retain all but maintenance and preservation           and related    ad-
ministrative      functions,   it should be able to maintain a basic
capability     that could be expanded as requirements        dictated.
For example, the Vallejo         staff was augmented during the re-
cent period of mass inactivation          with personnel from the
ships undergoing inactivation.

      Further we noted that additional        personnel were avail-
able through the Naval Reserve Ship Activation,         Maintenance
and Repair Program,     The mission of this program is to pro-
vide officers   and enlisted    personnel trained in ship mainte-
nance, repair,   and activation     procedures for immediate active
duty in the event of war or national        emergency or when other-
wise authorized   by law.

       The Navy contends that our estimate of savings is based
on a figure    for military  manpower that is larger   than normal
because of augmentation     of the Navy personnel to handle mass
inactivations.     By the end of fiscal   year 1972, military  man-
ning at Vallejo    is expected to decrease by at least 16 men.
This decrease, according      to the Navy, will reduce the sav-
ings.

       Our work at Vallejo   showed substantial       increases in ves-
sel inactivation     between our initial     survey in June 1969 and
follow-up    work in April 1970. Although there had been a sub-
stantial    increase in vessel inactivation,       the level of effort
expended on maintenance and preservation          had not changed sig-
nificantly;     however, some maintenance and preservation        work
had been deferred.

      Analysis of the changes in work load and manpower utili-
zation showed that the increase in the inactivation         work load
had been handled primarily      through the assignment of addi-
tional personnel,    many of whom had been assigned on a tempo-
rary basis from the ships being inactivated.        Therefore,
since the increase in personnel to handle increased inactiva-
tions primarily   affected   functions  other than maintenance
and preservation,    a decrease in personnel at this time simi-
larly would affect    other than maintenance and preservation

                                  31
personnel.   In this case the savings in our report would not
be affected  because these savings relate   only to the mainte-
nance and preservation   and related administrative  functions.

        The Navy also contended that untold administrative            com-
plications     would be created since the inactive      fleet    site at
Vallejo was a tenant of the Mare Island Naval Shipyard and
has no administrative      space other than that provided by a
station    ship.    The Navy added that, if consolidation        with
Stockton should take place and if the station         ship were re-
moved to allow pier space for the ships from Stockton, Mari-
time would be faced with costs to establish        itself     at
Vallejo.

        We agree with the Navy that there could be some adminis-
trative    problems associated    with the consolidation.      We be-
lieve,    however,  that  these  administrative   problems   would not
be so great that they could not be worked out between Mari-
time and the Navy.       The Vallejo   inactive fleet   site is in an
area remote from the shipyard and is fenced off from the rest
of the base.

       Our report recommends the transfer    of vessels from
Stockton to both Vallejo     and Suisun Bay as berthing   space
permits.    Provision  could be made in any arrangements agreed
upon by Maritime and the Navy to leave the station      ship at
Vallejo and to allow Maritime     to use it.

       Apparently   the Navy   considers    that factors     relative     to
the proposed consolidation        of functions    at its Vallejo       facil-
ity, as discussed above,       would be applicable       to consolidation
of vessels at any of its       other reserve fleet       sites,    with the
exception    of Orange, and    therefore    the Navy does not consider
that additional     study is   required    concerning consolidation           of
functions    of other Army,    Navy, and Maritime reserve fleet
sites.

       We do not agree.     We believe that the annual savings
available    through consolidation    of the fleets   at Orange and
Vallejo,   as presented in this report,      are substantial  enough
to warrant a study of the feasibility        and the effects  on
costs of consolidating      functions  of other Army, Navy, and
Maritime   inactive   fleet   sites.



                                     32
        The Army concurred in our proposal that a study be made
to ascertain      the feasibility    and the effect      on costs of con-
solidating     functions    of other Army, Navy, and Maritime         inac-
tive fleet     sites.    The Army, however, did not agree that the
Army watercraft       at Rio Vista should be physically         consoli-
dated with watercraft        at the Navy Vallejo      site.   Subsequently
we met with Army officials         and clarified    our position    con-
cerning the watercraft         at Rio Vista.     We informed these of-
ficials    that we were concerned only with the watercraft
berthed in wet storage at Rio Vista rather              than with all the
craft at Rio Vista as interpreted           by Army.

      The Army officials     advised us at the meeting on July 28,
1971, that they thought that the Army watercraft           in wet stor-
age could be moved to Vallejo.        They stated, however, that,
as an alternative,      the Army was considering   putting    its wet-
storage craft     in dry storage.    We informed these officials
that such an alternative      would meet the intent    of our pro-
posal, which was to eliminate       the security  costs at the wet
storage site .




                                    33
                              CF?TER 4

                 CONCLUSIONSAND RECOMMENDATIONS

CONCLUSIONS

      Substantial savings could be obtained if (1) the main-
tenance and preservation     and related administrative     func-
tions for the Navy inactive     vessels at Orange and Vallejo
were assumed by the Maritime Administration,        (2) the Army
wet storage area at Rio Vista were closed and the watercraft
were moved to Vallejo    or placed in dry storage,      and (3) the
Navy Stockton berthing    area were closed and the vessels were
moved to Vallejo and Suisun Bay.

       Our review indicates     that the method offering       the most
immediate economic advantage would be to leave the vessels,
with the exception of the Army watercraft          in wet storage at
Rio Vista and the vessels berthed at Stockton,           in their re-
spective   fleets   and to have Maritime assume the maintenance
and preservation     and related    administrative   functions.     We
recognize,    however, that other methods of consolidation          may
be advantageous.      Therefore the Secretary      of Commerce and
the Secretary     of Defense should consider alternative         methods
of consolidation,     such as those discussed in this report.

      Although our work was limited to the fleets  in the
Beaumont and San Francisco areas, there may be a potential
for savings at other Army, Navy, and Maritime sites located
in the same geographical  areas,

RECOMMENDATIONS TO THE
SECRETARIES OF DEFENSEAND COMMERCE

      We recommend that the Secretary of Defense and the
Secretary   of Commerce make arrangements to:

     --Have the Maritime Administration        assume the mainte-
        nance and preservation     and related    administrative
        functions for the Navy inactive       vessels at Orange,
        Texas, and Vallejo,    California.




                                  34
     --Close the Army wet storage facility      at Rio Vista,
        California, and move the watercraft      in wet storage
        to Vallejo or place the watercraft     in dry storage.

     --Close the Navy Stockton,  California, berthing area
        and move the vessels to Vallejo and Suisun Ray, Cal-
        ifornia,

       We recommend also that the Secretary      of Defense and the
Secretary of Commerce have a study made to ascertain         the
feasibility,       including the effect on costs, of consolidating
functions      for other Army, Navy, and Maritime Administration
inactive     fleet    sites.




                                35
                                                                                                                    APPENDIXI

                                                 ASSlSTANT      SECRETARY         OF DEFEWE
                                                          WASHINGTOM,      D.C.   20301




                                                                                                              1 XIL 1971
    IN5TAL:ATIONS   AND   LOGISTICS



          Mr.     C. M. Bailey
          Director,     Defense   Division
          General     Accounting   Office
          Washington,       D. C.   20548

           Dear     Mr.       Bailey:

           Views     and comments              are     furnished    on the “Savings      Available     by Transferring
           Function     of Preserving                Army     and Navy Reserve      Fleet     Ships to the Mari-
           time    Administration”,                  (OSD Case No. 3276)       GAO Draft        Report   dated    April
           27. 1971.

           The Department             of the Army        nonconcurs      in the findings,           the conclusion
           that Army’s         watercraft       should     be physically        consolidated         with    Navy’s      Vallejo
           site,    and the recommendation                that arrangements            should     be made        to trans-
          fer the maintenance              and preservation          and related        administration           and security
          functions      for the Navy’s          inactive     vessels    at Vallejo        and Orange          to the Mari-
          time     Administration           (MARAD).          The Army         concurs      with the recommendation
          that a study be made              to ascertain       the feasibility        and effect       on costs       from
           consolidating         functions     of other     Army,      Navy,      and Marine          inactive     fleet    sites.

                    a.    The Army          doubts      that savings          could     result      from       consolidation            of the
          maintenance          and preservation,                security       and administrative                 functions       of the
          Army’s       inactive      fleet    with     either      Navy or the Maritime                   Administration.                 It
          is the Army’s           position      that all functions             of the Rio Vista             storage        mission
          could     not be relocated            and physically            consolidated          with     Navy’s        Vallejo       site.
          The GAO concluded                that responsibility              for only the functions                  of maintenance
          and preservation,              security       and related          administrative             support         should     be
\         transferred         to MARAD.             Although         not stated       in the report,             it appears
          implied      that MARAD            would      perform         this function         only on inactive              vessels
          in wet storage.            There       is only one inactive              craft     at Rio Vista            that would         be
          moved        to Vallejo.          Practically          no savings        would       be gained          under      this cir-
          cums tance.          Furthermore,              the GAO recognizes                 that other         functions         are
          performed         by Army         and that Army             has a requirement                for dry storage,               but
          does not mention             Army’s        other      functions       or dry storage             requirements.                 The
          functions      of receipts,          issues,        set assembly           and disassembly,                  security,
          maintenance           and preservation              of amphibious           craft     and vessels             in dry
          storage      are of a continuing              nature       and the capability             and resources               to perform


                                                                            37
  APPENDIXI

these functions        must be at the storage       site.     Finally, the Navy in October
 1970 informed        the Army     that dry storage       space was not available.      It
appears     conclusive       that Rio Vista  would     have to be retained     in order    for
Army    to perform        these functions.

   b.    The Army       nonconcurs     with the recommendation         that arrangements
should     be made to transfer      the maintenance      and preservation        and related
administration       and security     functions  for the Navy’s     inactive    vessels    at
Vallejo      and Orange     to MARAD.

           1.    It is      noted that the recommendation             is not addressed    to Army.
However,           the      GAO report     implies    that it is applicable     to Army    craft,
therefore,           the    nonconcurrence         by Army   pertains     only to the transfer     of
Army       craft       to   MARAD.

          2. Excluding      amphibious         craft    and vessels      which      are provided
dry-storage,        the Rio Vista        wet storage       inventory     consists       of only one
inactive      item.    The remaining         craft,     excluding     depot operating          craft,     are
being     held for shipment       or planned         for dry storage.          Transfer      of one craft
would     not reduce     the activities       at Rio Vista        and would,      therefore,        provide
little   advantage     or savings       to the government.

          3. The Army      must have assurance       that sufficient     wet and dry
storage     space is available   for current   and future      requirements.      Navy
has informed      Army    that West coast dry storage        space is not available                        and
that wet storage      space is limited    and availability     on a continuing   basis                      is
doubtful.

           4.    The Army       concurs    that a study be made to ascertain              the
feasibility        and effect    on costs from      consolidating      functions     of other   Army,
Navy and Maritime             inactive   fleet sites.       In this regard,      the Army     is ini-
tiating      negotiations     with MARAD        for watercraft       storage,      to meet future
requirements            which   develop   from    current      force reductions.

The Department                   of the Navy’s  position     with    respect   to the   four   recommen-
dations made                by   GAO are described       below:

    a. In general   the Navy concurs     with the                   intent    of GAO’s    recommenda-
tions but strongly     recommends    that partial                    consolidation     not be accomplish-
ed in any geographical       area.

           1.      The Navy has two categories          of its reserve      ships,         “B” and “C”.
Category           “B” ships receive       maximum      possible   maintenance            effort     within
limitations          of resources    while     Category    “C” ships are left            essentially        in



                                                          38
                                                                                                   APPENDIX I


an “as -is”   condition.             It is essential     for the Navy to retain               control   of those
ships located     at its       facilities,     including     complete       freedom          of access     for in-
spections,    equipment            removals      , equipment      validation       and       supply   overhauls.

             2. The Navy requires            that it retain      the capability     for inactivating
and activating      its ships.       This the Navy believes            can best be accomplished
by retaining      appropriate       numbers      of active    duty personnel       at the Inactive
Ship Facilities.         Finally,    the Navy requires         that its reserve        ships be adequately
dispersed      geographically        while keeping       them     reasonably    close to industrial
facilities    for quick      access    in the event of mobilization.

     b. Recommendation                 1. Transfer         the maintenance            and preservation,            and
related    administration            and security        functions    for the        Navy’s   inactive        vessels
at Vallejo    and Orange           to MARAD.

             1. With respect             to Orange,        Texas,        the Navy recently               evaluated
the mission       of this facility         and is considering             the redesignation              of it as a
ship and craft       storage       site only.        Subject       to a Navy decision              to change         the
mission     of INACTSHIPFAC                 Orange      to eliminate          the requirements               of activating
and inactivating,         and in view of the GAO recommendation                                that MARAD
assume     the preservation,              maintenance          and security         functions         there,       the
Navy will recommend               that MARAD            assume        all responsibility             for the ships
remaining       at Orange,         either      to administer         the entire       facility       as an annex
of NDRF,       Beaumont,          Texas       or to physically           consolidate         with the latter            as
it sees fit.      Overhead        costs      associated        with administering                a small       military
base could thus be eliminated.                    Essential         Navy functions            could be handled
by about two officers            and ten enlisted           personnel.           If MARAD           were      to assume
the 64 man-years           indicated        in the GAO report,               a total of 28 military                and 122
civilian   positions      would       be eliminated          for a net saving           of 86 man-years.
If this were to occur,            we would be concerned                   that appropriate             provision
be made for employment                  priority      of affected        Navy civilian           personnel.

           2. With respect         to Vallejo,      California,       operations     should    remain
as they are now.        The necessity        of retaining       numbers       of Navy personnel        at
Vallejo  sufficient    to handle     those functions         for which     MARAD      personnel       may
not be qualified     would   reduce     the alleged       saving    noted by GAO.          These
factors  include    the following:

                  a. Navy combatant            ships,     although     generally      requiring    mainte-
nance and preservation          work    similar       to that provided         by MARAD,        may have
unique   requirements.         Submarines         in a disposal       status,     for example,      should
be under    control    of maintenance        personnel        who are qualified         in submarines
for such hazardous        operations      as adjustment          of trim      and ballasting     and de-



                                                           39
      APPENDIX I

ballasting.          A nuclear-capable        or nuclear-powered            ship also has                          special
requirements            which   can only be handled        by qualified       nuclear-trained                           personnel
who possess           the requisite    technical   knowledge,         security      clearance                        and radiation
monitoring          expertise.

                     b.   Expeditious         identification        of material        to be removed      from
reserve        ships   to meet     active     fleet     requests     frequently       requires     Navy tech-
nical     ratings.      MARAD       personnel          may be neither          technically     qualified    nor
available        on short   notice      outside      normal      working      hours      for such contingencies.

                        c.   Various        military         functions         at Vallejo        would       still   remain
after    the proposed            consolidation,             and would          continue        to require          Navy manning
and attendant            administrative            effort.        These       tasks     include       riding       crews       for
ships     being     towed,        shore     patrol,        transportation,              command          watches,          line
handling       details,       materials         handling         and military            communications,                all of
which      would      increase        the number            of man-years             retained       by the Navy for
security       and administration                from       about      15 man-years              as reported          by GAO
to about      45 man-years.                Provision          for all these           tasks      by the Navy would
thus reduce          the estimated           110 man-year                saving      reported        by GAO.           Since
military      personnel           are employed             very     flexibly,        and since         the actual        inactivation
workload        has in the past fluctuated                     radically,        manpower           that becomes              avail-
able when the tempo                 of inactivations             slackens        would       then be immediately
employed         for maintenance              work.          This effectiveness               makes        it desirable
for the Navy to retain                 maintenance             and preservation               responsibilities             at
Vallejo.

                      d.   The GAO report            bases   its savings       on a figure    for military
manpower          that is larger        than normal       because      of augmentation       of the Navy’s
personnel        in order      to handle      recent    mass    inactivations.         By end FY 1972,
military       manning       at Vallejo     is expected      to decrease        by at least    16, which
by itself      will   reduce     the quoted       savings    of $493,000        by about   $124,000.

                  e.     An additional      factor     tending      to erode     the reported       saving
is the fact that MAR.AD           maintenance         work     schedules      have not been worked
out for combatant         ships.     It is believed        that a moderate-sized             combatant
has an area just in its complicated                 superstructure          which     equals   the work-
load of the average         commercial        type MARAD             ships.     Furthermore,         it is
likely  that training      of MARAD        maintenance           personnel      in procedures        for a
variety    of unfamiliar       combatant      hulls     would     certainly     have an impact         cost
not now considered          by GAO.

     c.  Recommendation      2.   Move                     the Army   craft    at Rio Vista                  to Vallejo.
It is possible   for INACTSHIPFAC                           Vallejo eventually     to berth                the Army’s




                                                                  40
                                                                                                      APPENDIX I


19 watercraft         now    at Rio     Vista     in wet      storage,      but   not   the     250    craft     stored
on land.

    d. Recommendation                 3.  Close       the   Stockton       berthing      area     and     move       the
vessels   to Vallejo          or   Suisun   Bay.

          1. Although         consolidation           of the Stockton       Annex     with   the Vallejo
Facility      might      be desirable,          it is feasible      only if nonretention            ships     are
removed        from      Vallejo,       additional       ships are disposed           of from      Stockton       and
provision        is made       to retain       working       pier space      at Vallejo     for inactivation,
activation,        stripping,        and supply         overhaul     tasks.      Stockton     is, however,
the only fresh          water      berthing       site for reserve         ships    on the West Coast,
and the Navy may have need for this type of berthing                                 site at some         future
time.       Therefore,          the Navy should            retain  the option       to berth     inactive       ships
at Stockton        in case of need.

          2. Assumption          by MARAD           Suisun      Bay of maintenance,              preservation,
security       and associated         administration           of the ships        at Vallejo      would      create
untold     administrative         complications           since    the Facility         is a tenant      of the
Mare      Island     Naval    Shipyard      and has no administrative                   space    other     than
that provided          by a station      ship.      If consolidation          with Stockton         should       take
place     and if the station         ship were        removed        to allow      pier    space     for the ships
from     Stockton,        MARAD       would     be faced      with     constructing         a building       for
office     and storage        space,     providing       a barge,       or hauling        equipment        and
materials        from     its base at Suisun           Bay.      The cost impact            of these     factors
should      also be considered.

     e. Recommendation              4.   Study the feasibility           and effects      on costs      from
consolidating        functions      of other   Army,       Navy and URAD               inactive     fleet
sites.      In view of the foregoing           comments,         the Navy does not consider
that additional        study    is required      concerning        consolidation        of inactive       fleet
sites.      Operations       at all Navy and MARAD              facilities       other   than Orange,
Texas      should    remain      as they are now,         except      that the ships        berthed      at
Stockton      should     eventually     be relocated       to either       INACTSHIPFAC             Vallejo
or NDRF,         Suisun     Bay as berthing        space becomes            available.

In summary,        the Army           nonconcurs         with the findings,              conclusions,          and
recommendations             except      study     of the feasibility           of possible         consolidations
of other   Army,       Navy,        and Marine         inactive       fleet    sites.        The Navy is con-
sidering    action    at Orange,            Texas     which      would      permit       effecting     the GAO
recommendations             relative       to this site.         Furthermore,              the Navy recommends
that the proposed          transfer        of functions        at Stockton,          Vzllejo,       and Suisun        Bay
be accomplished          in a phased          sequence        to allow       for disposal          of excess       ships
and craft,     preparation           of final    berthing,        coordination           of administrative



                                                         41
 APPENDIX I


changes     and to facilitate      orderly     scheduling      of operations       by both    MARAD
and the    Navy.

In view of the above,          after  the General        Accounting       Office    has had the
opportunity      to review     these    comments,         representatives         of the Department
of Defense      welcome      the opportunity        to discuss       this proposal      further   with
your    office.    We are prepared          to participate        in implementing         your  proposal
to the optimum        extent    which    is economical         and practicable.

                                             Sincerely,



                                                                   BARti? J. SHILLITO
                                                            Assistant     Secretary  of Defense
                                                             (Installations      and Logistics)




                                                    42
                                                                  APPENDIX II




                              THE ASSISTANT               SECRETARY   OF COMh’lERCE
                              Washington,   DC.   20230




  JUL 7 1971
Mr. Max A. Neuwirth
Associate    Director
Civil   Division
General Accounting Office
Washington,     D. C. 20548

Dear Mr. Neuwirth:

This is in reply to your letter     of April 29, 1971, re-
questing comments on a draft    report  entitled "Savings
Available By Transferring  Function of Preserving    Army
and Navy Reserve Fleet    Ships To The Maritime                  Admini-
stration".

We have reviewed the comments of the Maritime Admini-
stration  and believe that they are appropriately respon-
sive to the matter discussed in the report.

Sincerely    yours,




Atfachment




                                43
APPENDIX II


                                                 THE ASS%STAR!T                SECRETAW\I   OF COMIMEWCE
                                                 Washington,    D C.   20230




    J-UN2 1971



   Mr. Max A. Neuwirth
   Associate      Director,     Civil   Division
   United    States     General    Accounting          Office
   Washington,       D. C. 20548

   Dear   Mr.   Neuwirth:

   This is in reply        to your letter       of April       291 1971, which
   forwarded     copies    of a proposed      report      to the Congress        on
    the review    by the General      Accounting        Office     of the feasi-
   bility    of consolidating      activities        involved     in managing
   the inactive      ship fleets    of the Maritime            Administration
    (MarAd),    Department    of Commerce;        the Department          of the
   Navy; and the Department         of the Army.

   The Draft      Report     and its conclusions       and recommendations
   have been reviewed           and MarAd reiterates       its earlier     ex-
   pression     that it is most receptive            to the idea of working
   with the Department            of the Navy and the Department         of the
   Army in the achievement             of the proposed     consolidation       of
   reserve   fleet      functions.

  In our previous           comments salient          factors     were discussed
  which continue          to bear directly           on the matter.        It is
  considered        that    the Draft        Report   is comprehensively          in-
  formative       and that      the Agencies         concerned      can proceed
  without      delay to develop            the particulars        of consolidation
  as initially         recommended.            It would seem appropriate            that
  study be made concurrently                   of the feasibility       of consoli-
  dating     other     similar     activities.

  The capability        of MarAd Reserve          Fleet    personnel     to assume
   the tasks     of deactivation          and preservation         of Naval Ves-
  sels is a matter           of record,      and it is not envisioned           that
  any of the organizational               or technical      problems     which have
  been mentioned        will    be insurmountable.            Close liaison       with
  Naval inactive        Ship Facilities         in connection        with the deac-
  tivation    of significant          numbers of Naval Ships during               the
  past two (2) years has broadened                  the MarAd Reserve        Fleet's
  knowledge,       understanding,         and proficiency        in handling      Naval
  Vessels.      With reference          to Army boats       and watercraft,         it


                                                  44
                                                         APPENDIX      II



is understood that only those in we% storage would be trans-
ferred to a MarAd managed fleet site.   No serious problem is
envisioned in this regard since MarAd Fleet personnel rou-
tinely operate and care for similar watercraft   as they are
utilized  at Reserve Fleet sites.  It would be necessary only
to become oriented to any special Army storage requirements
for watercraft.

Funding during the transitional    phase of consolidation     is
considered to be the most sensitive     and critical  factox in
the proposal.    MarAd is unable, within its present and pro-
jected Reserve Fleet Budgets, to assume any of the expense
of ship transfers from one site to another, the preservation
of additional  ships, the procurement of preservation       supplies
and equipments, or increases in work force levels.        It will
be necessary for the expenses of vessel transfers to be borne
by the Army or Navy as appropriate,     and any deactivation     and
preservation  care and work force increase to be handled by
suitable reimbursement by the Department in whose interests
services are performed.     This requirement for funding assist-
ance will continue until MarAd is able, within annual budget
cycles, to request and be authorized sufficient      funds in a
future budget to adequately finance its expanded Reserve Fleet
role.

The Mari time Aaminis tration will be pleased to participate
with the Army and Navy in further study of the proposed initial
consolidations   in order to identify  the details and the par-
ticular   tasks of each in the achievement of the Draft Report's
recommendations and the attainment of the economies the pxo-
posed consolidation   of Reserve Fleet activities  can conceivably
produce.

Sincerely,




 Assistant Secretary
 icgMaritime   Affaiss




                                 45
APPENDIX III


                    PRINCIPAL OFFICIALS

                OF DEPARTMENTSOF DEFENSE,

                 ARMY, NAVY, AND CQMMJZRCE

       RESPONSIBLE FOR ADMINISTRATION OF ACTIVITIES
                 DISCUSSED IN THIS REPORT


                                           Tenure of office
                                           From            -To
                   DEPARTMENTOF DEFENSE

SECRETARYOF DEFENSE:
   Melvin R. Laird                  Jan.      1969    Present

DEPUTY SECRETARYOF DEFENSE:
   David Packard                    Jan.      1969    Present


                  DEPARTMENTOF THE ARMY

SECRETARYOF THE ARMY:
   Robert F. Froehlke               July      1971    Present
   Stanley R. Resor                 July      1965    June 1971


                  DEPARTMENTOF THE NAVY

SECRETARYOF THE NAVY:
   John H. Chafee                   Jan.      1969    Present


                  DEPARTMENTOF COMMERCE

SECRETARYOF COMMERCE:
   Maurice H. Stans                 Jan.      1969    Present




                              46
                                                              APPENDIX III


                                                   Tenure of office
                                                   From            -To
                              DEPARTMENTOF COMMERCE(continued)

ASSISTANT SECRETARYOF COMMERCE
  FOR MARITIME AFFAIRS (note a):
    Andrew E. Gibson                            Dec.   1970     Present

MARITIME ADMINISTRATOR (note             a):
   Andrew E. Gibson                             Mar.   1969     Present
    James W. Gulick (acting)                    June   1966     Mar. 1969

aThe Merchant Marine Act of 1970 (84 Stat. 10181, which
 created the position  of Assistant  Secretary of Commerce
 for Maritime Affairs , provided that the Assistant  Secretary
 also be the Maritime Administrator.




U.S.   GAO.   Wash.,   D.C.             47
Copies  of this report are available      from the
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441 G Street, N W., Washington,     D.C., 20548.

Copies    are provided   without       charge to Mem-
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