U.S. Army Marine Maintenance Program in Southeast Asia

Published by the Government Accountability Office on 1971-05-04.

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

                                           WASHlNGTON,     B.C.    20548



              The Honorable                                                            lilllnlllllilllllllll~lllllillll
              The Secretary        of Defense

                     Attention:       Assistant    Secretary      of Defense

              Dear Mr. Secretary:

                                             view of theE.     g,_~&my+,marine m&n$enVs$e
                                               We compared the cost of the Army's prac-
                                               level maintenance by contract        with the
                                               type of maintenance    at the Naval Ship
                                          y, Philippines.      We also compared the effi-
               ciency of the Army contractors      and the Navy repair   facilities      in
               performing  maintenance assignments.

                      As a result    of a reduction       in '7th Fleet maintenance       requirements,
               the Naval Ship Repair Facility           at Subic Day can now perform Army
               depot marine maintenance        presently      being performed under contract
               at commercial shipyards.           Cur review showed that,      if the Army con-
               tract maintenance       was transferred      to the Navy repair     facility,
               marine maintenance       costs in Southeast Asia could be reduced by
               approximately      $2 million    for fiscal     year 19'j'2.  Other benefits
               would accrue to the Department,            such as improved operatuional.effi-
                ciency and use of resources,          as well as a reduced flow \ of dollars
               to foreign    countries.

                       Army officials    in Okinawa responsible      for the contract       mainte-
               nance program agree with our findings          and have stated that it would
               be both feasible       and economicalto   shift    the Army contract        mainte-
               nance workload to the Naval Repair ,Pacility            at Subic Ray. Their
               only reservation       to the use of the Navy shipyard was that the Army
               vessels would be given a lower priority.than             Navy ships.      IYavy
               officials    acknowledged that top priority        would be given to fleet
               vessels;    however, they stated that,     with good planning,         the Army
               watercraft    maintenance program could be accomplished            without
               compromising      Navy requirements.    Navy officials      believe    that the
               additional    Army workload would result        in more effective      u6e of

                                         50TH ANNIVERSARY1921-19711
.   .

               Because of potentially      significant  dollar savings, we propose
        that you authorize study of        the findings disclosed in this letter.
        If you agree that they have        merit, we reccmmend that you reassign
        Army watercraft maintenance        presently accomplished by contract to
        the Navy Repair Facility      at   Subfc Bay, Philippines.     AdditTonal
        details are presented below.                                              I

             The Army watercraft   fleet numbers over 2,000 vessels of which
        over '750 are located in the Pacific area.   Approximate3y 500 of
        these watercraft are assigned to U. S. Army, Vietnam activities.
              Prior to 1966, most marine vessel maintenance and overhaul was
        accomplished in Vietnam by the Army and by contract.    Early in 1966,
        it was recognjlzed that additional  capabiuty was required in Vietnm
        for general maintenance and limited depot maintenance.    A marine
        maintenance facility   at Cam Ranh Bay was established for this purpose.
               Xt became apparent that overhaul of the Army fheet in Vietnam
        would require extensive drydock and other shipyard fac;ilities           that
        could not be provided at Csm Ranh Bay. In November 1966, backup
        support for major overhaul of these vessels was given to the 2nd
        Logistical   Ccmmsu~d,Okinsm.     T..e facilities   at the 2nd. Logistical
        Cc%nmand,as well as those of local contractors in Okinawa, proved
        insufficient   to handle the volume of marine craft from Vietnam
        within a satisfactory    t%me limit,   so, contracts for depot level
        maintenance were awarded to commercial shipyards in the Philippines,
        Singapore, and Taiwan.
               The DIrectorate   of Marine Maintenance, 2na Logistical    Command,
        was given responsibility     for direction   of this program. !b3 Arw
        Procurement Office,     Okinawa, was given contracting responsibility.
        Field offices were established      in Manila and Poro Point in the
        Philippines,    Singapore, and Taipei, Taiwan, to administer and
        monitor the contract program. We were told the Taiwan Field Office
        would be closed by the first      of April 197'1, and that vessels would
        no longer be scheduled for depot level maintenance in Taiwan.

              We found that the Naval Ship Repair Facility    possesses the shop
        capability,   capacity, logistical support and flexibility   to accom-
        plish Army depot overhaul requirements.    Due to the Vicatnam phase-
        down, the productive workload declined from 9.9 million direct labor

.   .

        hours in fiscal   year 1969 to the projected      workload in fiscal    year
        1972 of 6.1 million    hours.  Navy officials     told us there were no
        plans to reduce the Naval Ship Repair Facility         capability  below
        that required   to perform vessel repairs     for the Arly.

               Officials     at the Naval Ship Repair Facility             said    s$nilar   Army
        vessels had been repaired        there without   difficulty.              They believe
        that adequate logistics        can be provided   and that          administrative      and
        clerical      effort  would not necessftate    additional          staff.


        Cost by contract

               At the time of our review,        the fiscal   year 1972 Army maintenance
        program had not been finalized.            Rowever, for planning   purposes,  the
        Directorate      of Marine Maintenance      had an approved fiscal   year 1972
        budget of about $5.8 million         for overhaul of 102 W. S. Army vessels,
        93 of which were scheduled for contract repair.             From an a3aiysis
        of the Army's estimate        of the number of man-hours required       for
        contract     overhaul of vessels in the fiscal        yeas 1971 program, we
        estimated     that the 93 vessels in the fiscal        year 1972 program would
        require     about 1.4 million    contractor    man-hours.   Fiscal year 1972
        requirements      for overhaul of Vietnamese vessels,       which were budgeted
        at $gCrO,OOO in fiscal      year 1971, were not known at the time of our

                On its fiscal      year 1971 contracts,       the Army was charged $1.56
        per man-hour by its major contractor              in the Philippines        and $1.50
        per hour in Singapore.           These costs do not include the Army's cost
        of contract      administration,       which we estimated      would amount to
        about $1,150,000       in fiscal      year 1972.     Based on the estimated           1.4
        million     contractor     man-hours,     the Army*s administrative         cost would
        smount to S.82 per hour.            ASSUJTIin~ that   contract    prices'remain        the
        same, we estimate        the total     cos t to the Army would be about $2.38
        and $2.32 per hour in the Philippines               and Singapore,      respectrvely.
        Using an average of $2.35 per hour, we estimate                 the cost to the
        Army of contracting          for these services would amount to about $3.3

        Cost by Navy facility

             The Naval Ship Repair Facility    has estimated   the fiscal   year
        1972 Navy workload at 6.1 million   production   hours and the cost
        per man-hour at $2.01.   This amount includes     $1.06 fixed cost,
        29 cents variable  cost, and 66 cents direct    labor cost.

             If the projected         Army workload of 1.4 million            man-hours is
        added to the projected         Navy workload, Navy officials            told us the

                                                                                               ?   -
                                                                                           -   4
rate per productive hour would be reduced to about $1.81. This
amount includes 91 cents fixed co&s, 2!4 cents variable cost, and
66 cents direct labor cost. Since the Naval Ship 33epal.r Facility's
overhead rate is dependent on the number of productive labor hours
worked, the decrease of 20 cents ($2.01 to $1.81) per productive
labor hour resulting   from the projected Arky requirements would
result in savings to the Navy of about $1.2 mD..3.ion on its exist?.ng
workload of 6.1 million hours.
      In addition,  savings would accrue to the Army. Using the
projected Navy plant rate of $1.81 per hour, Army cost to accomplish
the proposed contract work at the Subic Bay faellity     would amount
to about $2.5 million.     This is about $&O,OOO less than if accom-
plished by contract, including the cost of contract administration.
If the benefits to the Navy resulting    from an input of the Ar~y*s
requirements into the Subic Bay Facility     were to be passed OZI50
the Army in the form of a lower plant rate, the Army would be able
to realize even greater savings.
      To summarize, our computations show that overall savings to the
Government would amount to about $2 million in reduced maintenance
and administrative  costs to the Army and Navy in fiscal year I.972,
if contra& maintenance for the Army in Southeast Asia is trans-
ferred to the Naval Ship Repair Facility   at Subic Bay, Phfhipp?.nes.
      The Army incurred additional   costs because of lengthy delays
in contract repair and return of vessels to Vietnam. Time-consuming
award of contracts and lack of repair parts in Taiwan created criti-
cal shortages of tugboats in Vietnam which had to Be tiiled Sy
leasing tugboats from commercial firms.     During fisca:! years 1969
and 1970, approximebtely $1.3 million was s-pent each ye&r to lease
tugboats to replace those in depot overhaul more than 90 days.
       Repair time for vessels overhauled by contractors in the
Philippines     and Taiwan far exceeded the time limit permitted in
the contracts.      The average delivery time for vessels repaired by
the Philippine     contractors was 143 to 466 days (depending on the
type of vessel repaired),      or 94 to 358 days after delfvery dates
specified in the contracts.        In Taiwan, the actual delivery date
exceeded the date specified by an average of 257 days. Army
officials    stated the delays in the Philippines     were caused by.
      needed materials not furnished to contractors on time and
      inaccurate preliminary    tisual inspections of work required.

’   ,   .


                   In contrast, the Navy repaired the same types of vessels much
            faster.    For example, the average time for mechanized landing craft
            was 75 days; 66 days for utility    landing craft; and 70 days for
                  The Ship Repair Facility    at Subic Bay maintains a warehouse
            for small craft repair parts, and no significant      problems concern-
            ing parts has arisen nor is any anticipated     if the Army work is
            undertaken, Navy officials     said.
                 Our analysis of the cost for Army vessels repaired recently
            by Army contractors in the Manila area showed that actual contract
            costs were significantly higher than the initial. contract cost, as
            shown in the following table.
                               Number of
            Contractor          vessels     Contract    cost   Actual   cost   Increase
            El Varadero                       $:;;Jlz           g,;;;          $135,075
            Nassco                                                              215,650
            Luzon Stevedor        -             130: 345         lgo; 468        60,123

                 Totals           17
                                  3=           $455,230         $866,078       $410,848

            We believe that actual contractor costs, plus Army adminSstrative
            costs, far exceed the cost which would be incurred if the Navy were
            to perform the work at its Subic Bay Facility.
                      AND I43CCMMENDATION
                    The Naval Ship Repair .Facility at Subic Bay, Philippines,
            appears to have resources to handle the Army's depot watercr&ft
            maintenance at lower cost and in less time than is presently the
            case through use of commercial contractors.      We believe that other
            benefits would accrue to the Government through more efficient
            utilization    of U. S. Government resources.
                   Accordingly, we recommend that the Army depot maintenance
            requirements for watercraft be reassigned to the Naval Ship Repair

                    Your comments on our conclusions will be appreciated, as well
            as information about plans concerning matters disclosed in this

                                                                               -   5   -
2   .   c

                  Your attention   is invited to Section 256 of the Legislative
            Reorganization Act of 1970 which requires that you submit written
            statements of the action taken with respect to the above reccm-
            mendation.    The statements are to be sent to the House and Senate
            Ccanmittees on Government Operations not later than 60 days after
            the date of this report, and to the Committees on Appropriations
            in connection with the first request for appropriations    submitted
            by the Department of Defense more than 60 days after the date of
            this report.
                 Copies of this letter are being sent to the House and Senate
            Committees on Government Operations, the Committees on Appropriations,
            and to the Secretaries of the Arqy and t!!e Xavy.

                                                       Sincerely   yours,