oversight

Depot Maintenance: Public-Private Partnerships Have Increased, but Long-Term Growth and Results Are Uncertain

Published by the Government Accountability Office on 2003-04-10.

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

             United States General Accounting Office

GAO          Report to the Subcommittee on
             Readiness, Committee on Armed
             Services, House of Representatives


April 2003
             DEPOT
             MAINTENANCE
             Public-Private
             Partnerships Have
             Increased, but
             Long-Term Growth
             and Results Are
             Uncertain




GAO-03-423
             a
                                               April 2003


                                               DEPOT MAINTENANCE

                                               Public-Private Partnerships Have
Highlights of GAO-03-423, a report to the
Subcommittee on Readiness, Committee           Increased, but Long-Term Growth and
on Armed Services, House of
Representatives                                Results Are Uncertain


For several years, the Department              While the number of public-private partnerships that DOD is participating in
of Defense (DOD) and the                       has increased from 19 to 93 from fiscal year 1998 through fiscal year 2002,
Congress have encouraged the                   the existing partnerships represented only 2 percent of DOD’s fiscal year
defense logistics support                      2002 $19 billion depot maintenance program. Even with the small amount of
community to pursue partnerships               expenditures and workload associated with partnerships, some partnerships
with the private sector to combine
the best commercial processes and
                                               that GAO reviewed either improved some aspects of repair performance or
practices with DOD’s extensive                 showed potential for doing so. On the other hand, 19 partnerships have
maintenance capabilities. In                   generated no work thus far.
January 2002, DOD issued policy
encouraging the use of public-                 DOD and contractor officials have identified 14 characteristics that they
private depot maintenance                      believe over time will contribute to a partnership’s success in achieving
partnerships to improve the                    DOD’s objective of improved depot efficiency and viability. However, DOD
efficiency and viability of its                has a limited ability to measure the overall success of its partnering efforts
depots. GAO reviewed these                     because it has not yet developed measurable goals for the expected
partnerships and assessed the                  outcomes of the effort and the metrics that it has developed sometimes will
extent that DOD is participating in            not provide the data needed to fully assess the partnerships. Without initially
these partnerships, the
characteristics needed to achieve
                                               establishing clear, measurable goals to define success in improving the
effective partnerships and where               efficiency and viability of its depots and metrics that provide the relevant
DOD is in its ability to measure               data for the measurement, DOD has limited objective means to assess
success, and the management                    whether the partnerships are working as intended.
challenges to DOD’s planned
expansion of partnerships.                     Furthermore, DOD faces challenges in its efforts to expand its use of public-
                                               private partnerships. For example, opportunities available for DOD to
                                               expand its use of these partnerships may be limited by external factors that
                                               the services cannot replicate or create at will, such as one-time business
GAO recommends that DOD
•    establish overarching goals for           opportunities. Also, while DOD is expecting private sector funding to
     expected outcomes from its                support the establishment of capability for depot partnerships for new
     partnering initiative,                    systems, the amount of private-sector investment to date is only $6.9 million,
•    refine current metrics for                and the extent to which the private-sector will make additional investments
     measuring partnership                     is uncertain.
     benefits, and
•    require specific assessment
     and planning for new
     capability where partnerships
     are expected for new systems.
DOD partially concurred
but indicated that it did not
plan to implement these
recommendations. Consequently,
we are including matters for
congressional consideration that
address our recommendations.
www.gao.gov/cgi-bin/getrpt?GAO-03-423.

To view the full report, including the scope
and methodology, click on the link above.
For more information, contact Barry W.
Holman at (202) 512-8412 or
holmanb@gao.gov.
Contents



Letter                                                                                                 1
                             Results in Brief                                                          2
                             Background                                                                4
                             Growing Number of Partnerships Involve a Relatively Small
                               Portion of Depot Workload                                               8
                             Characteristics for Effective Partnerships Identified, but
                               DOD Is Limited in Its Ability to Measure Partnerships’
                               Overall Success                                                        13
                             Several Factors Could Affect DOD’s Planned Partnership
                               Expansion                                                              17
                             Conclusion                                                               20
                             Recommendations for Executive Action                                     21
                             Matters for Congressional Consideration                                  21
                             Agency Comments and Our Evaluation                                       22


Appendixes
               Appendix I:   Scope and Methodology                                                    25
              Appendix II:   Depot Maintenance Public-Private Partnerships Reviewed
                             and Depots Visited                                                       28
             Appendix III:   Summary Data Regarding the Reasons Cited and Approaches
                             Used for the 90 Partnerships Reviewed                                    45
              Appendix IV:   Examples of Partnerships That Are Achieving Positive
                             Results                                                                  52
              Appendix V:    Fourteen Characteristics Identified by DOD and Contractor
                             Officials Needed to Achieve Effective Partnerships                       60
             Appendix VI:    Comments from the Department of Defense                                  65
             Appendix VII:   GAO Staff Acknowledgments                                                68



Table                        Table 1: Characteristics That Partnerships Need to Achieve
                                      Success                                                         14


Figures                      Figure 1: Number of Partnerships by Individual Service in Fiscal
                                       Year 1998 and Fiscal Year 2002                                  9
                             Figure 2: Percentage of Workload Performed under Partnerships in
                                       Fiscal Year 2002 at 14 Depots That GAO Visited                 11




                             Page i                                  GAO-03-423 Defense Depot Maintenance
Contents




Figure 3: Reasons Cited for Entering Public-Private
           Partnerships                                                                    45
Figure 4: Types of Partnerships                                                            47
Figure 5: Frequency of Depots’ and Contractors’ Performance of
           Logistics Functions                                                             51
Figure 6: Depot and Industry Partnership Consultations at Corpus
           Christi Army Depot                                                              53
Figure 7: F/A-18 Auxiliary Power Unit Being Repaired Under a
           Partnership Between the Naval Aviation Depot Cherry
           Point and Honeywell                                                             54
Figure 8: The Nuclear-Powered Aircraft Carrier USS Enterprise
           Entering Norfolk Naval Shipyard                                                 55
Figure 9: Honeywell’s M1 Tank Engine Recuperator Manufacturing
           Line at the Anniston Army Depot                                                 57
Figure 10: Depot and Contractor Employees Repairing and Testing
           LANTIRN System                                                                  58
Figure 11: ICBM Global Positioning System Modification Showing
           Developmental Configuration Module                                              59




Abbreviations

BRAC         base realignment and closure
CVN          nuclear aircraft carrier
DOD          Department of Defense
ICBM         intercontinental ballistic missile
JSTARS       Joint Surveillance Target Attack Radar System
LANTIRN      Low-Altitude Navigation and Targeting Infrared for Night
NBCRS        nuclear, biological, chemical reconnaissance
OSD          Office of the Secretary of Defense
PDM          programmed depot maintenance


 This is a work of the U.S. Government and is not subject to copyright protection in the
 United States. It may be reproduced and distributed in its entirety without further
 permission from GAO. It may contain copyrighted graphics, images or other materials.
 Permission from the copyright holder may be necessary should you wish to reproduce
 copyrighted materials separately from GAO’s product.




Page ii                                            GAO-03-423 Defense Depot Maintenance
A
United States General Accounting Office
Washington, D.C. 20548



                                    April 10, 2003                                                                Leter




                                    The Honorable Joel Hefley
                                    Chairman
                                    The Honorable Solomon P. Ortiz
                                    Ranking Minority Member
                                    Subcommittee on Readiness
                                    Committee on Armed Services
                                    House of Representatives

                                    For the past several years, the Department of Defense (DOD) and the
                                    Congress have encouraged the defense logistics support community to
                                    pursue partnerships with the private sector. These public-private
                                    partnerships are arrangements through which the combined resources,
                                    risks, and rewards of a public agency and a private company are intended
                                    to provide greater efficiency, better access to capital, and improved
                                    compliance with a range of government regulations. In January 2002, DOD
                                    issued policy encouraging the use of such public-private partnerships in
                                    order to combine the best commercial processes and practices with DOD’s
                                    extensive depot maintenance capabilities with the objective of improving
                                    the efficiency and viability of DOD’s depots. DOD also expects these
                                    improvements to depot operations to ultimately improve support for
                                    war fighters.

                                    Your subcommittee has supported the use of public-private depot
                                    maintenance partnerships with its support of enabling legislation and
                                    interest in DOD’s use of such partnerships. This report addresses
                                    the following questions: (1) to what extent is DOD participating in
                                    public-private partnerships for depot maintenance; (2) what are the
                                    characteristics that need to be present to achieve effective partnerships,
                                    and where is DOD in its ability to measure success; and (3) what factors
                                    could affect DOD’s planned expansion of public-private partnerships?

                                    As part of our work, we reviewed 90 of the 93 partnerships DOD identified
                                    as ongoing during fiscal year 2002. We also visited 14 of DOD’s 20 major
                                    maintenance depots where these partnerships are ongoing. A more
                                    complete discussion of our scope and methodology is included in
                                    appendix I. A listing of the services’ partnerships we reviewed with
                                    relevant information about each is included in appendix II. We conducted
                                    our review from February 2002 through February 2003 in accordance with
                                    generally accepted government auditing standards.




                                    Page 1                                     GAO-03-423 Defense Depot Maintenance
Results in Brief   DOD has engaged in a growing number of public-private partnerships
                   for depot maintenance, but to date, the number of such partnerships
                   involves a relatively small portion of DOD’s depot workload. Specifically,
                   the number of such partnerships increased from 19 partnerships (13, Army;
                   3, Air Force; 2, Navy; and 1, Marine Corps) in fiscal year 1998 to 93
                   partnerships for all services in fiscal year 2002. 1 The Army still had the
                   greatest number of ongoing partnerships in fiscal year 2002—42, a 3-fold
                   increase from the 13 it had in 1998. In fiscal year 2002, the Navy had a total
                   of 31 ongoing partnerships—a 15-fold increase, the Air Force had
                   19 ongoing partnerships—a 6-fold increase, and the Marine Corps still had
                   1 partnership. While the number of DOD’s public-private partnerships for
                   depot maintenance has increased since 1998, these partnerships
                   represented only 2.2 percent of DOD’s total depot maintenance program
                   expenditures in fiscal year 2002. The partnerships at the depots we visited
                   typically accounted for a small portion of each depot’s total workload—
                   0.01 to 2.5 percent of the hours worked in fiscal year 2002—or generally did
                   not increase the workload to be performed at the depots. Nineteen—or
                   about one fifth—of the 90 partnerships we reviewed had generated no
                   workload for the depots, although many were expected to do so at some
                   point. However, even with the small amount of expenditures and
                   workload associated with partnerships, some partnerships provided
                   promising results or good potential, such as reduced repair time or better
                   parts availability.

                   DOD and contractor officials have identified 14 characteristics that they
                   believe over time will contribute to a partnership’s success in achieving
                   DOD’s objective of improved depot efficiency and viability; however, DOD
                   has not developed a baseline and measurable goals for the expected
                   outcomes needed to measure the overall success of its partnership
                   initiative. Almost all of these officials cited long-term commitment, shared
                   vision and objectives, and the right metrics as key elements for successful
                   partnering. While the 14 characteristics are not in place in all partnerships,
                   many depot partnership managers stated that they are working toward
                   pursuing the characteristics in their partnerships and that, over time
                   partnerships should evolve to include these characteristics. At the same
                   time, the depot partnership managers agreed on the importance of having
                   the right metrics (a key characteristic) in place early in the partnership to


                   1
                     We compared current depot partnerships with those in place in 1998, the last time we
                   reviewed such arrangements.




                   Page 2                                             GAO-03-423 Defense Depot Maintenance
measure success. However, DOD has a limited ability to measure the
overall success of its partnering efforts because it has not yet developed a
baseline and measurable goals for expected outcomes for the effort and
because the metrics that it has developed sometimes will not provide the
data needed to fully assess the partnerships.

While DOD plans to expand its use of public-private partnerships, several
factors could affect the department’s expansion efforts. First, opportunities
available for DOD to expand its use of public-private partnerships may be
limited by various external factors that led to partnering arrangements in
the past but that the services cannot necessarily replicate or create at will,
such as one-time business opportunities. Second, while DOD is expecting
private-sector partners to fund the establishment of capability to repair
new or upgraded systems at military depots, it is uncertain to what extent
the private-sector will make such investments. For example, the amount
of partnership-related private-sector investment in military depots
through fiscal year 2002 was $6.9 million, which, based on a commercial
sector benchmark for such investments, is only about 1 percent of the
$621 million investment needed by DOD to improve and maintain its depot
infrastructure in fiscal year 2002. Finally, much publicity has been given to
a recently considered DOD proposal to change provisions of title 10, United
States Code, that currently limit the department’s ability to outsource depot
maintenance workloads. According to DOD and depot officials, these title
10 provisions currently provide the key impetus for the expansion of
public-private partnerships.

We are making a number of recommendations to improve DOD’s
management, direction, potential for success, and assessment of its
public-private partnerships.

In commenting on a draft of this report, DOD agreed with the report’s
information, findings and conclusions, and partially concurred with the
report’s recommendations; however, DOD’s comments indicated that it
does not plan to implement the recommendations. Consequently, we are
including matters for congressional consideration that address the report’s
recommendations. DOD’s comments and our evaluation of them are
discussed in the agency comments section later in this report.




Page 3                                      GAO-03-423 Defense Depot Maintenance
Background   DOD spends about $19 billion annually on depot maintenance, which
             includes repairing, rebuilding, and overhauling weapon systems such as
             ships, tanks, and aircraft. DOD estimates that approximately 53 percent of
             its fiscal year 2002 depot-level workload will be performed in DOD-owned
             facilities, and that the remainder will be performed by the private sector,
             mostly in private-sector facilities. DOD has 20 major depots: 2 9 in the Navy
             (3 aviation depots, 4 shipyards, and 2 warfare centers), 5 in the Army, 4 in
             the Air Force (3 air logistics centers and 1 aircraft storage center), and 2 in
             the Marine Corps. The private sector operates numerous facilities where
             depot-level maintenance is performed on military and private (or
             nonmilitary) equipment and systems. Some of these facilities are
             manufacturing facilities where maintenance work is also performed, while
             others are used only for maintenance.

             For many years, debate has occurred between the Congress and various
             administrations over who should perform depot work and where it should
             be performed. Central to this debate has been the interplay between DOD’s
             efforts to rely more on the private sector for depot maintenance and title 10
             provisions that (1) limit private-sector workloads to 50 percent of available
             funding in a fiscal year, 3 (2) require the government to maintain certain
             core capabilities in military depots,4 and (3) require public-private
             competitions for certain workloads.5 The public-private partnership
             concept for improving government operations provides a cooperative
             approach for resolving this debate.




             2
                 DOD defines “major depots” as those having 400 or more employees.
             3
                 10 USC 2466.
             4
               DOD is required under 10 USC 2464 to identify and maintain within government owned and
             operated facilities a core logistics capability, including the equipment, personnel, and
             technical competence required to maintain weapon systems identified as necessary for
             national defense emergencies and contingencies.
             5
                 10 USC 2469.




             Page 4                                             GAO-03-423 Defense Depot Maintenance
The use of public-private partnerships to improve government operations
was recently endorsed in 2002 by the report of the congressionally
mandated Commercial Activities Panel chaired by the Comptroller General
of the United States.6 One sourcing principle adopted by the panel related
to the need to create incentives and processes to foster high-performing,
efficient, and effective organizations throughout the federal government.
Commentary surrounding that principle stated that

This principle recognizes that historically it has primarily been when a government entity
goes through a public-private competition that the government creates a “most efficient
organization” (MEO). Since such efforts can lead to significant savings and improved
performance, they should not be limited to public-private competitions. Instead, the federal
government needs to provide incentives for its employees, its managers, and its contractors
to constantly seek to improve the economy, efficiency, and effectiveness of the delivery of
government services through a variety of means, including competition, public-private
partnerships, and enhanced worker-management cooperation.

In early 1998, we reviewed DOD’s use of public-private depot maintenance
partnering arrangements and concluded that contractors had become more
interested in sharing repair and maintenance workloads with depots and
depots were willing to enter into partnering arrangements with the private
sector in an effort to reduce overhead costs and retain core capabilities.7
We also reported that the Army had 13 partnerships ongoing at four of its
depots, the oldest of which was initiated in fiscal year 1994. While we did
not report any partnerships for the Air Force, Navy, or Marine Corps at the
time of our review, by the end of 1998, the Air Force had three partnerships
ongoing, the Navy had two, and the Marine Corps had one.

Historically, DOD has used public-private partnering arrangements for
depot maintenance, such as work-share agreements and facility-use
partnerships, under various legal authorities—although these
arrangements generally were not referred to as “partnerships.” Partnering
with the private sector to (1) help sustain core depot maintenance
capabilities, (2) use underutilized public facilities, and (3) leverage private-


6
  Section 832 of the Floyd D. Spence National Defense Authorization Act for Fiscal Year 2001
required the Comptroller General to convene a panel of experts to study the policies and
procedures governing the transfer of commercial activities for the federal government from
government to contractor personnel. The Commercial Activities Panel’s report entitled
Improving the Sourcing Decisions of the Government (CAP-02-01) was issued on April 30,
2002.
7
  See U.S. General Accounting Office, Defense Depot Maintenance: Use of Public-Private
Partnering Arrangements, GAO/NSIAD-98-91 (Washington, D.C.: May 7, 1998).




Page 5                                             GAO-03-423 Defense Depot Maintenance
sector investment in these military facilities is a relatively new concept that
the department is pursuing on the basis of congressional direction under
10 USC 2474. The objectives of public-private partnerships under section
2474 are to

• maximize capacity use at depots,

• reduce or eliminate the depots’ ownership costs in areas such as
  operations and maintenance and environmental remediation,

• reduce the cost of products made or maintained at depots,

• leverage private-sector investments in plant and equipment and promote
  commercial business ventures at depots, and

• foster cooperation between the military and private industry.

In response to section 2474, DOD issued policy governing the formation of
public-private partnerships and incorporated the concept of these
partnerships into its current departmentwide logistics reengineering
initiative.

In January 2002, the Deputy Under Secretary of Defense (Logistics and
Materiel Readiness) issued a policy memorandum on public-private depot
maintenance partnerships. The memorandum outlined policy, provided a
definition and directed the services to pursue partnerships to strengthen
DOD’s depot maintenance operations and, ultimately, to improve support
to war fighters. The DOD policy focuses on using partnerships to improve
the efficiency and viability of its depots. The policy memorandum noted
that partnering can contribute to more effective DOD maintenance
operations, to the introduction of innovative processes and technologies,
and to the economical sustainment of depot capabilities. The department
defines a public-private partnership as “an agreement between an organic
[military] depot maintenance activity and one or more private industry or
other entities to perform work or utilize facilities and equipment.”
According to DOD policy, depot maintenance public-private partnering
arrangements generally include (but are not restricted to) one or more of
the following forms:

• Use of public-sector facilities, equipment, and employees to perform
  work or produce goods for the private sector.




Page 6                                      GAO-03-423 Defense Depot Maintenance
• Private-sector use of public-sector equipment and facilities to perform
  work for the public sector.

• Work-share agreements, using both public- and private-sector facilities
  and/or employees.

DOD included public-private partnerships in its June 2002 logistics
reengineering initiative8 to meet war fighters’ sustainment needs and
operational requirements of the National Defense Strategy. The initiative
states that public-private partnerships should help address the many
challenges facing military depots, which include facilities and equipment
that have become severely degraded because of limitations in funds for
recapitalization and an aging workforce that has shrunk by 51 percent in
the past 10 years. The department’s desired goal, according to this
initiative, is a dramatic increase in public-private depot maintenance
partnerships. The initiative reinforces the department’s effort to improve
the efficiency and viability of its depots, stating that partnerships will result
in creating greater private-sector investment in facilities and equipment,
better facility utilization, reduced costs of ownership, workforce
integration, more efficient business processes, greater credibility, and a
more collegial working relationship with the Congress.

DOD’s public-private partnership policy is intended to help the services
implement the department’s performance-based logistics initiative for its
weapon systems sustainment policy and still comply with title 10
provisions constraining the outsourcing of depot maintenance workload.
The 2001 Quadrennial Defense Review mandated the implementation of
performance-based logistics in order to improve readiness for major
weapon systems and commodities. DOD’s resulting performance-based
logistics initiative seeks to achieve these improvements by using
predetermined performance or readiness goals in evaluating a weapon
system’s logistics support provider. While performance-based logistics
does not require the use of a contractor as the logistics provider, according
to DOD officials, all of the performance-based arrangements thus far have
used a contractor as the logistics provider, and they expect that this trend
will continue. DOD officials anticipate that as the department implements

8
 The initiative is called the Future Logistics Enterprise and comprises six elements:
(1) depot maintenance partnerships, (2) condition-based maintenance, (3) total life-cycle
systems management, (4) end-to-end distribution, (5) executive agents, and (6) enterprise
integration—see Deputy Under Secretary of Defense (Logistics and Material Readiness),
Future Logistics Enterprise: The Way Ahead (Washington, D.C.: June 3, 2002).




Page 7                                             GAO-03-423 Defense Depot Maintenance
                            more performance-based logistics arrangements with contractors as
                            integrators, the contractors will have to partner with military depots for the
                            services to comply with title 10 requirements, thus increasing the use of
                            public-private partnering.



Growing Number              DOD’s public-private partnerships for depot maintenance increased from
                            19 to 93 from fiscal year 1998 through fiscal year 2002 and involved
of Partnerships             2.2 percent of DOD’s total depot maintenance program expenditures in
Involve a Relatively        fiscal year 2002. The Army had the largest number—42 partnerships in
                            fiscal year 2002. The partnerships at the depots we visited typically
Small Portion of            accounted for a small portion of each depot’s total workload—0.01 to
Depot Workload              2.5 percent—or generally did not increase the workload to be performed at
                            the depots. Two partnership arrangements resulted in large growth in
                            workload at individual depots although service officials do not consider
                            one of them as a typical increase because it was due to the closure of
                            another depot.9 Furthermore, about one-fifth of the partnerships have not
                            yet produced any workload for the depots, although future workload is
                            expected in many of these cases. However, even with the small amount of
                            new workload generated and the partnerships’ newness, some partnerships
                            provided promising results or good potential.



Services Expanding Use of   The department’s emphasis on the use of public-private partnerships for
Partnerships                depot maintenance has resulted in increases in their use—from 19 in
                            fiscal year 1998 to 93 in fiscal year 2002, an overall 4-fold increase. The
                            partnerships were formed for a variety of reasons, such as the contractors
                            seeking a depot’s unique capabilities. According to depot officials, a key
                            underlying factor for the increased use of partnerships has been the
                            legislative requirement to use at least 50 percent of available funding for
                            depot maintenance work in DOD depots. Simultaneously, long-term
                            logistics support contracts with the private sector are being pursued as the
                            preferred DOD support arrangement.


                            9
                              In 1995, the Base Realignment and Closure process resulted in the closure of the Air
                            Force’s San Antonio depot. The Air Force conducted a public-private competition for the
                            placement of much of the depot’s engine workload. The Air Force’s Oklahoma City depot
                            teamed with a contractor to compete for a combined workload package, which once
                            awarded, resulted in each partner working independently on different aircraft engine
                            workloads at their own respective locations—an atypical partnering arrangement according
                            to DOD officials.




                            Page 8                                           GAO-03-423 Defense Depot Maintenance
While the department has experienced an increase in the use of
partnerships, just over one-half of these were initiated during the last
2 fiscal years. In 1998 we reported that the Army had 13 ongoing
partnerships, a number that expanded to 42 during fiscal year 2002—a
3-fold increase. The Navy’s use of partnerships increased from 2 in 1998
to 31 in fiscal year 2002—a 15-fold increase. Similarly, the Air Force’s use of
partnerships increased from 3 in fiscal year 1998 to 19 in fiscal year 2002—
a 6-fold increase. The Marine Corps’ usage has remained constant with one
partnership in fiscal year 1998 and the same one in fiscal year 2002.10
Overall, partnership growth in the department represents a 4-fold increase
from fiscal year 1998 to fiscal year 2002. Figure 1 shows the number of total
partnerships by individual military service for fiscal years 1998 and 2002.



Figure 1: Number of Partnerships by Individual Service in Fiscal Year 1998 and
Fiscal Year 2002


 Marines




Air Force




     Navy




     Army




              0           10          20   30   40    50
            Number of partnerships
            Fiscal year

                          1998

                          2002

Source: DOD (data), GAO (analysis).




10
  The work being done as a result of the Marine Corps’ partnership is scheduled to be
completed in December 2003, although according to depot officials, the Marine Corps is
looking for additional opportunities to partner.




Page 9                                               GAO-03-423 Defense Depot Maintenance
                             These partnerships were formed for a variety of reasons and used differing
                             approaches on the basis of the circumstances surrounding the specific
                             partnering effort. For example, in a number of cases, the contractor sought
                             out the depot for its unique capabilities or for its advantageous labor rates.
                             In other cases partnerships formed to meet title 10 requirements to
                             maintain military depot capabilities for key weapon systems.11 Depot
                             officials stated that a key underlying factor driving the use of partnerships
                             has been the legislative requirement for at least 50 percent of available
                             funds to be used for depot maintenance work in DOD depots.12 At the same
                             time long-term logistics support contracts with the private sector are being
                             pursued as the preferred DOD support arrangement. The lease of
                             underutilized depot facilities to a contractor and the sale of depot repair
                             services to a contractor are examples of the approaches used to form
                             partnerships. (See appendix II for summary data regarding the reasons
                             cited and approaches used for the 90 partnerships we reviewed.)



Partnerships Account for a   While DOD has not established goals for the depot maintenance
Small Portion of DOD’s       expenditures or workload it expects to be involved in public-private
                             partnerships, currently, partnerships represent a small part of DOD’s
Depot Maintenance            overall in-house depot maintenance expenditures and workload. Some
Expenditure and of Depots’   partnerships had not yet resulted in work to be performed at their depot,
Workload                     but depot officials anticipate some in the future.

                             Maintenance performed in fiscal year 2002 by the depots under
                             partnerships accounted for only $435 million—or 2.2 percent—of the
                             $19.4 billion dollars that DOD reported spending on depot maintenance
                             in that year. Within the services, the amount of depot maintenance
                             expenditures involved in public-private partnerships varies from about
                             3.0 percent in the Army and 3.8 percent in the Air Force to about
                             0.5 percent for the Navy and Marine Corps combined.




                             11
                                  10 USC 2464.
                             12
                                  10 USC 2466.




                             Page 10                                     GAO-03-423 Defense Depot Maintenance
Furthermore, in fiscal year 2002, the total of all depots’ partnership
workload was 4.6 percent of DOD’s total military depot workload.
However, as indicated by figure 2, the partnerships’ workload at the
14 service depots we visited varied widely from 0.01 percent to nearly
26.0 percent.



Figure 2: Percentage of Workload Performed under Partnerships in Fiscal Year 2002
at 14 Depots That GAO Visited

                     Depot

       Puget Sound Naval Shipyard          0.01

 Naval Aviation Depot, North Island        0.06

 Naval Aviation Depot, Jacksonville
                                            0.18
              Norfolk Naval Shipyard
                                            0.40
             Tobyhanna Army Depot
                                              0.91
         Ogden Air Logistics Center
                                              1.30
Warner Robins Air Logistics Center
                                                  1.79
Naval Aviation Depot, Cherry Point
                                                   2.39
         Portsmouth Naval Shipyard
                                                    2.53

               Red River Army Depot
                                                           7.50
        Marine Corps Depot, Albany
                                                                       13.11

         Corpus Christi Army Depot
                                                                               15.88

Oklahoma City Air Logistics Center
                                                                                       19.23

                Anniston Army Depot
                                                                                                25.96

                                       0            5      10        15          20        25    30
                                       Percentage of workload performed
Source: DOD (data), GAO (analysis).



Partnerships at 9 of the 14 depots we visited—which have 59 partnerships
in total—involved workload that ranged from 0.01 to 2.53 percent of the
depot’s total workload. In addition, while partnership activity at the other
5 depots we visited—which have 31 partnerships in total—ranged from
7.5 to 26.0 percent of the depots’ workload, the partnerships themselves



Page 11                                                           GAO-03-423 Defense Depot Maintenance
                            were not always the reason why this workload was placed at the depots.
                            According to depot officials, with two exceptions, the placement of most of
                            the partnership workload at these depots was based on program managers’
                            decisions that occurred prior to the formation of the associated
                            partnership. The program managers’ decisions were based on reasons such
                            as maintaining repair capability in military depots, using the most
                            cost-effective maintenance source, or sustaining the viability of the
                            industrial base.

                            The two instances where partnerships resulted in significant new
                            workloads for a depot were the Army’s Abrams Integrated Management
                            XXI partnership—which accounts for about half of the Anniston workload
                            shown in figure 2—and the Air Force’s Propulsion Business Area
                            partnership-—which accounts for most of the Oklahoma City workload
                            shown in figure 2. The propulsion workload at the Oklahoma City depot
                            resulted from the closure of a major Air Force depot, and according to
                            DOD officials, this workload volume does not represent the typical
                            workload that a depot can expect as a result of a partnership.

                            In addition, as of December 2002, 19—or 21 percent—of the 90
                            partnerships we reviewed had generated no workload for the depot. For
                            example, seven partnerships at Tobyhanna Army Depot created from fiscal
                            year 1999 and through fiscal year 2001 for the depot to repair electronic
                            equipment for a contractor have not resulted in workload at the depot,
                            although workload was expected. Other partnering efforts, such as the
                            Air Force’s Flexible Acquisition and Sustainment Tool partnership and the
                            Army’s H-60 Helicopter Engineering Logistical Services and Supplies
                            partnership, are too new to have generated workload, but the depots
                            anticipate that workload will be forthcoming.



Experience Is Limited at    While the small amount of workload and expenditures attributed to
This Time, but Some         partnerships and the newness of many of the partnerships limited the
                            availability of data to assess DOD partnerships’ impact on the efficiency
Partnerships Show Promise
                            and viability of depots, some partnerships provide promising results or
for Achieving Positive      good potential for improving some aspects of repair performance. Of the
Results                     90 partnerships we reviewed, 28 either improved some aspects of repair
                            performance or showed potential for doing so. Improvements from these
                            partnerships included better parts availability, reduced repair time,
                            reduced backorders, or reduced depot support costs. These improvements
                            relate to DOD’s objective of enhancing greater depot efficiency and
                            viability. For example, reducing repair time results in improved business



                            Page 12                                   GAO-03-423 Defense Depot Maintenance
                                processes—one approach for enhancing depot operations. Reducing depot
                                support cost can result in reduced ownership costs of weapon systems—
                                another approach for enhancing depot operations. Appendix IV provides
                                six examples of partnerships that are achieving these improvements. On
                                the other hand, 19 partnerships thus far have generated no work for
                                the depots.



Characteristics for             DOD and contractor officials have identified 14 characteristics that they
                                believe over time will contribute to a partnership’s success in achieving
Effective Partnerships          DOD’s objective of improved depot efficiency and viability, but DOD has
Identified, but                 not developed sufficient data and goals for assessing its partnering
                                initiative. Many depot partnership managers stated that they are working
DOD Is Limited in Its           toward pursuing these 14 characteristics in their partnerships, including
Ability to Measure              having the right metrics in place early in the partnership to measure
Partnerships’                   success. However, DOD’s ability to measure the partnerships’ overall
                                success is limited because it has not yet developed baseline data and
Overall Success                 measurable goals for assessing the outcomes of its partnering efforts and
                                the metrics that it has developed sometimes will not provide the clear data
                                needed to fully assess the partnerships.



Characteristics Identified by   While DOD continues to gain experience in partnering, senior-level DOD
DOD and Contractor              and contractor officials have identified 14 characteristics, or best practices,
                                that they believe over time may be important for a partnership’s success in
Officials Needed to Achieve
                                contributing toward achieving DOD’s objective. Almost all officials cited
Effective Partnerships          three characteristics as key—long-term relationship and commitment,
                                shared vision and objectives, and the right metrics. The other 11 attributes
                                were cited less frequently but, according to the identifying officials, will
                                nonetheless improve the potential for success if present in a partnership.
                                Table 1 summarizes the 14 characteristics cited by DOD and contractor
                                officials as important to the success of partnerships.




                                Page 13                                     GAO-03-423 Defense Depot Maintenance
Table 1: Characteristics That Partnerships Need to Achieve Success

Success characteristic                    Reason for/Benefit of partnership
Long-term relationship and                A long-term relationship and commitment (1) permits both contractors and depots to better plan
commitment                                future workload requirements and create a better business case for the contractor to make
                                          investments to improve depot repair capability and (2) allows the contractor to help manage parts
                                          obsolescence.
Shared partnership vision and             Having partners share the same partnership vision and objectives helps ensure that the partners
objectives                                will not be working at cross-purposes.
The right metrics and incentives          The right metrics and incentives are needed to effectively measure that progress is being made
                                          and ensure that the partners are effectively motivated to achieve partnership goals
                                          and objectives.
Early acquisition community               Developing the partnership with acquisition community involvement during the early phases of a
involvement                               weapon system’s acquisition helps to ensure that any additional depot maintenance capability
                                          development needed is fully planned and funded.a
Complementary skills and abilities        Each partner should bring complementary skills and abilities to the partnership because if each
                                          partner’s capabilities are the same, the relationship may result in a competitive and potentially
                                          adversarial relationship, not the cooperative synergistic relationship hoped for in a partnership.
Senior-level advocacy and support         DOD and contractor senior management support for a partnership is necessary to ensure that
                                          the effort receives the focus and resources needed to achieve success.
Sound business case analysis              A comprehensive business case analysis, including expected outcomes, should be conducted as
                                          part of the decision process for entering a partnership to ensure a sound result benefiting both
                                          the depot and the private-sector partners.
Mutual trust and shared risk              The partnership should be firmly grounded in mutual trust, open communications, and balanced
                                          risk among partners.
Flexibility to change partnership scope To ensure the ability to adapt to changing circumstances or factors, the partnerships should have
                                        the flexibility to change the partnership scope.
Balanced workload                         Workload should be balanced among the partners to ensure meaningful involvement for each
                                          partner and ensure that one partner does not receive only low-skilled work or no work at all.
Independent review and oversight          Independent review and oversight provides an objective assessment of whether each
                                          partnership is achieving the expected benefits and that each partner performs as expected. Such
                                          a review also provides a basis for correcting or redirecting partnership efforts if expectations are
                                          not being met.
Enforce partnership decisions and         To ensure successful partnering efforts, the partners’ senior management must provide a
requirements                              mechanism for enforcing compliance with partnership decisions and requirements.
Full coordination with all stakeholders   Public-private partnership efforts should include steps to get feedback from all stakeholders on
                                          planned efforts and adjust the partnering strategies to reflect legitimate concerns of these
                                          stakeholders.
Clearly documented objectives in          Once clear mutual partnering objectives are determined, they should be documented into a
partnering agreement                      formal partnering agreement. The documentation can provide for dispute mediation and
                                          resolution, and also help delineate each partner’s liability.
Sources: DOD and contractors.
                                                 a
                                                  Recently, we reported that reducing the logistics costs for a weapon system is enhanced with early
                                                 involvement among the acquisition and logistics community—see U.S. General Accounting Office,
                                                 Best Practices: Setting Requirements Differently Could Reduce Weapon System’s Total Ownership
                                                 Costs, GAO-03-57 (Washington, D.C.: Feb. 11, 2003).




                                                 Page 14                                                  GAO-03-423 Defense Depot Maintenance
                             While we observed the presence of these characteristics in some of the
                             partnerships we reviewed, we did not attempt to validate the extent to
                             which the characteristics were present in all partnerships reviewed, given
                             the newness of many of the partnerships. (See appendix V for examples of
                             how some of the partnerships we reviewed exhibited these
                             characteristics.) Nonetheless, many of the depot officials responsible for
                             managing partnerships stated that the characteristics identified by senior-
                             level contractor and DOD officials will contribute to making partnership
                             efforts successful. They also stated that while the characteristics are not
                             currently present in all partnerships, over time, more partnerships will
                             evolve to include these characteristics. The officials agreed that the
                             characteristic of having long-term commitment should permit both
                             contractors and depots to better plan future workload requirements and
                             create a better business case for the contractor to make investments to
                             improve depot repair capability. The officials agreed that the characteristic
                             of sharing the same partnership vision and objective helps ensure that the
                             partners will not be working at cross-purposes. Additionally, these officials
                             pointed out that another of the characteristics—having the right metrics—
                             is critical to develop early in a partnership. Without establishing sound
                             metrics for partnerships early, the services cannot effectively measure that
                             progress is being made toward achieving the partnerships’ goals and
                             objectives. The officials added that in such instances a partnership risks
                             making no progress toward its goal or possibly even having an impact that
                             is counter to the partnership’s goals and objectives.



DOD’s Ability to Measure     DOD is limited in its ability to measure the overall success of its partnering
Success Is Limited by Lack   efforts because it has not yet developed baseline data and measurable goals
                             for the expected outcomes of the effort. Furthermore, the metrics that
of Measurable Goals for      DOD has developed sometimes will not provide the data needed to assess
Outcomes and Unclear         the partnerships’ results.
Metrics
                             While some partnerships have produced positive results, such as reduced
                             repair time, DOD has neither established a baseline regarding efficiency
                             and viability for where the depots are today nor developed measurable
                             goals for the expected outcomes that would define success for achieving
                             improved depot efficiency and viability. Such goals could include
                             measurable targets for the amount of reductions in general and
                             administrative expenses, degree of increased utilization of depot capacity,
                             number of jobs created at depots, and amount of private-sector investment
                             in depot infrastructure and equipment. Establishing such goals would
                             provide DOD and the Congress with a measuring stick against which to



                             Page 15                                     GAO-03-423 Defense Depot Maintenance
determine the progress that DOD’s partnering initiative is making toward
improved depot efficiency and viability.

Without the goals, DOD’s existing metrics—the data that DOD is collecting
to measure individual partnership performance—do not provide the clear
information needed to assess a partnership’s progress in improving a
depot’s performance. DOD is collecting data to measure individual
partnership performance—revenue generated, capital investment, jobs
created, cost avoidance, increased facility utilization, improved business
processes, and improved responsiveness to customers. However, these
metrics are not tied to overarching goals for DOD’s partnership initiative.
Consequently, DOD does not have a clear means for assessing the
accomplishments of its individual partnerships toward meeting its
overarching objective and therefore risks not achieving the improvements
to depot operations expected from public-private partnership efforts. For
example, investments made by the private sector in military depots to date
have been about $6.9 million in total at all DOD depots. However, without
an established goal for such investments based on each depot’s strategic
capital investment needs, DOD does not have a means of evaluating how
effective these investments are toward improving a depot’s viability
or efficiency.

Furthermore, in some cases, the metrics that DOD has developed may not
indicate whether improvements in depot performance are due to a
partnership or to other factors. This is because some partnerships coincide
with changes to a weapon system program (such as adopting a new repair
approach) that may cloud the service’s ability to measure whether the
partnership is responsible for any of the measured impacts. For example,
metrics for the Army’s T700 helicopter engine partnership will measure
changes in an engine’s reliability. However, the Army began a
recapitalization effort shortly after the start of the partnership, and
according to a program management official, the recapitalization effort will
affect the reliability of the metrics. An Army depot official stated that it is
not possible to separate the impact of the recapitalization from the impact
of the partnership, since the two initiatives were implemented
concurrently. Eleven of the partnerships we reviewed involved similar
recapitalization or other major weapon system modifications and
improvements that likewise have the potential for distorting the metrics for
these partnerships.




Page 16                                     GAO-03-423 Defense Depot Maintenance
Several Factors              While DOD plans to expand its use of public-private partnerships to
                             improve the efficiency and viability of its depots, several factors could
Could Affect                 affect the department’s expansion efforts. The opportunities for increased
DOD’s Planned                partnering may be limited by external factors that the services cannot
                             create at will, and uncertainties over the extent to which the private sector
Partnership Expansion        will invest to improve or develop new capabilities at DOD depots to
                             support partnerships. In addition, should the Congress change title 10
                             provisions pertaining to depot maintenance, the changes could affect the
                             impetus for public-private partnerships.



Partnering Opportunities     The opportunities available for DOD to expand its use of public-private
May Be Limited by External   partnerships may be limited by external factors that the services cannot
                             replicate or create at will. Indeed, the creation of some partnerships
Factors                      resulted from the occurrence of one-time business opportunities arising
                             from external factors, such as contractors’ decisions to divest themselves
                             of repair capabilities.

                             Such one-time opportunities may be critical to developing successful
                             partnerships, but their occurrence is unpredictable. For example, Northrop
                             Grumman made a business decision to discontinue its in-house composite
                             repair capability for B-2 aircraft flight control surfaces. This created an
                             opportunity for the Air Force’s Ogden depot to develop repair capability for
                             the flight control surfaces and enter into a partnership with Northrop
                             Grumman, which retained the overarching contract responsibility for the
                             B-2’s airframe maintenance. This partnering opportunity between the
                             Ogden depot and Northrop Grumman was wholly contingent on the
                             contractor’s decision to divest itself of this repair capability.



Expected Private-Sector      Expanding the use of partnerships to new or upgraded systems where
Investments to Establish     depots do not currently have the capability to accomplish the work will
                             require investment directly from system program offices or from the
New Capabilities Are
                             private-sector partner to develop new system capabilities in the depot.
Uncertain                    Although DOD expects private-sector partners to contribute to developing
                             these capabilities, the extent to which the private sector will make such
                             investments is uncertain.




                             Page 17                                    GAO-03-423 Defense Depot Maintenance
The department’s January 2002 partnership policy encourages public-
private partnerships to be structured to improve the deteriorating
condition of depot facilities and equipment by “leveraging private-sector
investments, such as facilities and equipment, to contribute to re-
capitalization of depot maintenance activities.” However, DOD’s data on
the investments made by the private sector in military depots to support
partnership as of the end of fiscal year 2002 show only about $6.9 million in
private-sector investment at all DOD depots. Ninety-six percent of this total
occurred at one depot—the Army’s Anniston depot—and the remaining 4
percent occurred at one other depot—the Air Force’s Warner Robins depot.
For fiscal year 2002, DOD invested about $330 million in the depots through
its defense working capital fund’s capital investment program. This funding
was for equipment replacement, productivity improvements,
environmental compliance, computer equipment and software, and minor
construction. Additional investments are made in depots by program
management offices for establishing new system capabilities, and while
DOD does not quantify the amount of this investment, we reported in 2001
that program management offices had invested $403 million over a 10-year
period ending in 2000—about $40 million annually.13 The department
recognizes that adequate funding has not been made available to revitalize
the depots and incorporate new systems capabilities, and is looking to
private-sector investments by its partners to mitigate this shortfall.

In its recently issued depot maintenance strategy plan, the Air Force states
that a commercial-sector benchmark for adequate investment levels in
depots is from 6 to 7 percent of revenue per year. Assuming that this
represents a reasonable target for the services, investments in depots’
infrastructure would equate to about $621 million for fiscal year 2002.
However, at its fiscal year 2002 level, private-sector depot investments
resulting from partnerships equated to about 1 percent of this investment
level. While the department has not established specific goals for the share
of private-sector investments, the extent to which DOD will be able to rely
on the private-sector investments is uncertain.




13
 See U.S. General Accounting Office, Defense Logistics: Actions Needed to
Overcome Capability Gaps in the Public Depot System, GAO-02-105 (Washington, D.C.:
Oct. 12, 2001).




Page 18                                        GAO-03-423 Defense Depot Maintenance
Changes to Title 10 Could   Recently, DOD considered proposing changes to title 10 provisions
Limit Impetus for           that limit the outsourcing of depot maintenance workloads. Should
                            the Congress make such changes, the impetus for expanded use of
Expanding Use of            public-private partnerships could be reduced.
Partnerships
                            While DOD recognizes that some of its partnerships have resulted from
                            external factors beyond the services’ control, the department expects that
                            its initiative to expand contractors’ involvement in logistics support for
                            weapon systems will increase partnering opportunities for depots.
                            According to DOD officials, this will occur because the services will require
                            contractors to partner with depots for some depot maintenance work to
                            satisfy title 10 provisions that limit the amount of depot maintenance work
                            that can be performed by the private sector. Recently, however, much
                            publicity has surrounded discussions within DOD over its tentative
                            proposal to change title 10 by repealing six provisions in order to create
                            greater flexibility in determining the most effective and efficient sources
                            for depot maintenance.14 At the time we completed our review, DOD had
                            discontinued this current effort to repeal these provisions, but the
                            department has proposed repeal of depot-related provisions in the past and
                            could again in the future. If the Congress were to repeal these provisions,
                            private-sector contractors might not consider public-private partnering as
                            an attractive alternative to performing the work themselves or to
                            subcontracting the work to another private-sector entity.

                            Our work found that these provisions have fostered the use of
                            partnerships. For example, 11 percent of the 90 partnerships we reviewed
                            cited compliance with title 10 provisions as the reason for partnering (see
                            fig. 3 in app. III), and depot officials indicated it was an underlying factor
                            influencing the decisions to form other partnerships. According to depot
                            officials, these title 10 provisions currently provide the key impetus for the
                            expansion of public-private partnerships and removal of these title 10
                            provisions could have an adverse impact on partnering opportunities.




                            14
                              The sections DOD considered proposing for repeal were 2460, 2464, 2466, 2469, 2470,
                            and 2472.




                            Page 19                                           GAO-03-423 Defense Depot Maintenance
Conclusion   Even with the significant increase in the number of DOD’s public-private
             partnerships from fiscal year 1998 through fiscal year 2002, the existing
             partnerships represent only 2.2 percent of DOD’s $19 billion depot
             maintenance program. DOD does plan to greatly expand the use of
             public-private partnerships to help achieve the partnership initiative’s
             objective of improving the efficiency and viability of its military depots.
             However, it has neither established a baseline regarding depots’ efficiency
             and viability for where they are today nor developed measurable goals for
             expected outcomes to define the degree of the improved depot efficiency
             and viability desired. Additionally, the metrics that DOD has developed will
             not, in certain circumstances, provide the relevant data needed to assess
             individual partnership results. Without initially establishing both clear and
             measurable goals to define success in improving the efficiency and viability
             of its depots and the metrics that provide the relevant data for the
             measurement, DOD has limited objective means to assess whether the
             partnerships are working as intended. Furthermore, while DOD is
             expecting private-sector investment in public depots to support the
             creation of capability to support new systems the extent to which this
             investment is likely to occur is uncertain. Absent additional planning, this
             situation could result in capability shortfalls or lead to delays in
             establishing needed capabilities.

             To improve DOD’s management, direction, potential for success, and
             assessment of its public-private partnerships, we provided DOD with a
             number of recommendations in a draft of this report. In commenting on the
             draft, DOD indicated that it does not plan to implement our
             recommendations because it found them to be too general and thus not
             actionable. However, the department’s reluctance to establish overall goals
             for partnerships makes it unclear as to the overall role that DOD envisions
             for partnerships in its depots—even though DOD’s focus on partnering was
             intended as one means of fostering improvements in government owned
             and operated depot facilities. We have long reported on weaknesses in
             DOD’s processes for identifying core capabilities to be accomplished in
             government-owned depot maintenance facilities, continuing deterioration
             in depot facilities with inadequate recapitalization plans, and a smaller but
             aging workforce with inadequate human capital plans in place to preserve
             depot capabilities for the future. Such conditions place at risk the role of
             these facilities in ensuring the existence of a ready and controlled source of
             in-house technical competence and resources so that the military can
             respond to mobilizations, national defense emergencies, and




             Page 20                                     GAO-03-423 Defense Depot Maintenance
                      contingencies. Clear goals for partnership arrangements are important if
                      they are expected to play a role in improving depot operations.



Recommendations for   To improve the management, direction, potential for success, and
                      assessment of its public-private partnerships, we recommend that the
Executive Action      Secretary of Defense direct the Under Secretary of Defense for Acquisition,
                      Technology and Logistics to

                      • establish baseline data and overarching goals for expected outcomes of
                        partnership efforts, including the partnership initiative’s desired
                        improvements to depot operations and

                      • develop or refine metrics as needed to provide a more complete basis to
                        assess the results of the depot partnering arrangements as well as
                        ensuring that they differentiate between improvements to a weapon
                        system’s support resulting from partnering and from other factors or
                        changes affecting the weapon system.

                      To support the expansion of partnership arrangements for new systems, we
                      recommend that the Secretary of Defense require the Under Secretary of
                      Defense for Acquisition, Technology and Logistics

                      • to require specific assessment and planning for new capability in
                        military depots where partnership arrangements for new systems are
                        expected and

                      • as part of this planning, assess the likelihood of private-sector
                        investment in new systems capability in military depots and other
                        alternatives as needed.



Matters for           To encourage the Department of Defense to more clearly identify its
                      long-term goals for its depot facilities and the role of public-private
Congressional         partnerships in meeting those goals, the Congress should consider
Consideration         requiring DOD to develop measurable goals for improving future
                      operations of its depot facilities to include (1) facilities recapitalization,
                      (2) retention of specific depot capabilities, and (3) human capital plans for
                      preserving a viable workforce. In doing so, the Congress should also
                      consider requiring DOD to establish time frames against which it will
                      periodically assess and report to the Congress on progress in each of



                      Page 21                                     GAO-03-423 Defense Depot Maintenance
                      these areas, including the contribution of partnering arrangements to
                      those goals.



Agency Comments and   In commenting on a draft of this report, the Deputy Under Secretary of
                      Defense for Logistics and Material Readiness agreed with the report’s
Our Evaluation        information, analysis and conclusions but only partially concurred with the
                      report’s recommendations. Overall, he expressed the view that the
                      recommendations were so generally drawn that they are not actionable as a
                      practical matter. We disagree and continue to believe that they are needed
                      actions. The department’s comments are included in this report in
                      appendix VI.

                      With regard to our first recommendation to establish baseline data and
                      overarching goals for expected outcomes of partnerships, DOD stated that
                      it has already established baseline data and goals. However, these baselines
                      and goals relate to individual partnerships rather than to the partnership
                      program as a whole. We agree that baseline data and goals are needed to
                      measure the progress of individual partnership initiatives; however, our
                      intent was to have the department establish overarching goals with
                      measurable outcomes to help gauge the success of DOD’s overall
                      partnership initiative toward strengthening DOD’s depot maintenance
                      operations. Such goals would be key to measuring progress toward
                      achieving the expectation identified in DOD’s partnership policy
                      memorandum, which was to have partnerships “contribute to more
                      effective depot maintenance operations, the introduction of innovative
                      processes or technologies, and the economical sustainment of organic
                      capabilities.” We do not agree that the goals stated in the policy
                      memorandum in and of themselves are specific enough to provide
                      measurable outcomes against which to assess the collective effectiveness
                      of the department’s efforts to improve depot efficiency and viability.

                      Regarding our second recommendation to develop or refine metrics as
                      needed to provide a more complete basis to assess the results of depot
                      partnering arrangements, DOD said it will be difficult, if not impossible, to
                      differentiate between improvements solely resulting from partnering
                      versus other factors. While we agree that it may be difficult, we nonetheless
                      believe that it will be critical in assessing the department’s partnering
                      initiative. Unless the department develops meaningful metrics that
                      reasonably determine relative contributions of various factors contributing
                      to changed conditions in weapon system support, it will not be in a position




                      Page 22                                    GAO-03-423 Defense Depot Maintenance
to determine the results of ongoing partnerships and the conditions under
which additional partnerships should be undertaken.

Regarding our third recommendation to require specific assessment and
planning for new capability in military depots where partnership
arrangements for new systems are expected, the department stated that it
currently requires assessment and planning for new weapon systems but
agreed that more emphasis could be placed on determining the role that
public-private partnerships may play in establishing new depot capabilities.
However, it did not identify any specific action planned to do so—we
believe it is important for the department to identify steps to be taken to
give this increased emphasis.

Regarding our fourth recommendation to assess as part of planning, the
likelihood of private-sector investment in new systems capability in
military depots, the department stated that capital investment by the
private sector across the broad spectrum is unrealistic, stating that it was
never the department’s intention for its public-private partnership program
to supplant the need for capital investment and funding by the services. We
did not intend to suggest that partnerships supplant service funding but
rather give visibility to a goal established by the department in its public-
private partnership policy memorandum, which states that one objective of
public-private partnerships is “leveraging private-sector investments such
as facilitates and equipment to contribute to re-capitalization of depot
maintenance activities.” We continue to believe that the assessment called
for in our recommendation is important both to help assess the
contribution of partnerships in achieving this partnering objective as well
as to more clearly assess capital investment needs from other sources.

Finally, we disagree with the department’s statement that our
recommendations are not actionable as a practical matter. A key element
needed for the department to achieve its objective of more effective
military depot maintenance operations through public-private partnerships
is the ability to measure and assess the contribution of partnerships toward
meeting that objective. As a practical matter, without establishing clear and




Page 23                                    GAO-03-423 Defense Depot Maintenance
measurable goals for its partnering program, the department is limited in
its ability to assess whether the partnerships are working as intended to
produce positive results or, conversely, are having a negative effect on
military depot maintenance operations.


We are sending copies of this report to interested congressional
committees; the Secretary of Defense; the Secretaries of the Army,
the Navy, and the Air Force; the Commandant of the Marine Corps; and the
Director, Office of Management and Budget. We will make copies available
to others upon request. In addition, the report will be available at no charge
on the GAO Web site at http://www.gao.gov.

If you or your staff have questions regarding this report, please contact me
at (202) 512-8412 or holmanb@gao.gov. Other major contributors to this
report are listed in appendix VII.




Barry W. Holman
Director, Defense Capabilities
 and Management




Page 24                                     GAO-03-423 Defense Depot Maintenance
Appendix I

Scope and Methodology                                                                     AA
                                                                                           ppp
                                                                                             ep
                                                                                              ned
                                                                                                n
                                                                                                x
                                                                                                id
                                                                                                 e
                                                                                                 x
                                                                                                 Iis




             To determine the extent to which the Department of Defense (DOD) is
             participating in public-private partnerships for depot maintenance; we met
             with officials from the Office of the Secretary of Defense (OSD) and from
             service logistics offices to identify recent, ongoing, and planned
             partnerships within each service and identified the military depots
             associated with these partnerships. We also reviewed partnership data
             maintained in the Joint Depot Maintenance Activities Group partnering
             database. We visited 14 of DOD’s 20 major military depots (see appendix II
             for the depots visited and the partnerships reviewed) to examine in more
             depth the partnerships associated with these depots. We selected depots
             that had the greatest volume of partnership activity, also ensuring that we
             included each service. Of the six depots we did not visit, four did not have
             any partnerships reported in the Joint Depot Maintenance Activities Group
             partnering database—the Marine Corps Maintenance Center Barstow,
             Barstow, California; the Naval Surface Warfare Center, Crane Division,
             Crane, Indiana; the Naval Undersea Warfare Center, Keyport Division,
             Keyport, Washington; and the Aerospace Maintenance and Regeneration
             Center, Tucson, Arizona—the other two depots—Pearl Harbor Naval
             Shipyard and Letterkenny Army Depot—reported two partnerships and
             one partnership, respectively. We did not assess why these sites had this
             low volume of partnership activity. To collect information on the
             partnerships we reviewed, we developed a data collection instrument for
             each depot to complete for each partnership. The information collected on
             each partnership included the type of partnership, reasons why the
             partnership was formed, roles and responsibilities of each partner, and the
             legislative authority or basis for the partnership. We did not, however,
             validate the data provided by the depots or attempt to assess whether or
             not the tasks and responsibilities assumed by the contractor and military
             depot partners represented the best division of work for achieving success
             within the partnership.

             To calculate the growth in public-private partnerships, we used our 1998
             work reviewing the use of public-private partnerships in DOD as a baseline,
             tallied the number of partnerships by service, and compared these numbers
             with the partnerships reported in the Joint Depot Maintenance Activities
             Group partnering database as of December 4, 2002. To determine the
             relative size or scale of the partnership efforts within DOD, we analyzed
             fiscal year 2002 data on (1) the workload that each partnership brought to
             the each depot compared with the total ongoing workload for each depot,
             (2) the total workload that the partnerships brought to the depots
             compared to the total combined workload for all depots visited, and (3) the
             total dollar value of depot maintenance performed under the partnerships



             Page 25                                   GAO-03-423 Defense Depot Maintenance
Appendix I
Scope and Methodology




at the depots we visited compared with the department’s total depot
maintenance expenditures.

To determine the characteristics that need to be present to achieve
effective partnerships and where DOD is in its ability to measure success,
we met with OSD logistics officials, service logistics officials, high-level
contractor officials, and officials at each depot visited. We discussed
evaluating the effectiveness of ongoing partnerships—measuring success
against DOD’s objective of improved depot efficiency and viability—with
these officials and collected relevant data and also discussed the
characteristics of successful partnerships with the senior-level DOD and
contractor officials. To identify the characteristics of successful
partnerships, we reviewed the information collected through structured
interviews with senior-level DOD and contractor officials and grouped the
characteristics into categories based on the similarities of responses. We
also discussed the extent to which depot partnership managers expect
these characteristics to be present in current partnerships or will be
present in future partnerships. To determine whether DOD has developed a
sufficient framework for measuring success, we reviewed the metrics that
DOD has developed to gauge the performance of its partnerships and
assessed whether these metrics included measurable goals and outcomes
tying the partnerships’ performance to DOD’s public-private partnership
policy objective. We also assessed the relevance of the department’s
metrics to DOD’s public-private partnership policy objective. We did not
test or validate the accuracy of the reported performance data related to
the public-private partnerships but instead considered the structure of the
metrics to assess their relevance to DOD’s partnership policy objective. To
analyze the sufficiency of data for evaluating the extent to which
partnerships improved the economy and efficiency of depot operations and
improved the viability of the depots, we compared the relative volume of
each depot’s partnership workload with the ongoing workload at each
depot visited and assessed the age of the partnerships to determine if
enough data existed to make an evaluation. To determine the amount of
investments made by the private sector in military-depot plant and
equipment, we extracted information from a database on partnerships
developed by the Joint Depot Maintenance Activities Group at OSD’s
request. We also used this database to identify the expected annual value of
depot work for each partnership and presented this data in appendix II.
When no annual estimate was identified in the database, we calculated an
annual work value by dividing the total expected value for the partnership
by the expected partnership life, where possible. In those instances where
this was not possible, we presented the total revenue generated by the



Page 26                                   GAO-03-423 Defense Depot Maintenance
Appendix I
Scope and Methodology




partnership to date. We did not perform a reliability assessment on this
Joint Depot Maintenance Activities Group database. Through discussions
with depot officials and reviews of individual partnerships, we identified
instances where the partnering efforts produced promising outcomes as
related to DOD’s objective of improved depot efficiency and viability.

To determine what future management challenges face DOD’s planned
expansion of public-private partnerships, we relied on our discussions with
OSD logistics officials, service logistics officials, high-level contractor
officials, and officials at each depot visited to identify challenges that may
inhibit the department’s expansion efforts. To assess the potential impact
of proposed legislative changes on limiting DOD’s planned expansion of
public-private partnerships, we discussed the impact of removing title 10
provisions that currently limit the outsourcing of military depot
maintenance and repair workload with OSD maintenance policy officials,
depot officials, and contractor officials and discussed how these title 10
provisions affect contractors’ and military depots’ decisions to form public-
private partnerships. To assess whether the opportunities for partnering
are limited, we reviewed the reasons why ongoing partnerships developed
and then discussed with these officials the services’ ability to control or
create opportunities that can lead to successful partnerships. We also
discussed the relationship between the expansion of public-private
partnerships and DOD’s implementation of performance-based logistics
with OSD officials and reviewed the services’ performance-based logistics
implementation plans. To assess the potential impact of DOD’s new policy
calling for private-sector investment in depots on establishing and funding
needed depot capabilities, we reviewed and compared the new public-
private partnership policy with DOD’s overarching acquisition policy, and
discussed the partnering policy’s implementation with depot and OSD
officials.

We conducted our review from February 2002 through February 2003 in
accordance with generally accepted government auditing standards.




Page 27                                    GAO-03-423 Defense Depot Maintenance
Appendix II

Depot Maintenance Public-Private
Partnerships Reviewed and Depots Visited                                                                                                      Appendx
                                                                                                                                                    Ii




Depot/Partnership (year Private-sector        Reason(s) for                 Expected annual           Partnership type—description of
initiated)              partner               partnership              value of work in depot         partnership tasks
Anniston Army Depot
Stryker-1 (2001)         General Dynamics     Contractor sought                       $2 million      Direct sale/government-furnished
                         Land Systems         out depot for its                                       resources—Depot performs
                                              unique capabilities                                     finishing operations, paints the
                                              and advantageous                                        vehicle and provides production
                                              labor rates.                                            services. The contractor performs
                                                                                                      vehicle test and acceptance and
                                                                                                      supplies all parts and material for
                                                                                                      the production of the vehicle. Both
                                                                                                      the depot and the contractor
                                                                                                      perform vehicle assembly.
Stryker-2 (2001)         General Motors       Contractor sought                         $40,000       Direct sale—Depot performs hull
                         Defense              out depot for its                                       and component modification and
                                              unique capabilities                                     repair. The contractor performs
                                              and advantageous                                        vehicle assembly, test and
                                              labor rates.                                            acceptance, and provides all parts
                                                                                                      and material.
Fox Vehicle              General Dynamics     Contractor sought                       $1 million      Direct sale/lease—Depot performs
Upgrade-Services and     Land Systems         out depot for its                                       vehicle hull upgrade, tail upgrade,
Facility Use (1996)                           unique capabilities                                     paints vehicle, disassembles
                                              and advantageous                                        engine, and removes asbestos. The
                                              labor rates.                                            contractor performs vehicle
                                                                                                      disassembly and reassembly, sub
                                                                                                      assembly/component rework, and
                                                                                                      systems integration and test.
Fox Vehicle Maintenance- General Dynamics     Provided collocation                      $30,000       Lease—Depot provides use of a
Facility Use (1996)      Land Systems         with related Fox                                        facility. Contractor uses facility to
                                              vehicle upgrade                                         receive, store, and issue Fox
                                              partnership.                                            vehicle subassemblies,
                                                                                                      components and parts for fielded
                                                                                                      vehicles.
Gunner’s Primary Sight   General Dynamics     Depot had available                       $85,000       Lease—Depot provides use of a
Manufacturing (1997)     Land Systems         production facilities                                   facility. Contractor performs
                                              needed by the                                           manufacture of a new gunner’s
                                              contractor.                                             primary site.
M113 Family of Vehicles United Defense        Program manager              No annual estimate         Work share/lease—Depot performs
Overhaul and Conversion Limited Partnership   directed work share            available, but total     vehicle disassembly, hull overhaul
(1997)                                        and contractor            revenue reported since        and conversion, and provides the
                                              sought out depot for    partnership’s inception in      “dismate” power pack. The
                                              its unique                 January 1997 through         contractor overhauls
                                              capabilities.                March 2002—$15.9           subassemblies and components,
                                                                                         million.     performs engine and suspension
                                                                                                      modification, vehicle assembly,
                                                                                                      systems integration and test, and
                                                                                                      final paint.




                                            Page 28                                                 GAO-03-423 Defense Depot Maintenance
                                             Appendix II
                                             Depot Maintenance Public-Private
                                             Partnerships Reviewed and Depots Visited




(Continued From Previous Page)
Depot/Partnership (year Private-sector          Reason(s) for                Expected annual           Partnership type—description of
initiated)              partner                 partnership             value of work in depot         partnership tasks
M1/M1A2 Upgrade           General Dynamics      Program manager                     $15.3 million      Work share—This is a partnership
(1994)                    Land Systems          directed work share.                                   for the upgrade of the M1 tank to
                                                                                                       the M1A2 version. Depot performs
                                                                                                       vehicle receipt, disassembly, hull
                                                                                                       rework and upgrade,
                                                                                                       demilitarization of the turret,
                                                                                                       overhaul of major subassemblies
                                                                                                       and components, and then ships
                                                                                                       tank parts to the contractor in Lima,
                                                                                                       Ohio. Contractor performs vehicle
                                                                                                       reassembly, turret installation and
                                                                                                       systems test and integration.
Partnership for Reduced   Honeywell             Program developed                        $31,000       Lease—Depot provides use of
Operation and Support                           by program                                             underutilized facility to contractor.
Cost—Engine (1999)                              manager, contractor,                                   Contractor uses facility to supply
                                                and depot to                                           parts and material to support the
                                                enhance current                                        depot’s turbine engine
                                                depot engine                                           repair/overhaul line.
                                                overhaul programs,
                                                and reduce
                                                operations and
                                                support costs.
Recuperator Plate         Honeywell             Base realignment                        $200,000       Direct sale/lease—Depot provides
Manufacturing (1998)                            and closure (BRAC)                                     material handling and movement,
                                                process closed a                                       and the contractor manufactures
                                                government-owned                                       recuperator plates.
                                                facility where
                                                contractor
                                                performed work.
Abrams Integrated         General Dynamics      Program manager                       $47 million      Work share—This is a partnership
Management for the 21st   Land Systems          directed work share.                                   for a recapitalization of the M1A1
Century (1996)                                                                                         tank. Depot performs vehicle
                                                                                                       receipt, disassembly; overhaul of
                                                                                                       hull, turret, and major
                                                                                                       subassemblies and components;
                                                                                                       and ships the tank to contractor in
                                                                                                       Lima, Ohio. The contractor
                                                                                                       performs vehicle reassembly and
                                                                                                       systems test and integration.
Hercules (1998)           United Defense        Program manager             No annual estimate         Work share—Depot performs
                          Limited Partnership   directed work share.          available, but total     vehicle disassembly, structural
                                                                         revenue reported since        repair of the hull and front blade
                                                                       partnership’s inception in      repair. Contractor performs
                                                                          January 1998 through         modification, reassembly, and
                                                                       March 2002—$9 million.          systems test and integration.




                                             Page 29                                                 GAO-03-423 Defense Depot Maintenance
                                               Appendix II
                                               Depot Maintenance Public-Private
                                               Partnerships Reviewed and Depots Visited




(Continued From Previous Page)
Depot/Partnership (year Private-sector           Reason(s) for                Expected annual            Partnership type—description of
initiated)              partner                  partnership             value of work in depot          partnership tasks
Paladin (1998)             United Defense        BRAC process                No annual estimate          Work share—Depot performs
                           Limited Partnership   closed a                      available, but total      overhaul and conversion of chassis
                                                 government-owned         revenue reported since         assembly and armament system,
                                                 facility where         partnership’s inception in       and provides turret kit components.
                                                 contractor                January 1998 through          Contractor fabricates and
                                                 performed work.              March 2002—$1.6            assembles the new cab, performs
                                                                                           million.      vehicle reassembly and systems
                                                                                                         test and integration.
Wolverine (1998)           General Dynamics      Program manager                       $1.6 million      Work share—Depot performs
                           Land Systems          directed work share.                                    vehicle disassembly, hull rework,
                                                                                                         demilitarization of turrets, overhaul
                                                                                                         of major subassemblies and
                                                                                                         components, and ships the vehicles
                                                                                                         to the contractor in Lima, Ohio.
                                                                                                         Contractor performs chassis
                                                                                                         assembly, procures and installs
                                                                                                         bridge systems, and conducts
                                                                                                         inspections and testing.
Opposing Forces            United Defense        Contractor sought                     $8.2 million      Work share—Depot fabricates
Surrogate Vehicle (1999)   Limited Partnership   out depot for its                                       unique parts and spares;
                                                 unique capabilities                                     disassembles vehicle; cleans,
                                                 and advantageous                                        machines, and repairs hull; repairs,
                                                 labor rates.                                            converts and paints; and
                                                                                                         assembles and integrates turret.
                                                                                                         Depot also performs program
                                                                                                         management functions. Contractor
                                                                                                         overhauls subassemblies and
                                                                                                         components, modifies engine and
                                                                                                         suspension, assembles and paints
                                                                                                         vehicle, and performs final systems
                                                                                                         integration and testing.
Corpus Christi Army Depot
T700 Engine Overhaul       General Electric      Desire to reduce           Partnership involves         Teaming—Depot provides the
and Repair (2000)                                repair turnaround      reengineering of ongoing         labor, facilities and equipment for
                                                 time.                    workload that annually         the overhaul and repair of airframes
                                                                            has a value of about         and components. Contractor
                                                                                   $87.7 million.        provides technical, engineering and
                                                                                                         logistical support, and spare parts
                                                                                                         to improve repair turn around time.
H-60 Overhaul and          Sikorsky Aircraft     Desire to reduce          Partnership is in initial     Teaming—Depot will provide the
Repair of Airframe and     Corporation           repair turnaround        phase of development           labor, facilities and equipment for
Structural Components                            time.                  and implementation, and          the overhaul and repair of airframe
(2000)                                                                    depot work has not yet         and components. Contractor will
                                                                              begun—no annual            provide technical, engineering and
                                                                          estimate yet available.        logistical support to improve repair
                                                                                                         turn around time.




                                               Page 30                                                 GAO-03-423 Defense Depot Maintenance
                                            Appendix II
                                            Depot Maintenance Public-Private
                                            Partnerships Reviewed and Depots Visited




(Continued From Previous Page)
Depot/Partnership (year Private-sector          Reason(s) for                Expected annual            Partnership type—description of
initiated)              partner                 partnership             value of work in depot          partnership tasks
AH-64 Apache and          Boeing                Desire to reduce         Partnership is in initial      Teaming—Depot will provide the
CH-47 Chinook                                   repair turnaround        phase of development           labor, facilities and equipment for
Overhaul and Repair of                          time.                  and implementation, and          the overhaul and repair of airframes
Airframe Structures and                                                         depot work has          and components. Contractor will
Components (2000)                                                            not yet begun—no           provide technical, engineering and
                                                                            annual estimate yet         logistical support, and some parts
                                                                                      available.        on an emergency basis.
T55/T53 Engines           Honeywell             Desire to reduce          Partnership is in initial     Teaming—Depot will provide the
Overhaul and Repair                             repair turnaround        phase of development           labor, facilities and equipment for
Activities (2000)                               time.                  and implementation, and          the overhaul and repair of engines.
                                                                         depot work has not yet         Contractor will provide technical,
                                                                             begun—no annual            engineering and logistical support,
                                                                         estimate yet available.        and some parts to depot
                                                                                                        workstations.
Red River Army Depot
Bradley Fire Support      United Defense        Program manager                     $17.5 million       Work share—Depot modifies and
Team Vehicle (2000)       Limited Partnership   directed work share.                                    overhauls the A2 configuration of
                                                                                                        the Bradley fighting vehicle and
                                                                                                        transports the vehicle to the
                                                                                                        contractor’s York, Pennsylvania
                                                                                                        facility. Contractor integrates the
                                                                                                        Bradley Fire Support Team
                                                                                                        capability into the vehicle.
Heavy Expanded Mobility Oshkosh Truck           Program manager                       $7.5 million      Work share—Depot and contractor
Tactical Truck (2001)   Center                  directed work share.                                    overhaul or recapitalize a complete
                                                                                                        vehicle and each partner performs
                                                                                                        work on an equal number of
                                                                                                        vehicles.
Multiple Launch Rocket    Lockheed Martin       Program manager                         $700,000        Work share—Depot is overhauling
System M270A1 (2000)                            directed work share.                                    vehicle chassis and components
                                                                                                        and transports completed chassis
                                                                                                        to contractor’s overhaul facility.
                                                                                                        Contractor integrates and upgrades
                                                                                                        the Loader Launcher and its related
                                                                                                        components.
Multiple Launch Rocket    Lockheed Martin       Contractor sought                       $347,200        Direct sale—Depot repairs the hoist
System Hoist Assembly                           out depot for its                                       assemblies and ships them to the
(2001)                                          unique capabilities.                                    contractor’s plant in East Camden,
                                                                                                        Arkansas. Contractor installs the
                                                                                                        hoist on the vehicle.
M915A4 Glider Program     Lear Sielgler         Contractor sought           No annual estimate          Direct sale—Depot provides
(2001)                                          out depot for its              available but total      support for testing qualifying and
                                                unique capabilities.           revenue reported         painting the engine and cleaning
                                                                             since partnership’s        and painting the axel.
                                                                       inception in March 2001
                                                                         through March 2002—
                                                                                       $157,000.




                                            Page 31                                                   GAO-03-423 Defense Depot Maintenance
                                               Appendix II
                                               Depot Maintenance Public-Private
                                               Partnerships Reviewed and Depots Visited




(Continued From Previous Page)
Depot/Partnership (year Private-sector           Reason(s) for                Expected annual           Partnership type—description of
initiated)              partner                  partnership             value of work in depot         partnership tasks
Small Emplacement         Stewart &              Contractor sought        Partnership is in initial     Teaming—Depot and contractor
Excavator (2002)          Stevenson Tactical     out depot for its        phase of development          have agreed to cooperate in
                          Vehicle Systems        unique capabilities.    and depot work has not         potential partnerships on mutually
                                                                          yet begun—no annual           beneficial programs and
                                                                          estimate yet available.       solicitations.
Patriot Missile Conduit   Lockheed Martin        Contractor sought       Partnership completed          Direct sale—Depot provides all raw
Cover Shields (2001)                             out depot for its             and total revenue        material and labor to manufacture
                                                 unique capabilities.      generated during the         Patriot missile conduit cover shields
                                                                          partnership’s 2 month         for the contractor. Contractor
                                                                        period of performance—          incorporates the shields into the
                                                                                          $4,600.       Patriot missile.
Tobyhanna Army Depot
Communications Security Titan Systems            Contractor sought           No annual estimate         Direct sale—Depot repairs circuit
Cryptographic Equipment                          out depot for its             available, but total     cards, which contractor uses in
(2002)                                           unique capabilities.     revenue reported since        repair of communications security
                                                                        partnership’s inception in      cryptographic equipment.
                                                                              June 2002 through
                                                                              December 2002—
                                                                                          $4,900.
Brackets and Racks,      TRW                     Contractor sought         Partnership ended but        Direct sale—Depot fabricated six
Local Area Network Box                           out depot for its      total revenue reported for      items—Local Area Network Box
and Panel Display (2001)                         unique capabilities.               partnership’s       Assembly, Remote TAU Radio Box
                                                                         6-month period—August          Assembly, Flat Panel Display
                                                                        2001 to February 2002—          Assembly, V1 RWS Rigid Kit, and
                                                                                        $137,000        Router Adapter Plate Assembly.
                                                                                                        Contractor installed these parts in
                                                                                                        communications shelters as part of
                                                                                                        retrofit program.
FIREFINDER Block II       Raytheon               Contractor sought                        $305,000      Direct sale/teaming—Depot
Program (1999)                                   out depot for its                                      designed, manufactured, and
                                                 unique capabilities                                    tested two engineering
                                                 and advantageous                                       development model Prime Power
                                                 labor rates.                                           groups for the program; and
                                                                                                        provided cabling and interfaces
                                                                                                        needed to mount Portable
                                                                                                        Operations Suite in vehicles and
                                                                                                        power transfer boxes, as well as
                                                                                                        integration, test and logistics
                                                                                                        support at the system level.
                                                                                                        Contractor is responsible for overall
                                                                                                        design and manufacture of the
                                                                                                        weapon system.
FIREFINDER AN/TPQ-37 Raytheon                    Contractor sought                        $300,000      Teaming—Depot produces modular
Radar (2001)                                     out depot for its                                      azimuth positioning system kits.
                                                 unique capabilities                                    Contractor incorporates kits into
                                                 and advantageous                                       AN/TPQ-37 FIREFINDER radars.
                                                 labor rates.




                                               Page 32                                                GAO-03-423 Defense Depot Maintenance
                                            Appendix II
                                            Depot Maintenance Public-Private
                                            Partnerships Reviewed and Depots Visited




(Continued From Previous Page)
Depot/Partnership (year Private-sector        Reason(s) for                Expected annual           Partnership type—description of
initiated)              partner               partnership             value of work in depot         partnership tasks
Prophet Block I Cable    Titan Systems        Contractor sought           No annual estimate         Teaming—Depot manufactures
Assemblies (2001)                             out depot for its             available, but total     cable assemblies. Contractor is
                                              unique capabilities.     revenue reported since        prime for electronic warfare system
                                                                     partnership’s inception in      that uses these cable assemblies.
                                                                           June 2001 through
                                                                      March 2002—$209,000.
Area Common User         CMC Electronics      Contractor sought                        $500,000      Direct sale/teaming—Depot
System Program (1998)                         out depot for its                                      designed and manufactures
                                              unique capabilities.                                   modification installation kits that are
                                                                                                     installed by Laguna Industries at
                                                                                                     the depot and Fort Hood. The
                                                                                                     contractor provides the radio that is
                                                                                                     connected to existing systems
                                                                                                     using the depot’s installation kit.
Weapon Systems           Blackhawk            Contractor sought           No annual estimate         Direct sale/teaming—Depot
Omnibus-1 (1999)         Management, Inc.     out depot for its             available, but total     participated in program to secure
                                              unique capabilities.     revenue reported since        repair workload on critical systems
                                                                     partnership’s inception in      in order to help maintain critical
                                                                     December 1999 through           capabilities and skills at the depot.
                                                                     March 2002— $941,000.           The contractor markets the team’s
                                                                                                     capabilities to potential customers
                                                                                                     and provides depot and other
                                                                                                     subcontractors with components for
                                                                                                     repair.
AN/PRC-112               EPS                  Contractor sought                        $100,000      Direct sale/teaming—Depot
Modernization (2001)                          out depot for its                                      assembles and warrants the field
                                              unique capabilities                                    radio. Contractor manages overall
                                              and to meet new                                        contract and provides depot
                                              weapon system title                                    components needed to assemble
                                              10 core depot                                          the radio.
                                              maintenance
                                              requirements.
CECOM Field Support      EPS                  Contractor sought        Although depot initially      Direct sale/teaming—Depot
Services-1 (2000)                             out depot for its       expected workload from         participated in program to secure
                                              unique capabilities       this partnership, none       repair workload on critical systems
                                              and advantageous           has materialized and        in order to help maintain critical
                                              labor rates.                    none is currently      capabilities and skills at the depot.
                                                                                     expected.       The contractor markets its team’s
                                                                                                     capabilities to potential customers
                                                                                                     and provides depot and other
                                                                                                     subcontractors with components for
                                                                                                     repair.




                                            Page 33                                                GAO-03-423 Defense Depot Maintenance
                                             Appendix II
                                             Depot Maintenance Public-Private
                                             Partnerships Reviewed and Depots Visited




(Continued From Previous Page)
Depot/Partnership (year Private-sector         Reason(s) for                Expected annual           Partnership type—description of
initiated)              partner                partnership             value of work in depot         partnership tasks
CECOM Field Support      Logistics,            Contractor sought        Although depot initially      Direct sale/teaming—Depot
Services-2 (2000)        Engineering &         out depot for its       expected workload from         participated in program to secure
                         Environmental         unique capabilities       this partnership, none       repair workload on critical systems
                         Support Services,     and advantageous           has materialized and        in order to help maintain critical
                         Inc.                  labor rates.                    none is currently      capabilities and skills at the depot.
                                                                                      expected.       The contractor markets the team’s
                                                                                                      capabilities to potential customers
                                                                                                      and provides depot and other
                                                                                                      subcontractors with components for
                                                                                                      repair.
Rapid Response to        ARINC                 Contractor sought        Although depot initially      Direct sale/teaming—Depot
Critical System                                out depot for its       expected workload from         participated in program to secure
Requirements (1998)                            unique capabilities.      this partnership, none       repair workload on critical systems
                                                                          has materialized and        in order to help maintain critical
                                                                               none is currently      capabilities and skills at the depot.
                                                                                      expected.       The contractor markets its team’s
                                                                                                      capabilities to potential customers
                                                                                                      and provides depot and other
                                                                                                      subcontractors with components for
                                                                                                      repair.
Rapid Response to        Lear Siegler          Contractor sought        Although depot initially      Direct sale/teaming—Depot
Critical System                                out depot for its       expected workload from         participated in program to secure
Requirements (1998)                            unique capabilities.      this partnership, none       repair workload on critical systems
                                                                          has materialized and        in order to help maintain critical
                                                                               none is currently      capabilities and skills at the depot.
                                                                                      expected.       The contractor markets its team’s
                                                                                                      capabilities to potential customers
                                                                                                      and provides depot and other
                                                                                                      subcontractors with components for
                                                                                                      repair.
Rapid Response to        Lockheed Martin       Contractor sought           No annual estimate         Direct sale/teaming—Depot
Critical System                                out depot for its             available, but total     participated in program to secure
Requirements (1998)                            unique capabilities.     revenue reported since        repair workload on critical systems
                                                                      partnership’s inception in      in order to help maintain critical
                                                                         October 1998 through         capabilities and skills at the depot.
                                                                         March 2002—$2,600.           The contractor markets its team’s
                                                                                                      capabilities to potential customers
                                                                                                      and provides depot and other
                                                                                                      subcontractors with components for
                                                                                                      repair.




                                             Page 34                                                GAO-03-423 Defense Depot Maintenance
                                              Appendix II
                                              Depot Maintenance Public-Private
                                              Partnerships Reviewed and Depots Visited




(Continued From Previous Page)
Depot/Partnership (year Private-sector          Reason(s) for                Expected annual          Partnership type—description of
initiated)              partner                 partnership             value of work in depot        partnership tasks
Navy Tri-Service (1999)   ARINC                 Contractor sought       Although depot initially      Direct sale/teaming—Depot
                                                out depot for its      expected workload from         participated in program to secure
                                                unique capabilities.     this partnership, none       repair workload on critical systems
                                                                          has materialized and        in order to help maintain critical
                                                                               none is currently      capabilities and skills at the depot.
                                                                                      expected.       The contractor markets its team’s
                                                                                                      capabilities to potential customers
                                                                                                      and provides depot and other
                                                                                                      subcontractors with components for
                                                                                                      repair.
Weapon Systems            Information System    Contractor sought       Although depot initially      Direct sale/teaming—Depot
Omnibus-2 (1999)          Support Inc.          out depot for its      expected workload from         participated in program to secure
                                                unique capabilities.     this partnership, none       repair workload on critical systems
                                                                          has materialized and        in order to help maintain critical
                                                                               none is currently      capabilities and skills at the depot.
                                                                                      expected.       The contractor markets the team’s
                                                                                                      capabilities to potential customers
                                                                                                      and provides depot and other
                                                                                                      subcontractors with components for
                                                                                                      repair.
Satellite Communications Signal Corporation     Contractor sought       Although depot initially      Direct sale/teaming—Depot
Equipment (2002)                                out depot for its      expected workload from         participated in program to secure
                                                unique capabilities.     this partnership, none       repair workload on critical systems
                                                                          has materialized and        in order to help maintain critical
                                                                               none is currently      capabilities and skills at the depot.
                                                                                      expected.       The contractor markets its team’s
                                                                                                      capabilities to potential customers
                                                                                                      and provides depot and other
                                                                                                      subcontractors with components for
                                                                                                      repair.
Naval Aviation Depot Cherry Point
P-3, S-3, C-2, and F/A-18 Honeywell             To satisfy title 10                 $5.3 million      Direct sale/teaming—Depot repairs
Auxiliary Power Units                           core depot                                            power units providing repair
(2000)                                          maintenance                                           facilities, skilled labor, support
                                                requirements for the                                  equipment, production engineering,
                                                workload involved                                     and logistics support. Contractor
                                                and contractor                                        provides failed power units, spare
                                                sought out depot for                                  parts, engineering support,
                                                its unique                                            inventory management, and
                                                capabilities.                                         packaging and shipping.
F/A-18E/F Integrated      Boeing                To meet new                              $885,000     Direct sale/teaming—Depot repairs
Readiness Support                               weapon system title                                   components providing touch labor
Teaming (2001)                                  10 core depot                                         and depot maintenance logistics
                                                maintenance                                           support. Contractor provides overall
                                                requirements.                                         program execution, and customer
                                                                                                      and engineering support.




                                              Page 35                                               GAO-03-423 Defense Depot Maintenance
                                               Appendix II
                                               Depot Maintenance Public-Private
                                               Partnerships Reviewed and Depots Visited




(Continued From Previous Page)
Depot/Partnership (year Private-sector           Reason(s) for                Expected annual          Partnership type—description of
initiated)              partner                  partnership             value of work in depot        partnership tasks
AV-8B Remanufacture      Boeing                  Program manager                     $6.5 million      Work share—Depot disassembles
Program (1996)                                   directed work share.                                  the AV-8B aircraft, repairs and/or
                                                                                                       modifies 287 components, and
                                                                                                       ships repaired components to
                                                                                                       contractor. Contractor installs
                                                                                                       components into new fuselage and
                                                                                                       delivers remanufactured aircraft to
                                                                                                       the Navy.
SR-61/AS-61 Blades       Aviation Blade          Program manager                           $22,000     Work share—Depot dynamically
(1999)                   Services                directed work share.                                  balances turbine engine blades
                                                                                                       providing facilities, skilled labor, and
                                                                                                       logistics support. Contractor
                                                                                                       provides unbalanced blades.
Naval Aviation Depot Jacksonville
LAU-7, PP-2581A/A        Associated Aircraft     Contractor sought         Partnership began in        Direct sale—Depot repaired
Power Supply (2000)      Manufacturing &         out depot for its          July 2000, ended in        components providing repair
                         Sales, Inc.             unique capabilities.          August 2001 and         facilities, skilled labor, support
                                                                         generated total revenue       equipment, spare parts, and
                                                                                      of $7,000.       technical data. Contractor provided
                                                                                                       failed components and shipping.
Test and Repair         Aeronautical             Contractor sought                         $27,042     Direct sale—Depot repairs
Components on P-3, F/A- Systems, Inc.            out depot for its                                     components providing repair
18, H-3 and H-60 (2002)                          unique capabilities.                                  facilities, skilled labor, support
                                                                                                       equipment, and technical data.
                                                                                                       Contractor provides failed
                                                                                                       components, packaging, and
                                                                                                       shipping.
AN/ALQ126B               BAE Systems             To satisfy title 10                      $771,428     Direct sale—Depot repairs
Countermeasures Set                              core depot                                            components providing repair
(2002)                                           maintenance                                           facilities, skilled labor, support
                                                 requirements for the                                  equipment, and technical data; and
                                                 workload involved                                     collects and provides contractor
                                                 and contractor                                        with failure data. Contractor
                                                 sought out depot for                                  provides total asset management,
                                                 its unique                                            failed components, repair parts,
                                                 capabilities.                                         configuration management,
                                                                                                       technical and engineering support,
                                                                                                       and packaging and shipping; and
                                                                                                       investigates and incorporates
                                                                                                       reliability improvements.




                                               Page 36                                               GAO-03-423 Defense Depot Maintenance
                                             Appendix II
                                             Depot Maintenance Public-Private
                                             Partnerships Reviewed and Depots Visited




(Continued From Previous Page)
Depot/Partnership (year Private-sector         Reason(s) for                Expected annual          Partnership type—description of
initiated)              partner                partnership             value of work in depot        partnership tasks
CF-18 Boresight (2002)   Boeing                Contractor sought                         $12,000     Direct sale—Depot responsible for
                                               out depot for its                                     boresight calibration, shipment
                                               unique capabilities.                                  preparation, maintenance of
                                                                                                     inspection and test records, and
                                                                                                     reporting schedule and funding
                                                                                                     expenditures. Contractor
                                                                                                     responsible for inventory and asset
                                                                                                     tracking, preparation for shipping,
                                                                                                     repair parts, and technical support.
F/A-18E/F Integrated     Boeing                To meet new                              $130,600     Direct sale—Depot repairs
Readiness Support                              weapon system title                                   components providing repair
Teaming (2001)                                 10 core depot                                         facilities, skilled labor, and support
                                               maintenance                                           equipment; and collects and
                                               requirements.                                         provides contractor with failure
                                                                                                     data. Contractor provides total
                                                                                                     asset management, failed
                                                                                                     components, repair parts,
                                                                                                     configuration management,
                                                                                                     technical and engineering support,
                                                                                                     and packaging and shipping.
F404 High Pressure       General Electric      Contractor sought                        $350,000     Direct sale—Depot repairs
Turbine Rotors (2001)                          out depot for its                                     components providing repair
                                               unique capabilities.                                  facilities, skilled labor, support
                                                                                                     equipment, and technical data; and
                                                                                                     collects and provides contractor
                                                                                                     with failure data. Contractor
                                                                                                     provides failed components, repair
                                                                                                     parts, and packaging and shipping.
J52 Engines (2000)       General Electric      Contractor made                           $66,667     Direct sale—Depot repairs engines
                                               business decision to                                  providing repair facilities, skilled
                                               close facility where                                  labor, support equipment, spare
                                               work was previously                                   parts, and technical data.
                                               done                                                  Contractor provides failed engines
                                                                                                     and shipping.
Calibration, Metal       Logistic Services     Contractor sought                         $61,111     Direct sale—Depot calibrates test
Processing, and          International         out depot for unique                                  stands, and provides metal
Engineering Support                            its capabilities.                                     processing and engineering
(2001)                                                                                               support services. Contractor
                                                                                                     provides access to test stands
                                                                                                     requiring calibration and items
                                                                                                     requiring metal processing, and
                                                                                                     shipping to and from the depot.
Various F-14, EA-6B,     Neptune Technical     Contractor sought              This partnership       Direct sale—Depot was to provide
AH-1 and F-22 Antenna    Services, Inc.        out depot for its          began in December          antenna and radome testing,
and Radome Testing                             unique capabilities.        2000 and ended in         autoclave processing, coordination
(2000)                                                                October 2001 but did not       of measuring machine inspection,
                                                                       produce any workload.         and technical data. Contractor was
                                                                                                     to provide components for testing
                                                                                                     and shipping.




                                             Page 37                                               GAO-03-423 Defense Depot Maintenance
                                                 Appendix II
                                                 Depot Maintenance Public-Private
                                                 Partnerships Reviewed and Depots Visited




(Continued From Previous Page)
Depot/Partnership (year Private-sector             Reason(s) for                Expected annual           Partnership type—description of
initiated)              partner                    partnership             value of work in depot         partnership tasks
LAU-7, AN/APG-65, and       S&K Technologies,      Contractor sought                         $81,081      Direct sale—Depot repairs
AN/ARA-48 (2002)            Inc.                   out depot for its                                      components providing repair
                                                   unique capabilities.                                   facilities, skilled labor, support
                                                                                                          equipment, and technical data.
                                                                                                          Contractor provides failed
                                                                                                          components, and packaging and
                                                                                                          shipping.
AN/AWG-9 Fire Control       System &               Contractor sought           No annual estimate         Direct sale—Depot repairs
Radar Components            Electronics, Inc.      out depot for its             available, but total     components providing repair
(1999)                                             unique capabilities.     revenue reported since        facilities, skilled labor, support
                                                                          partnership’s inception in      equipment, and technical data.
                                                                            February 1999 through         Contractor provides failed
                                                                                November 2002—            components and shipping.
                                                                                           $19,000.
Naval Aviation Depot North Island
F/A-18E/F Integrated        Boeing                 To meet new                           $10 million      Direct sale/teaming—Depot repairs
Readiness Support                                  weapon system title                                    components providing touch labor,
Teaming (2001)                                     10 core depot                                          facilities, equipment, production
                                                   maintenance                                            engineering, technical data, and
                                                   requirements.                                          packaging. Contractor provides
                                                                                                          failed components, repair parts,
                                                                                                          obsolescence management, and
                                                                                                          shipping.
Aircraft Painting (2002)    San Diego Aircraft     Contractor sought                        $150,000      Direct sale—Depot will paint aircraft
                            Carrier Museum         out depot for its                                      providing touch labor, facilities and
                                                   unique capabilities.                                   equipment. Contractor will provide
                                                                                                          ready-for-paint aircraft,
                                                                                                          specifications, and paint.
Norfolk Naval Shipyard
USS Enterprise Nuclear      Northrop Grumman       Contractor sought                    $4.5 million      Direct sale/government-furnished
Aircraft Carrier (CVN 65)   Newport News           out depot for its                                      resources—Depot is providing a
FY02 Extended Drydock                              unique capabilities.                                   drydock and related facilities, and
Selected Restricted                                                                                       skilled labor. Contractor is providing
Availability (2001)                                                                                       skilled labor and overall
                                                                                                          management responsibility for this
                                                                                                          overhaul.
USS Nimitz (CVN 68) and Northrop Grumman           Contractor sought                    $1.8 million      Direct sale—Depot sold general
USS Ronald Reagan       Newport News               out depot for its                                      production services—including
(CVN 76) Production                                unique capabilities.                                   pipefitting, sheet metal, and
Services (2000)                                                                                           insulation—to contractor for these
                                                                                                          two overhauls. Contractor had
                                                                                                          overall responsibility for these
                                                                                                          overhauls.




                                                 Page 38                                                GAO-03-423 Defense Depot Maintenance
                                            Appendix II
                                            Depot Maintenance Public-Private
                                            Partnerships Reviewed and Depots Visited




(Continued From Previous Page)
Depot/Partnership (year Private-sector        Reason(s) for                Expected annual          Partnership type—description of
initiated)              partner               partnership             value of work in depot        partnership tasks
USS Dwight D.         Northrop Grumman        Contractor sought                        $440,000     Direct sale—Depot sold general
Eisenhower (CVN 69)   Newport News            out depot for its                                     production services—including
and USS Ronald Reagan                         unique capabilities.                                  pipefitting, sheet metal, electrician,
(CVN 76) Production                                                                                 and machinist—to contractor for
Services (2001)                                                                                     these two overhauls. Contractor
                                                                                                    had overall responsibility for these
                                                                                                    overhauls.
Portsmouth Naval Shipyard
USS Memphis (SSN 691) General Dynamics        Contractor sought       Partnership expected to       Work share/teaming—Depot is
FY02 Selected Restricted                      out depot for its      generate a total of $28.9      providing manpower (60 percent)
Availability/ Restricted                      unique capabilities.   million between January        and has overall responsibility for
Availability (2002)                                                       2002 and December         submarine overhaul. Contractor is
                                                                                         2002.      providing manpower (40 percent)
                                                                                                    and facilities—including a drydock.
High Performance           Noesis, Inc.       Contractor sought                        $486,487     Direct sale—Depot provides
Brush (2000)                                  out depot for its                                     equipment, technical support, and
                                              unique capabilities.                                  knowledge for testing services.
                                                                                                    Contractor provides program
                                                                                                    management, technical data,
                                                                                                    engineering expertise, and
                                                                                                    research and development
                                                                                                    expertise.
Lease of Portsmouth        Seavey Island,     Contractor sought               Partnership has       Lease—Depot provided facility.
Naval Shipyard Former      L.L.C.             out depot for its            terminated without       Contractor’s intent was to refurbish
Prison (1999)                                 unique facility.          producing revenue for       facility and sublet as office space.
                                                                                   the depot.       Lease termination negotiations in
                                                                                                    process because of death of
                                                                                                    lessee.
Puget Sound Naval Shipyard
Nuclear Aircraft Carrier   Todd Pacific       Contractor sought                 The sharing of      Teaming—The partnership’s intent
Maintenance                Shipyards          out depot for its          processes under this       is to study (benchmark) similar
Benchmarking (2001)        Corporation        unique capabilities.         partnership will not     depot and contractor processes
                                                                          produce workload or       associated with nuclear aircraft
                                                                     revenue for the partners,      carrier overhauls, which will
                                                                      instead the partners are      contribute to a mutually beneficial
                                                                     benefiting from improved       goal of achieving the most timely
                                                                             repair processes.      and cost effective ship repair
                                                                                                    processes.




                                            Page 39                                               GAO-03-423 Defense Depot Maintenance
                                             Appendix II
                                             Depot Maintenance Public-Private
                                             Partnerships Reviewed and Depots Visited




(Continued From Previous Page)
Depot/Partnership (year Private-sector           Reason(s) for                Expected annual           Partnership type—description of
initiated)              partner                  partnership             value of work in depot         partnership tasks
Nuclear Aircraft Carrier   Todd Pacific          Partnership                      This partnership      Direct sale/government-furnished
Maintenance Work           Shipyards             established to gain    establishes a framework         resources—Depot subcontracts
Resource Sharing           Corporation           consistent planned     for resource sharing that       segments of its aircraft carrier to
(1999)                                           and anticipated           will be used for carrier     contractor owing to resource
                                                 workload on nuclear     overhaul partnerships—         shortfalls. Contractor also does this
                                                 aircraft carriers.      resulting revenue to the       in reverse. Depot supports
                                                                           depot will be reported       contractor by accomplishing work in
                                                                            under these resulting       propulsion spaces owing to security
                                                                          partnerships; however,        classification. Contractor supports
                                                                          depot has not reported        depot by providing resources such
                                                                             any revenue to date.       as painters, welders, and pipe
                                                                                                        fitters.
USS John C. Stennis        Northrop Grumman      Contractor sought        Partnership completed         Direct sale—Depot performed work
(CVN 74) Planned           Newport News          out depot for its                  and between         in propulsion plant owing to security
Incremental Availability                         unique capabilities.   partnership’s inception in      classification. Contractor was
(2000)                                                                         October 2000 and         responsible for overhaul.
                                                                             November 25, 2002
                                                                         generated total revenue
                                                                                     of $156,000.
Explosion Bulge Plate      Northrop Grumman      Contractor sought        Partnership completed         Direct sale/government-furnished
Testing Services (2000)    Newport News          out depot for its        between partnership’s         resources—Depot provided
                                                 unique capabilities.       inception in October        explosion bulge testing services.
                                                                         2000 and January 2001          Contractor provided high-strength-
                                                                         generated total revenue        low-alloy plates for testing.
                                                                                     of $31,000.
Puget Sound and Pacific    Puget Sound           1944 triggering                        $375,000        Government-furnished resources—
Railway Contract (1944)    and Pacific Railway   event is unknown.                                      Contractor allowed use of Navy
                                                                                                        owned railway in exchange for
                                                                                                        normal maintenance to rails and
                                                                                                        roadbed. Depot provides funding
                                                                                                        for major maintenance and capital
                                                                                                        improvements.
Guided Missile Attack      Electric Boat         Contractor sought           No annual estimate         Teaming—Depot will develop work
Submarine (Nuclear         Corporation           out depot for its             available, but total     packages for installation on
Powered) Design                                  unique capabilities.     revenue reported since        submarine on the basis of
Conversion (2001)                                                       partnership’s inception in      contractor provided conversion
                                                                           October 2001 through         drawings. Contractor will also
                                                                              November 2002—            provide all standard material,
                                                                                         $67,000.       engineered components, and
                                                                                                        manufactured assemblies.




                                             Page 40                                                  GAO-03-423 Defense Depot Maintenance
                                               Appendix II
                                               Depot Maintenance Public-Private
                                               Partnerships Reviewed and Depots Visited




(Continued From Previous Page)
Depot/Partnership (year Private-sector             Reason(s) for                Expected annual           Partnership type—description of
initiated)              partner                    partnership             value of work in depot         partnership tasks
Ogden Air Logistics Center
Composites Umbrella          Alliant Techsystems   Contractor sought        Partnership is in initial     Direct sale/work share/lease—
Agreement (2002)                                   out depot for its        phase of development          Depot provides touch labor, non-
                                                   unique capabilities.    and depot work has not         destructive inspection, and support
                                                                            yet begun—no annual           equipment operators. Contractor
                                                                            estimate yet available.       provides engineering, supply chain
                                                                                                          management, and oversight.
Digital Analog Test          Westest Engineering Contractor sought                       $10 million      Work share—Test station design is
Station (2002)                                   out depot for its                                        a joint engineering effort between
                                                 unique capabilities.                                     depot and contractor. Contractor
                                                                                                          will fabricate test stations. Depot
                                                                                                          and contractor will share effort to
                                                                                                          rehost software test programs on
                                                                                                          new test station.
F-16 Block 40 Avionics       Lockheed Martin       Contractor sought                      $610,169        Work share/government-furnished
Software                                           out depot for its                                      resources—Depot performs
Maintenance/Upgrade                                unique capabilities.                                   software maintenance tasks.
(2001)                                                                                                    Contractor integrates products
                                                                                                          associated with these tasks into the
                                                                                                          avionics system.
Global Positioning           Boeing and TRW        Contractor sought                    $1.2 million      Work share/government-furnished
System Metric Tracking                             out depot for its                                      resources—Depot provides labor
Program (2002)                                     unique capabilities                                    for program installation, and share
                                                   and advantageous                                       responsibility for the development
                                                   labor rates.                                           of program hardware and software
                                                                                                          requirements with the contractors.
                                                                                                          Contractor provides program
                                                                                                          management and engineering
                                                                                                          support.
Sacramento Competition       Boeing                BRAC process           Because this partnership        Teaming—Depot performed
Workload for KC-135                                closed a               is terminated, there is no      analytical inspection and painted A-
Programmed Depot                                   government-owned               continuing annual       10 aircraft, overhauled components
Maintenance (PDM) and                              facility where work          workload expected.        and subcontracted KC-135 PDM
A-10 PDM and                                       was performed.                                         workload to contractor. Contractor
Commodities (1998)                                                                                        overhauled KC-135 aircraft. The Air
                                                                                                          Force transferred the contract
                                                                                                          management out of the depot;
                                                                                                          therefore, the depot no longer
                                                                                                          considers this a partnering effort—
                                                                                                          there is no ongoing partnering
                                                                                                          interaction between the depot and
                                                                                                          the contractor.
Intercontinental Ballistic   TRW                   Program manager                      $4.1 million      Work share—Depot provides labor
Missile Automatic Test                             directed work share.                                   to replace antiquated automatic test
Systems (2001)                                                                                            station. Contractor maintains
                                                                                                          overarching ICBM system
                                                                                                          integration responsibilities and
                                                                                                          oversight.




                                               Page 41                                                  GAO-03-423 Defense Depot Maintenance
                                             Appendix II
                                             Depot Maintenance Public-Private
                                             Partnerships Reviewed and Depots Visited




(Continued From Previous Page)
Depot/Partnership (year Private-sector         Reason(s) for                Expected annual          Partnership type—description of
initiated)              partner                partnership             value of work in depot        partnership tasks
B-2 Advanced             Northrop Grumman      Contractor sought                   $3.0 million      Direct sale/work share/government-
Composite (1998)                               out depot for its                                     furnished resources—Depot
                                               unique capabilities.                                  provides maintenance and repair
                                                                                                     for 413 different B-2 bomber
                                                                                                     panels, doors, and surfaces.
                                                                                                     Contractor provides engineering
                                                                                                     services and technical assistance.
Oklahoma City Air Logistics Center
B-2 Defensive            Northrop Grumman      Contractor sought                        $800,000     Work share/lease—Depot performs
Management System                              out depot for its                                     specified development and
Tools Program Set (1999)                       advantageous labor                                    software maintenance tasks.
                                               rates.                                                Contractor maintains total system
                                                                                                     performance responsibility for this
                                                                                                     support effort.
Propulsion Business Area Lockheed Martin       BRAC process                       $270 million       Teaming—Depot performs overhaul
partnership (1999)                             closed a                                              and repair of F100 engines,
                                               government-owned                                      modules, components, and fuel
                                               facility where work                                   accessories. Contractor performs
                                               was performed.                                        overhaul and repair of T56 and
                                                                                                     TF59 engines, modules,
                                                                                                     components, and fuel accessories.
F100 Engine Test Cell    Pratt and Whitney     Contractor sought                        $276,933     Direct sale—Depot performs jet
(2002)                                         out depot for its                                     engine testing. Contractor provides
                                               unique capabilities.                                  jet engines.
F100 Eddy Current        Pratt and Whitney     Contractor sought                        $697,894     Work share—Depot inspects and
Workload (2002)                                out depot for its                                     polishes F100 engine parts.
                                               unique capabilities.                                  Contractor provides F100 engine
                                                                                                     parts.
F100 Special             Pratt and Whitney     Contractor made                           $57,000     Lease—Depot provides depot
Technologies Coating                           business decision to                                  space and support to contractor.
Facility (2002)                                close facility where                                  Contractor performs proprietary
                                               work was previously                                   spray coating processes in depot
                                               done.                                                 spray booth.




                                             Page 42                                               GAO-03-423 Defense Depot Maintenance
                                               Appendix II
                                               Depot Maintenance Public-Private
                                               Partnerships Reviewed and Depots Visited




(Continued From Previous Page)
Depot/Partnership (year Private-sector           Reason(s) for                Expected annual          Partnership type—description of
initiated)              partner                  partnership             value of work in depot        partnership tasks
Warner Robins Air Logistics Center
C-130 Integrated Weapon Boeing                   To meet new                              $397,000     Work share/government-furnished
System Support Program                           weapon system title                                   resources—Depot provides
(2001)                                           10 core depot                                         software development and
                                                 maintenance                                           integration support for new
                                                 requirements and                                      components being added to
                                                 contractor sought                                     aircraft, which increases the depot’s
                                                 out depot for its                                     software capabilities. Contractor
                                                 unique capabilities.                                  maintains its overarching C-130
                                                                                                       system integration responsibilities
                                                                                                       and oversight under the Air Force’s
                                                                                                       Total Systems Support
                                                                                                       Responsibility contract; therefore,
                                                                                                       specific contractor tasks will vary
                                                                                                       depending on the specific
                                                                                                       subsystem.
C-17 Analytical Condition Boeing                 To meet new                         $1.6 million      Direct sale—Depot identifies
Inspection (1999)                                weapon system title                                   hidden defects, deteriorating
                                                 10 core depot                                         conditions, corrosion, fatigue,
                                                 maintenance                                           overstress, and other conditions
                                                 requirements and                                      that affect structure of C-17 aircraft.
                                                 contractor sought                                     Contractor provides the depot with
                                                 out depot for its                                     engineering, parts, and equipment
                                                 advantageous labor                                    support.
                                                 rates.
Flexible Acquisition and   Boeing, Lockheed      Contractor sought              No workload has        Work share—Depot will provide
Sustainment Tool (2001)    Martin, MTC Inc.,     out depot for its           materialized yet and      labor to support delivery or task
                           SSAI, and SAIC        unique capabilities.             because of the       orders issued to one of five
                                                                                     variable and      contractors under the Air Force’s
                                                                        unpredictable frequency        flexible acquisition sustainment tool
                                                                        of task orders no annual       contract. Contractor will manage
                                                                            estimate of workload       the delivery or task orders to
                                                                               value is available.     ensure performance, however, the
                                                                                                       specific contractor tasks will vary
                                                                                                       depending on the specific delivery
                                                                                                       or task order.
Low Altitude Navigation Lockheed Martin          Contractor made                          $123,000     Lease—Depot provides facility
Targeting Infrared for                           business decision to                                  where contractor repairs LANTIRN
Night (LANTIRN) Phase I                          close facility where                                  components.
(1997)                                           work was previously
                                                 done.




                                               Page 43                                               GAO-03-423 Defense Depot Maintenance
                                               Appendix II
                                               Depot Maintenance Public-Private
                                               Partnerships Reviewed and Depots Visited




(Continued From Previous Page)
Depot/Partnership (year Private-sector             Reason(s) for               Expected annual         Partnership type—description of
initiated)              partner                    partnership            value of work in depot       partnership tasks
LANTIRN Phase II (2001) Lockheed Martin            Contractor made                        $796,000     Direct sale—Depot repairs 155
                                                   business decision to                                different components and delivers
                                                   close facility where                                repaired components to contractor.
                                                   work was previously                                 Contractor provides failed
                                                   done, and contractor                                components for repair.
                                                   sought out depot for
                                                   its unique
                                                   capabilities and
                                                   advantageous labor
                                                   rates.
C-130 Avionics               Boeing                To meet new                       $1.4 million      Work share—Depot upgraded two
Modernization Program                              weapon system title                                 laboratories to accommodate
(2001)                                             10 core depot                                       testing of upgraded avionics, and
                                                   maintenance                                         provides software engineering
                                                   requirements and                                    support to rehost operational flight
                                                   contractor sought                                   software into upgraded avionics.
                                                   out depot for its                                   Contractor provides upgraded
                                                   unique capabilities                                 avionics components for testing
                                                   and advantageous                                    and rehosting.
                                                   labor rates.
Joint Surveillance Target    Northrop Grumman      To satisfy title 10               $9.7 million      Work share—Depot performs prime
Attack Radar System                                core depot                                          mission equipment repair, system
(JSTARS) Total Systems                             maintenance                                         and ground support software
Support Responsibility                             requirements for the                                maintenance, and various
Partnership (2000)                                 workload involved.                                  backshop functions. Contractor
                                                                                                       determines depot’s work
                                                                                                       requirements, and provides depot
                                                                                                       with sustaining engineering and
                                                                                                       other support functions.
Marine Corps Maintenance Center—Albany
Amphibious Assault           United Defense        Program manager                   $22 million       Work share/lease—Depot
Vehicle Reliability,         Limited Partnership   directed work share.                                disassembles and reassembles
Availability, and                                                                                      vehicle; rebuilds transmission,
Maintainability/Rebuild to                                                                             electronics, generators, and other
Standard (1998)                                                                                        components; installs new engine;
                                                                                                       and blasts and paints vehicle.
                                                                                                       Contractor provides labor expertise
                                                                                                       and equipment to modify vehicle
                                                                                                       hulls.
Source: DOD.




                                               Page 44                                               GAO-03-423 Defense Depot Maintenance
Appendix III

Summary Data Regarding the Reasons Cited
and Approaches Used for the 90 Partnerships
Reviewed                                                                                                                                  Appendx
                                                                                                                                                iI




                         Partnerships were formed for a variety of reasons such as to allow industry
                         to take advantage of depots’ unique capabilities and advantageous labor
                         rates, to take advantage of industry’s engineering capabilities and
                         accessibility to spare and repair parts, and to help meet title 10
                         requirements while increasingly relying on the private sector for logistics
                         support activities. Depending on the specific circumstances surrounding
                         the work to be performed, the services used various arrangements—such
                         as work share and teaming—to form their partnerships. Although the
                         partnerships involve many logistics functions performed in various
                         combinations by both public- and private-sector partners, in general,
                         contractors perform more spare parts, engineering, and technical data
                         functions, while the military depots provide more repair labor, facilities,
                         and equipment.



Reasons for Partnering   Partnerships between military depots and contractors were formed for a
                         variety of reasons. Service depot officials identified nine reasons for
                         entering into partnerships as indicated in figure 3.



                         Figure 3: Reasons Cited for Entering Public-Private Partnerships

                             Contract established to facilitate workforce sharing
                                                                                         1
                                           Desire to reduce repair turnaround time
                                                                                             4
                          BRAC closed a government-owned facility where work
                                                             was performed
                                                                                             4
                         Contractor closed a facility where work was performed
                                                                                             4
                         Meeting title 10 requirements that limit the outsourcing
                                                           of depot maintenance
                                                                                                      10
                         Program manager directed work share memorandum of
                                                                   understanding
                                                                                                       12
                         Contractor sought out depot for its advantageous labor
                                                                            rates
                                                                                                       13
                          Contractor sought out depot for its unique capabilities
                                                                                                                                     57

                                                                                     0           10         20   30   40   50   60
                                                                                     Number of times each reason was cited
                         Source: DOD (data), GAO (analysis).

                         Notes: Figures represent the number of partnerships citing a particular reason for partnering.
                         More than one reason may have been cited for each partnership.




                         Page 45                                                         GAO-03-423 Defense Depot Maintenance
                       Appendix III
                       Summary Data Regarding the Reasons Cited
                       and Approaches Used for the 90 Partnerships
                       Reviewed




                       In some instances, a combination of these reasons motivated the parties to
                       form a partnership. As shown by figure 3, the largest category involved
                       contractors seeking out a depot for its unique capabilities—57 times for the
                       partnerships we reviewed. Other reasons frequently cited were contractors
                       seeking out a depot for its advantageous labor rates—13 times, program
                       mangers directing work share arrangements—12 times, and meeting title
                       10 requirements that limit the outsourcing of depot maintenance—10
                       times.1 As discussed in the body of the report, DOD expects these title 10
                       requirements to increasingly become an important driver to expanding
                       partnerships as the department increases contractors’ involvement in
                       logistics support for weapon systems because the contractors will often be
                       required to partner with depots in order to satisfy title 10 provisions that
                       limit the outsourcing of depot workload.



Partnership            The reasons for partnering discussed above and the circumstances
                       surrounding a depot’s workload shape how the services develop the
Approaches Used Vary   approach used for each of their partnerships, including the selection of a
                       partnership type and how they divide responsibilities for the performance
                       of logistics functions. The depot maintenance partnerships we reviewed
                       used one or a combination of five partnering approaches: work share,
                       direct sale, lease, government-furnished resources, and teaming. Figure 4
                       illustrates how frequently the five partnership types were used for the
                       partnerships we reviewed.




                       1
                         While specifically mentioned 10 times by depot officials, title10 requirements are generally
                       recognized by DOD and service officials as providing a major impetus for partnering.




                       Page 46                                              GAO-03-423 Defense Depot Maintenance
Appendix III
Summary Data Regarding the Reasons Cited
and Approaches Used for the 90 Partnerships
Reviewed




Figure 4: Types of Partnerships

60        Frequency of use



50           48



40



30                      27          26


20

                                            12
                                                            9
10



 0                                                         ou -
          ale



                      ing



                                 are




                                             e




                                                             res
                                                         es nt
                                           as



                                                      d r me
        ts



                    am



                               sh



                                         Le
     rec




                                                    he ern
                  Te



                               rk
                             Wo
     Di




                                                 nis Gov
                                                 fur




Source: DOD (data), GAO (analysis).



As indicated by figure 4, “direct sale” was the most frequently used
approach. According to DOD officials, that approach is expected to
increase in number with the expansion of contractor-managed logistics-
support arrangements for weapon systems. The five public-private
partnership approaches are described below.

1. Direct sale. An arrangement whereby military and commercial entities
   enter into a contractual relationship for the use of military depot
   maintenance facilities and employees to provide the private sector with
   articles and/or services. Forty-eight—53 percent—of the 90
   partnerships we reviewed used the direct sale approach, making it the
   most frequently used partnering arrangement. DOD expects the use of
   direct sale arrangements to increase as DOD expands contractor
   involvement in logistics support for weapon systems in order to comply
   with title 10 provisions that limit the outsourcing of depot maintenance.
   The Navy’s F-18 Integrated Readiness Support Team and the Air Force’s
   B-2 Advanced Composite partnerships are examples of the direct sale



Page 47                                                            GAO-03-423 Defense Depot Maintenance
Appendix III
Summary Data Regarding the Reasons Cited
and Approaches Used for the 90 Partnerships
Reviewed




    approach to partnering. These examples each involve one partner—the
    depot—performing work directly for, and receiving payment from, the
    other partner—the contractor. (See appendix II for more detail on these
    and other partnerships.)

2. Work share. An arrangement whereby a combination of military and
   commercial facilities and/or employees is used to execute a program
   manager’s work package—including tasks such as weapon systems
   remanufacture, modification, or upgrade. Under the work share
   arrangement, the program manager issues a work order to the military
   participant and a contract to the private-sector participant. The
   relationship between the participants to accomplish the work package
   is usually coordinated with a memorandum of understanding or
   memorandum of agreement instead of a contract. Twenty-six—29
   percent—of the 90 partnerships we reviewed used the work share
   approach, and this approach was typically used to form the services’
   larger partnerships. The Army’s M1/M1A2 Abrams Tank upgrade
   partnership and the Navy’s Harrier Aircraft remanufacturing
   partnership are examples of work shares. These examples involve each
   partner’s performing its designated share of the workload directly for
   the weapon system’s program office and the paying of each partner by
   the program manager.

3. Teaming. An arrangement whereby military and commercial entities
   enter into a contractual relationship to accomplish a deliverable
   stipulated in a contract. The relationship between the participants is
   usually initially outlined in a teaming agreement during the proposal’s
   preparation and then formalized as a contractor/subcontractor
   relationship subsequent to contract award. Twenty-seven—or 30
   percent—of the 90 partnerships we reviewed used the teaming
   approach. Most of the teaming arrangements occurred in the Army—
   19, with the Navy using the teaming approach for six of its partnerships
   and the Air Force using teaming for two of its partnerships.

4. Lease. An arrangement whereby military and commercial entities enter
   into a contractual relationship for the private sector’s use of public
   depot maintenance facilities and/or its equipment to perform work for
   either the public or private sector. Twelve—13 percent—of the 90
   partnerships we reviewed used the lease approach, often in
   conjunction with other partnering approaches. For example, the
   upgrade partnership for the Army’s Fox Nuclear, Biological, Chemical
   Reconnaissance System vehicle uses a lease arrangement in



Page 48                                       GAO-03-423 Defense Depot Maintenance
Appendix III
Summary Data Regarding the Reasons Cited
and Approaches Used for the 90 Partnerships
Reviewed




    conjunction with a direct sale arrangement. The lease portion of the
    Fox partnership involves the depot’s providing underutilized facilities
    at Anniston Army Depot and the contractor’s paying for facility upkeep
    and utilities. The Air Force’s partnership for the F100 aircraft engine
    special technologies coating facility is an example of a stand-alone
    lease arrangement not involving other partnering arrangements. In this
    example, the Air Force’s Oklahoma City depot provides underutilized
    facilities, while the contractor pays the depot for the use of the
    facilities, provides facility upkeep, and pays utilities.

5. Government-furnished resources. An arrangement whereby military
   and commercial entities enter into an agreement for private-sector use
   of public depot maintenance facilities and/or its equipment and
   employees at no cost in connection with and under the terms of a
   contract. Nine—10 percent—of the 90 partnerships we reviewed used
   the government-furnished resources approach, which was also often
   used in conjunction with other partnering approaches. The Air Force’s
   F-16 block 40 avionics software maintenance/upgrade and the Navy’s
   Puget Sound railway partnerships are examples of the government-
   furnished resources approach to partnering. Under the F-16
   partnership, the government performs F-16 component software
   maintenance tasks for the contractor without charge as a government-
   furnished resource, while the contractor performs final software
   integration. In the railway partnership, the government provides the
   contractor with access to a Navy-owned railway in exchange for the
   contractor’s performing normal maintenance on the railway.

According to DOD and contractor officials, the type of partnership selected
is based on what approach or combination of approaches best served the
objectives of the partnership. For example, in the case of the Army’s Fox
vehicle upgrade partnership, the Army contracted with General Dynamics
to upgrade its Fox vehicle. To improve the economy and efficiency of the
upgrade, the contractor elected to partner with the Army’s Anniston depot
for a portion of the work and to colocate its segment of the upgrade with
Anniston’s segment at the Anniston depot. Consequently, the contractor’s
approach used a combination of two partnership types—direct sale
and lease.




Page 49                                       GAO-03-423 Defense Depot Maintenance
                          Appendix III
                          Summary Data Regarding the Reasons Cited
                          and Approaches Used for the 90 Partnerships
                          Reviewed




Functions                 Depot maintenance involves not only the application of labor to repair and
                          maintain military equipment but also several other logistics elements or
Performed Vary            functions such as supply support, production engineering, facilities, and
between Public- and       equipment. For the partnerships we reviewed, these logistics elements or
                          functions were performed or provided by both public- and private-sector
Private-Sector Partners   partners in various combinations on the basis of the characteristics of the
                          workload and the abilities of the partners. In the case of the Navy’s
                          auxiliary power unit repair effort, for example, the depot was repairing
                          power units but did not have all the spare parts needed to complete repairs
                          in a timely manner. To improve the availability of overhauled power units,
                          the Navy awarded a contract for the power unit program’s overall system
                          support and performance. As a condition of the contract, the contractor
                          partnered with a Navy depot to perform depot repairs to comply with title
                          10 requirements that limit the outsourcing of depot maintenance. The
                          partnership that developed for this workload involved the depot’s providing
                          labor, facilities, and equipment, while the contractor provides technical
                          data and spare parts. Figure 5 compares the frequency with which logistics
                          functions are performed by depots and contractors for the partnerships we
                          reviewed. As indicated by figure 5, the contractors’ contribution to the
                          partnerships consisted of performing or providing more of the spare parts,
                          engineering, and technical data functions than the other functions; and the
                          depots’ contribution to partnerships consisted more of providing repair
                          labor, facilities, and equipment.




                          Page 50                                       GAO-03-423 Defense Depot Maintenance
Appendix III
Summary Data Regarding the Reasons Cited
and Approaches Used for the 90 Partnerships
Reviewed




Figure 5: Frequency of Depots’ and Contractors’ Performance of Logistics
Functions

      Shipping



Technical data



  Engineering



  Spare parts



   Equipment



      Facilities



  Repair labor


                      0          15        30    45        60        75      90
                      Number of times function was performed

                                 Depots

                                 Contractors

Source: DOD (data), GAO (analysis).

Note: The numbers in the figure represent how many of the 90 partnerships involved the depot’s or the
contractor’s providing the indicated logistics function.




Page 51                                                        GAO-03-423 Defense Depot Maintenance
Appendix IV

Examples of Partnerships That Are Achieving
Positive Results                                                                            Appendx
                                                                                                  iIV




              Some partnerships provide promising results or good potential for results
              related to improvements in parts availability, reduced repair time, reduced
              back orders, or reduced support costs. These improvements align with
              some of the partnership approaches included as a part of DOD’s logistics
              reengineering initiative—more efficient business processes, better facility
              utilization, workforce integration, and reduced cost of ownership—and
              may therefore contribute to enhancing depot efficiency and viability. The
              following examples provide illustrations of some of the improvements the
              partnerships achieved:

              T700 Engine. Corpus Christi Army Depot wanted to reduce the repair time
              and improve reliability for the Army’s T700 helicopter engine.
              Consequently, it entered into a partnership with General Electric to achieve
              these improvements. (See fig. 6 on p. 53.) Under the partnership, Corpus
              Christi provides the needed facilities and equipment and repairs the engine.
              General Electric provides spare parts, and technical, engineering, and
              logistics services. According to depot officials, this effort has resulted in
              the introduction of General Electric’s best practices at the depot, which in
              turn has resulted in the T700 engine repair line’s realizing a 26 percent
              reduction in engine turnaround time and a 40 percent increase in test cell
              pass rates. Depot and contractor officials both attribute the T700 engine’s
              improved depot repair times to better parts availability and improvements
              to the depot’s repair processes, although they also recognize that the
              related T700 recapitalization effort begun shortly after the formation of the
              partnership may also be a factor influencing these improvements.




              Page 52                                    GAO-03-423 Defense Depot Maintenance
                                                  Appendix IV
                                                  Examples of Partnerships That Are Achieving
                                                  Positive Results




Figure 6: Depot and Industry Partnership Consultations at Corpus Christi Army Depot




Source: Corpus Christi Army Depot.

Left: Corpus Christi Army Depot and General Electric T700 partnership managers review a process improvement proposal. Right: Corpus Christi T700
assembly supervisor consults with General Electric partnership manager on the T700 engine assembly process.


                                                  Auxiliary Power Unit. Cherry Point Naval Aviation Depot was repairing
                                                  auxiliary power units for four aircraft1 but was experiencing production
                                                  delays owing to poor spare parts support. To improve the availability of
                                                  overhauled power units, the depot formed a partnership with Honeywell—
                                                  the auxiliary power units’ manufacturer. (See fig. 7 on p. 54.) Under the
                                                  partnership, the depot provides labor, facilities, and equipment, while the
                                                  contractor provides production engineering and spare parts. According to
                                                  depot officials, the number of units’ awaiting depot repair because of lack
                                                  of parts went from 118 when the partnership began in July 2000 to zero in
                                                  October 2002. According to the auxiliary power units users in the fleets, the
                                                  resulting improvement in support has been outstanding. For example, the
                                                  back orders for the power units were reduced from 125 in July 2000 to 26 in
                                                  October 2002. Depot officials attribute these improvements to better parts
                                                  support and the introduction of more efficient business practices to the




                                                  1
                                                      The four aircraft are the C-2, F/A-18, S-3 and P-3.




                                                  Page 53                                                   GAO-03-423 Defense Depot Maintenance
Appendix IV
Examples of Partnerships That Are Achieving
Positive Results




repair process that include replacing rather than repairing worn
components.



Figure 7: F/A-18 Auxiliary Power Unit Being Repaired Under a Partnership Between
the Naval Aviation Depot Cherry Point and Honeywell




Source: Naval Aviation Depot, Cherry Point.



USS Enterprise. Northrop Grumman Newport News shipyard was
scheduled to overhaul the nuclear-powered aircraft carrier USS Enterprise
in fiscal year 2002 but lacked the necessary capacity at its facility to
perform the work as scheduled. (See fig. 8 on p. 55.) Consequently,
Northrop Grumman formed a partnership with the Navy wherein the
Norfolk Naval Shipyard provided drydock space and the Navy’s four
shipyards provided 108,000 man-days of labor to augment Northrop
Grumman’s overhaul of the aircraft carrier, which resulted in the overhaul’s



Page 54                                       GAO-03-423 Defense Depot Maintenance
Appendix IV
Examples of Partnerships That Are Achieving
Positive Results




completion as scheduled. Northrop Grumman retained overall
responsibility for the overhaul and also contributed labor, equipment,
production engineering, and technical data. According to shipyard officials,
this partnership allowed the contractor and the shipyards to share their
labor resources, which along with the drydock space, increased the
Navy’s maintenance ability and therefore increased its production,
making carriers available to the fleet sooner than would otherwise have
been feasible.



Figure 8: The Nuclear-Powered Aircraft Carrier USS Enterprise Entering Norfolk
Naval Shipyard




Source: Norfolk Naval Shipyard.




Page 55                                       GAO-03-423 Defense Depot Maintenance
Appendix IV
Examples of Partnerships That Are Achieving
Positive Results




AGT1500 Recuperator.2 The Abrams Tank Recuperator production was
formerly located at the Army’s Stratford Engine Plant in Connecticut,
which was closed by BRAC in 1995. Honeywell relocated the capability to
Anniston Army Depot in 1998 and entered a partnership with the depot at
that time. (See fig. 9 on p. 57.) According to depot officials, this partnership
is an example of a “pure” facility lease arrangement in which production
has been colocated with its primary user—Anniston’s M1 tank engine
repair line. The production operation benefits from base operations
support provided by the depot. On-site production eliminates the need for a
parts manager at the depot. It also eliminates the need for the Defense
Logistics Agency to stock and issue recuperators, which means Anniston
avoids Defense Logistics Agency surcharges. The minimal supply chain
also reduces the need for raw material inventory and on-hand finished-
goods inventory. Production is adjusted to meet customer demand on a
near “just-in-time” basis. According to depot officials, these benefits
resulted from Honeywell’s recuperator production operation’s proximity to
the depot.




2
  The recuperator is a heat exchanger for the Abrams tank used for warming inlet air for the
engine.




Page 56                                            GAO-03-423 Defense Depot Maintenance
Appendix IV
Examples of Partnerships That Are Achieving
Positive Results




Figure 9: Honeywell’s M1 Tank Engine Recuperator Manufacturing Line at the
Anniston Army Depot




Source: Anniston Army Depot.



LANTIRN Phase II. Lockheed Martin was under contract for the depot
maintenance and repair of the Air Force’s LANTIRN3 system, but its
vendors were not providing timely turnaround on the repair of certain
LANTIRN components. To improve component support, Lockheed Martin
and the Air Force’s Warner Robins depot negotiated a direct sale agreement
for the depot to repair various quantities of 155 LANTIRN components.
(See fig. 10 on p. 58.) According to Warner Robins officials, since the start
of partnership in August 2001, the depot’s performance in repairing the
components has been very good. For example, the depot’s average
component repair turnaround time of 18 days under the partnership is
much better than the average turnaround time of 93 days under Lockheed
Martin’s prior vendors and also better than the negotiated turnaround time
of 45 days agreed to under the partnership. Depot officials attributed these


3
  The LANTIRN system—Low-Altitude Navigation and Targeting Infrared for Night—is used
on the Air Force’s F-15E and F-16C aircraft for targeting enemies.




Page 57                                         GAO-03-423 Defense Depot Maintenance
                                                 Appendix IV
                                                 Examples of Partnerships That Are Achieving
                                                 Positive Results




                                                 improvements to (1) Lockheed Martin’s colocation at the depot, which
                                                 reduced the shipping time between Lockheed Martin and its vendors—
                                                 some of which were overseas—and (2) ongoing Warner Robins’ operations
                                                 that historically were more efficient in the repair of the LANTIRN
                                                 components than were Lockheed Martin’s prior vendors.



Figure 10: Depot and Contractor Employees Repairing and Testing LANTIRN System




Source: Warner Robins Air Logistics Center.
Left: Warner Robins Air Logistics Center employee repairing a LANTIRN component. Right: Lockheed Martin employee testing LANTIRN System.




                                                 Page 58                                              GAO-03-423 Defense Depot Maintenance
Appendix IV
Examples of Partnerships That Are Achieving
Positive Results




ICBM Global Positioning System. As the Air Force’s intercontinental
ballistic missile (ICBM) logistics integrator, TRW Inc. had a requirement to
arrange for the modification of ICBMs to add satellite global positioning
capability. (See fig. 11.) However, TRW’s component manufacturing
subcontractor’s estimate for the modification was too costly. To achieve the
required modification at less cost, TRW Inc. formed a partnership with the
Air Force’s Ogden depot to replace the old tracking system with the
required global positioning system capability. Under the partnership,
Ogden provides the labor for the modification installation, while TRW Inc.
performs its integration and engineering support responsibilities. As a
result of the partnership, the depot estimates that the program will save
about $11 million in 4 years, thereby reducing the overall support cost of
ICBMs. According to depot officials, the savings will result from the depot’s
ability to produce and install the guidance modification for less than the
original equipment manufacturer.



Figure 11: ICBM Global Positioning System Modification Showing Developmental
Configuration Module




Source: Ogden Air Logistics Center.




Page 59                                       GAO-03-423 Defense Depot Maintenance
Appendix V

Fourteen Characteristics Identified by DOD
and Contractor Officials Needed to Achieve
Effective Partnerships                                                                     Append
                                                                                                x
                                                                                                i
                                                                                                V




               DOD and contractor officials have identified 14 characteristics that they
               believe over time will contribute to a partnership’s success in achieving
               DOD’s objective of improved depot efficiency and viability. The following
               describes these characteristics and provides examples of how some of the
               partnerships we reviewed exhibited these characteristics.

               1. Long-term relationship and commitment. A long-term relationship
                  and commitment (1) permits both contractors and depots to better plan
                  future workload requirements and create a better business case for the
                  contractor to make investments to improve depot repair capability and
                  (2) allows the contractor to help manage parts obsolescence. For
                  example, the F/A-18 partnership involves a long-term relationship
                  between the Navy and Boeing to provide logistics support for the F/A-
                  18E/F aircraft over the life cycle of the weapon system. Boeing and the
                  depots are projecting partnering workloads for the Navy depots for the
                  next 30 years, allowing the partners to create a phased plan to move
                  from providing maintenance and repair on limited aircraft components
                  to eventually encompass the entire weapon system.

               2. Shared partnership vision and objectives. Having partners share the
                  same partnership vision and objectives helps ensure that the partners
                  will not be working at cross-purposes. The Navy ship depot
                  maintenance partnerships involving shipyard work and workforce
                  sharing—USS Memphis, USS Enterprise, and USS John C. Stennis—
                  exemplify this characteristic. With the downsizing of the Navy, a
                  corresponding decrease in the Navy and contractor shipyard
                  workforces occurred. To manage the resulting downsized workforces
                  and avoid the unnecessary duplication of skills, Navy and private
                  shipyard officials developed and implemented a workforce-sharing
                  initiative whereby shipyard workers are assigned to public or private
                  workloads depending on the skills needed to perform the work and the
                  Navy’s ship maintenance priorities. The partners view the shipyards as
                  a shared resource that needs to be effectively managed in order to
                  provide the Navy with the needed overhaul capability and cost and
                  schedule performance while minimizing the collective workforce
                  requirements.

               3. The right metrics and incentives. The right metrics and incentives are
                  needed to effectively measure that progress is being made and that the
                  partners are effectively motivated to achieve partnership goals and
                  objectives. For example, the prime reason why the Navy entered into
                  its auxiliary power unit partnership at its Cherry Point depot was the



               Page 60                                  GAO-03-423 Defense Depot Maintenance
Appendix V
Fourteen Characteristics Identified by DOD
and Contractor Officials Needed to Achieve
Effective Partnerships




    shortage of power units within the fleets. To ensure that this problem
    was addressed by the partnership, the metrics that the Navy uses to
    evaluate the partners are the same metrics used to assess the quality of
    auxiliary power unit support to the fleet—e.g., depot turnaround-time,
    testing acceptance rates, and system availability.

4. Early acquisition community involvement. Developing the
   partnership with acquisition community involvement during the early
   phases of a weapon system’s acquisition helps to ensure that any
   additional depot maintenance capability development needed is fully
   planned and funded. The C-17 partnership efforts under way at Air
   Force depots illustrate that not building the partnership concept into
   the acquisition process early enough can lead to funding challenges.
   Until the Air Force recently determined that a significant portion the
   C-17 depot maintenance was core under 10 USC 2464 and would
   involve a public-private partnership, the system acquisition strategy
   was focused on contractor-provided depot maintenance. Consequently,
   the acquisition community had not planned or budgeted for the
   development of depot capability to support the currently planned
   partnering efforts. The Air Force is exploring ways of dealing with the
   potential shortfall.

5. Complementary skills and abilities. Each partner should bring
   complementary skills and abilities to the partnership because if each
   partner’s capabilities are the same, the relationship may result in a
   competitive and potentially adversarial relationship, not the
   cooperative synergistic relationship hoped for in a partnership. The Air
   Force’s Low Altitude Navigation Targeting Infrared for Night
   (LANTIRN) partnering approach provides an example in which each
   partner brought complementary abilities to the effort. The contractor
   managed the repair of the LANTIRN system but did not have the ability
   within its supplier network to repair subcomponents in a timely
   manner. The Air Force’s Warner Robins depot already had an ongoing
   repair line for these components and was able to easily supply the
   contractor’s requirements for maintaining the LANTIRN system.

6. Senior-level advocacy and support. DOD and contractor senior
   management support for a partnership is necessary to ensure that the
   effort receives the focus and resources needed to achieve success. The
   Air Force’s Joint Surveillance Target Attack Radar System (JSTARS)
   partnership, for example, illustrates the value of this characteristic.
   Senior Air Force and contractor leaders endorsed the partnership,



Page 61                                      GAO-03-423 Defense Depot Maintenance
Appendix V
Fourteen Characteristics Identified by DOD
and Contractor Officials Needed to Achieve
Effective Partnerships




    requiring their managers to be innovative in overcoming the obstacles
    created by years of competitiveness and the associated tension. The
    partners responded by putting the right people in place with the
    mindset and leaderships skills necessary to make the partnership work.

7. Sound business case analysis. A comprehensive business case
   analysis, including expected outcomes, should be conducted as part of
   the decision process for entering a partnership to ensure a sound result
   benefiting both the depot and the private-sector partners. The Air
   Force’s ICBM Automatic Test Systems partnership, for example, was
   formed after the Air Force conducted an analysis to assess the cost-
   benefit of the effort. As a result, the Air Force documented its expected
   savings of approximately $30 million over the 5-year partnership.

8. Mutual trust and shared risk. The partnership should be firmly
   grounded in mutual trust, open communications, and balanced risk
   among partners. For example, according to the business development
   office at the Corpus Christi Army Depot, the T700 partnership involved
   both parties’ investing the necessary time to understand each other’s
   goals and develop a level of trust so that both parties were willing to
   share risks in order to make their partnering effort successful.

9. Flexibility to change partnership scope. To ensure the ability to adapt
   to changing circumstances or factors, the partnerships should have the
   flexibility to change the partnership scope. The Air Force’s F100
   partnership illustrates this characteristic. For example, the partnership
   currently involves two types of F100 workload—the inspections of
   selected engine components and engine testing—but the partnership
   agreement provides for adding additional F100 workloads and other
   engine workloads.

10. Balanced workload. Workload should be balanced among the partners
    to ensure meaningful involvement for each partner and ensure that one
    partner does not receive only low-skilled work or no work at all. The
    AV-8B Harrier Remanufacturing partnership demonstrates a balanced
    division of workload among the partners. Both the depot and the
    contractor were responsible for segments of the remanufacturing effort
    that involved challenging tasks requiring highly skilled labor. For
    example, the depot partner modified and rewired the aircraft wing and
    rebuilt complex aircraft components, while the contractor built and
    provided new aircraft components and then incorporated these
    components along with the wing and components from the depot into



Page 62                                      GAO-03-423 Defense Depot Maintenance
Appendix V
Fourteen Characteristics Identified by DOD
and Contractor Officials Needed to Achieve
Effective Partnerships




    the remanufactured aircraft. The division of tasks helped each partner
    maintain and improve its respective technical expertise.

11. Independent review and oversight. Independent review and oversight
    provides an objective assessment of whether each partnership is
    achieving the expected benefits and that each partner performs as
    expected. Such a review also provides a basis for correcting or
    redirecting partnership efforts if expectations are not being met. To this
    end, OSD has begun a process to provide review and oversight of depot
    maintenance partnering efforts throughout the department. For
    example, OSD has directed its Joint Depot Maintenance Analysis
    Group1 to collect and maintain data on the conduct and performance of
    service partnerships. OSD plans to use these data to redirect and
    improve partnering efforts toward achieving DOD’s goals and objective.

12. Enforce partnership decisions and requirements. To ensure
    successful partnering efforts, the partners’ senior management must
    provide a mechanism for enforcing compliance with partnership
    decisions and requirements. The Air Force’s JSTARS partnership effort,
    for example, incorporates the partnership agreement and requirements
    into the overarching system logistics support contract. According to
    depot officials, the contract is the most effective means for compelling
    partner compliance with partnership decisions and requirements.

13. Full coordination with all stakeholders. Public-private partnership
    efforts should include steps to get feedback from all stakeholders on
    planned efforts and adjust the partnering strategies to reflect the
    legitimate concerns of these stakeholders. The Army’s Multiple Launch
    Rocket System Hoist Assembly partnership exemplifies full
    coordination among the depot; the contractor; and the major
    command’s general counsel, business operations office, and acquisition
    community.

14. Clearly documented objectives in partnering agreement. Once clear
    mutual partnering objectives are determined, they should be
    documented into a formal partnering agreement. For example, the


1
  The Joint Depot Maintenance Activities Group is a DOD organization created to support
the department’s Joint Depot Maintenance Program by providing DOD with staff support in
depot maintenance areas such as studies and analyses, business planning and evaluation,
and performance metrics development and tracking.




Page 63                                          GAO-03-423 Defense Depot Maintenance
Appendix V
Fourteen Characteristics Identified by DOD
and Contractor Officials Needed to Achieve
Effective Partnerships




    Army’s Tobyhanna depot follows a standard procedure of documenting
    all partnering arrangements with formal agreements. This
    documentation typically includes a nondisclosure agreement, which
    protects shared information that is proprietary or otherwise business
    sensitive, and a partnering agreement that includes the partnership’s
    objectives, a statement of work to be performed, the partners’ roles and
    responsibilities, and other terms and conditions as needed.




Page 64                                      GAO-03-423 Defense Depot Maintenance
Appendix VI

Comments from the Department of Defense                         Appendx
                                                                      iVI




              Page 65        GAO-03-423 Defense Depot Maintenance
Appendix VI
Comments from the Department of Defense




Page 66                                   GAO-03-423 Defense Depot Maintenance
Appendix VI
Comments from the Department of Defense




Page 67                                   GAO-03-423 Defense Depot Maintenance
Appendix VII

GAO Staff Acknowledgments                                                                    Append
                                                                                                  x
                                                                                                  iVI




Acknowledgments   Julia Denman, Larry Junek, Robert Malpass, M. Jane Hunt, Jack Edwards,
                  Robert Ackley, and John Strong also made significant contributions to
                  this report.




(350160)          Page 68                                 GAO-03-423 Defense Depot Maintenance
GAO’s Mission            The General Accounting Office, the audit, evaluation and investigative arm of
                         Congress, exists to support Congress in meeting its constitutional responsibilities
                         and to help improve the performance and accountability of the federal government
                         for the American people. GAO examines the use of public funds; evaluates federal
                         programs and policies; and provides analyses, recommendations, and other
                         assistance to help Congress make informed oversight, policy, and funding
                         decisions. GAO’s commitment to good government is reflected in its core values of
                         accountability, integrity, and reliability.


Obtaining Copies of      The fastest and easiest way to obtain copies of GAO documents at no cost is
                         through the Internet. GAO’s Web site (www.gao.gov) contains abstracts and full-
GAO Reports and          text files of current reports and testimony and an expanding archive of older
                         products. The Web site features a search engine to help you locate documents
Testimony                using key words and phrases. You can print these documents in their entirety,
                         including charts and other graphics.
                         Each day, GAO issues a list of newly released reports, testimony, and
                         correspondence. GAO posts this list, known as “Today’s Reports,” on its Web site
                         daily. The list contains links to the full-text document files. To have GAO e-mail this
                         list to you every afternoon, go to www.gao.gov and select “Subscribe to GAO
                         Mailing Lists” under “Order GAO Products” heading.


Order by Mail or Phone   The first copy of each printed report is free. Additional copies are $2 each. A check
                         or money order should be made out to the Superintendent of Documents. GAO
                         also accepts VISA and Mastercard. Orders for 100 or more copies mailed to a single
                         address are discounted 25 percent. Orders should be sent to:
                         U.S. General Accounting Office
                         441 G Street NW, Room LM
                         Washington, D.C. 20548
                         To order by Phone:     Voice: (202) 512-6000
                                                TDD: (202) 512-2537
                                                Fax: (202) 512-6061


To Report Fraud,         Contact:
                         Web site: www.gao.gov/fraudnet/fraudnet.htm
Waste, and Abuse in      E-mail: fraudnet@gao.gov
Federal Programs         Automated answering system: (800) 424-5454 or (202) 512-7470



Public Affairs           Jeff Nelligan, Managing Director, NelliganJ@gao.gov (202) 512-4800
                         U.S. General Accounting Office, 441 G Street NW, Room 7149
                         Washington, D.C. 20548
United States                  Presorted Standard
General Accounting Office      Postage & Fees Paid
Washington, D.C. 20548-0001           GAO
                                 Permit No. GI00
Official Business
Penalty for Private Use $300
Address Service Requested