oversight

Navy Small Boats: Maintenance Report Addressed Most Directed Elements, but Additional Information Needed

Published by the Government Accountability Office on 2012-03-13.

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

             United States Government Accountability Office

GAO          Report to Congressional Committees




March 2012
             NAVY SMALL BOATS

             Maintenance Report
             Addressed Most
             Directed Elements,
             but Additional
             Information Needed




GAO-12-421
                                                March 2012

                                                NAVY SMALL BOATS
                                                Maintenance Report Addressed Most Directed
                                                Elements, but Additional Information Needed
Highlights of GAO-12-421, a report to
congressional committees




Why GAO Did This Study                          What GAO Found
The Navy has noted that successful              The Navy report addressed four of the five elements specified in House Report
execution of its maritime strategy              112-78, while partially addressing one of the five elements. The Navy report
requires the acquisition of not only            addressed the potential for reducing maintenance and repair costs for the Navy’s
surface combatants, but also small              small boat fleet by using advanced boat lifts, and it addressed recommendations
boats. The Navy reported that it                regarding the potential establishment of improved boat corrosion control and
received about $135 million in fiscal           prevention as key performance parameters. The Navy report partially addressed
year 2010-2012 base procurement                 the committee’s direction to include an evaluation and business case analysis of
funding for small boats. These small            the impact of advanced boat lifts for potential improvements to small boat
boats vary widely in the missions they          acquisition costs and life-cycle sustainment. The report’s business case analysis
perform, their sizes, and the                   evaluated potential improvements to life-cycle sustainment, focusing on potential
approaches for their maintenance. The           maintenance cost savings associated with boat lifts. However, this business case
House Armed Services Committee                  analysis did not evaluate the impact of the use of advanced boat lifts on potential
directed the Navy in House Report               improvements to small boat acquisition costs. Navy officials told GAO that the
112-78 to conduct a study on
                                                use of advanced boat lifts would not significantly contribute to extending the
strategies to reduce maintenance and
                                                service life of the boats or produce any other additional benefits that would lead
repair costs associated with small boat
storage and harboring and to submit a
                                                to reduced small boat acquisition costs. This is primarily because a critical
report to the House and Senate Armed            feature of current procurement strategies is to select, specify, or design boats
Services Committees on its findings by          that are made from corrosion-resistant materials and use components that are
October 31, 2011. The committee                 corrosion resistant. Nonetheless, the Navy did not include this justification in the
directed GAO to assess the Navy’s               report or analyze the potential effects of the use of boat lifts on small boat
report for completeness, including the          acquisition costs in the report’s business case analysis.
methodology used in the Navy’s
analysis. For this report, GAO
evaluated the extent to which (1) the           While the Navy completed a business case analysis of the impact of reduced
Navy's report addressed the                     maintenance and repair costs for the Navy’s small boat fleet through the use of
committee’s direction and (2) the               advanced boat lifts, GAO found several areas in which more complete
findings in the Navy's study are                information could have been included to better support the findings of the Navy
supported by the data and information           study. The April 2011 DOD Product Support Business Case Analysis Guidebook
examined. GAO analyzed study                    provides standards for the DOD business case analysis process used to conduct
documents and the business case                 analyses of costs, benefits, and risks. GAO identified several areas in which
analysis, obtained and analyzed key             more comprehensive information, consistent with the DOD guidebook, could
documents, and interviewed cognizant
                                                have been included in the Navy’s business case analysis. For example, the Navy
officials.
                                                did not include (1) actual lift installation and maintenance cost data or
What GAO Recommends                             (2) qualitative data on other potential costs and benefits associated with the use
                                                of boat lifts, particularly location- and mission-specific benefits, from Navy
GAO recommends that the Navy                    installations that are using 72 recently acquired boat lifts. The DOD guidebook
collect and include more complete               indicates that authoritative data sources—those used to conduct the financial and
information when evaluating future              nonfinancial analysis for a business case analysis—should be comprehensive
investment decisions at individual
                                                and accurate. Navy officials recognized that more comprehensive information
locations. DOD concurred with the
                                                would have been useful, but noted that they were unable to systematically survey
recommendation.
                                                all current boat lift users within the few months they had to complete their
                                                business case analysis. The Navy noted in its report that a significant number of
                                                boat lifts have recently entered service in the fleet and that the Navy will monitor
                                                service experience, data that may provide a basis for future decisions regarding
                                                the use of boat lifts. Without more complete information, the Navy may not be
View GAO-12-421 or key components.              fully informed when it considers making future investments in boat lifts or other
For more information, contact Zina Merritt at
(202) 512-5257 or merrittz@gao.gov.
                                                storage and harboring techniques at individual locations.

                                                                                         United States Government Accountability Office
Contents


Letter                                                                                  1
               Background                                                               3
               Navy Report Addressed Four of the Five Elements Specified in the
                 House Report                                                           6
               Navy Would Benefit from More Comprehensive Information in
                 Future Analyses                                                       9
               Conclusions                                                            11
               Recommendation for Executive Action                                    12
               Agency Comments                                                        12

Appendix I     Scope and Methodology                                                  14



Appendix II    Photographs of Selected Navy Small Boats                               16



Appendix III   Comments from the Department of Defense                                18



Appendix IV    GAO Contact and Staff Acknowledgments                                  19




Table
               Table 1: Overview of Navy Small Boat Inventory as of November
                        2011                                                            4


Figures
               Figure 1: Small Boat Storage and Harboring Techniques                    6
               Figure 2: GAO Assessment of the Extent to Which the Navy Small
                        Boat Report Addressed the House Report-Directed
                        Elements                                                       7
               Figure 3: Riverine Command Boat                                        16
               Figure 4: Rigid Inflatable Boat                                        16
               Figure 5: Harbor Security Boat                                         17




               Page i                                          GAO-12-421 Navy Small Boats
Abbreviation

DOD Department of Defense




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Page ii                                                      GAO-12-421 Navy Small Boats
United States Government Accountability Office
Washington, DC 20548




                                   March 13, 2012

                                   The Honorable Carl Levin
                                   Chairman
                                   The Honorable John McCain
                                   Ranking Member
                                   Committee on Armed Services
                                   United States Senate

                                   The Honorable Howard P. McKeon
                                   Chairman
                                   The Honorable Adam Smith
                                   Ranking Member
                                   Committee on Armed Services
                                   House of Representatives

                                   The Navy has noted that successful execution of its maritime strategy
                                   requires the acquisition of not only surface combatants, such as cruisers
                                   and destroyers, but also numerous high-performance small boats. To that
                                   end, the Navy is investing millions of dollars to acquire small boats to
                                   meet emerging fleet, antiterrorism, and force protection needs and to
                                   support ongoing operations. The Navy reported that it received about
                                   $135 million in fiscal year 2010-2012 base procurement funding for small
                                   boats. These small boats vary widely in the missions they perform, their
                                   sizes, the materials of which they are composed, their locations, and the
                                   approaches for their maintenance—including corrosion prevention
                                   measures. In the current constrained fiscal environment, the Department
                                   of Defense (DOD) must maximize its investment in small boats and
                                   reduce maintenance and repair costs where appropriate.

                                   In House Report 112-78, accompanying the House bill for the National
                                   Defense Authorization Act for Fiscal Year 2012 (H.R. 1540), the House
                                   Armed Services Committee directed the Navy to conduct a study on
                                   strategies to reduce maintenance and repair costs associated with small
                                   boat storage and harboring and to submit a report to the House and
                                   Senate Armed Services Committees on its findings by October 31, 2011. 1
                                   The study was to include an evaluation and business case analysis of the



                                   1
                                    See H.R. Rep. No. 112-78, at 105-06 (2011).




                                   Page 1                                           GAO-12-421 Navy Small Boats
impact that certain strategies, such as the use of advanced boat lifts,
would have on potential improvements to small boat acquisition costs and
life-cycle sustainment. The Navy’s report was to include
recommendations on the potential establishment of improved boat
corrosion control and prevention through various means. 2 In the House
report, the committee also directed GAO to assess the Navy’s report for
completeness, including the methodology used in the Navy’s analysis.
For this report, we evaluated the extent to which (1) the Navy’s report
addressed the committee’s direction and (2) the findings in the Navy’s
study are supported by the data and information examined.

To determine the extent to which the Navy’s report addressed the
committee’s direction, we analyzed House Report 112-78 to identify each
element of the committee’s direction for the Navy report. We developed
an evaluation tool based on House Report 112-78 to assess the extent to
which the Navy’s report addressed these elements. Using scorecard
methodologies, two GAO analysts independently evaluated the Navy
report against the elements specified in the House report. After the two
analysts had completed their independent analyses, they compared the
two sets of observations and discussed and reconciled any differences.
We also interviewed Navy subject matter experts to obtain additional
information and corroborate the statements made in the Navy report, and
we obtained the officials’ opinions of our assessments.

To determine the extent to which the findings in the Navy’s study are
supported by the data and information examined, we reviewed the study
and obtained information on the objectives, scope, and methodology
officials used to conduct it. We evaluated the Navy study’s business case
analysis using criteria found in the DOD Product Support Business Case
Analysis Guidebook, which provides standards for the DOD business
case analysis process as well as generally acceptable economic
methodologies. 3 We reviewed the Navy’s study to determine the extent to
which the Navy incorporated elements of the DOD guidebook into the
planning, design, and execution of the study. We also obtained and
analyzed key data sources, such as maintenance cost savings inputs and



2
 The Navy delivered Naval Sea Systems Command, Report to Congress: Study on Small
Boat Maintenance Costs (October 2011), to Congress on October 31, 2011.
3
 Department of Defense, DOD Product Support Business Case Analysis Guidebook (April
2011).




Page 2                                                  GAO-12-421 Navy Small Boats
                           boat lift cost data, for information included in the study. We interviewed
                           officials from the Office of the Deputy Assistant Secretary of the Navy for
                           Ships, Naval Sea Systems Command, and the Naval Surface Warfare
                           Center to obtain their views on key aspects of the study, findings and
                           conclusions, and any limitations that may have affected the study’s
                           findings. We assessed the reliability of the data we analyzed by reviewing
                           existing documentation related to the data sources and interviewing
                           knowledgeable agency officials about the data that we used. We found
                           the data sufficiently reliable for the purpose of evaluating the planning,
                           design, and execution of the Navy’s business case analysis.

                           We conducted this performance audit from November 2011 to March
                           2012 in accordance with generally accepted government auditing
                           standards. Those standards require that we plan and perform the audit to
                           obtain sufficient, appropriate evidence to provide a reasonable basis for
                           our findings and conclusions based on our audit objectives. We believe
                           that the evidence obtained provides a reasonable basis for our findings
                           and conclusions based on our audit objectives. We discuss our scope
                           and methodology in more detail in appendix I.



Background
Small Boat Inventory and   Navy boats are self-propelled craft, suitable primarily to be carried on
Responsibilities           board ships and to operate in and around naval activities. 4 As of
                           November 2011, there were 2,872 small boats in the Navy’s inventory
                           and 58 different types of small boats, varying in length from 16 feet to
                           over 200 feet, with expected service lives ranging from 7 to 12 years.
                           Small boat types include rigid inflatable boats, riverine command boats,
                           riverine assault boats, force protection boats, fleet harbor security boats,
                           and unmanned craft. 5 These small boats vary widely in the missions they



                           4
                            Office of the Chief of Naval Operations Instruction 4780.6E, Policy for Administering
                           Service Craft and Boats in the U.S. Navy (Jan. 25, 2006).
                           5
                            The Department of Defense Dictionary of Military and Associated Terms, Joint
                           Publication 1-02 (Nov. 8, 2010; amended Jan. 15, 2012), defines riverine as an inland or
                           coastal area comprising both land and water characterized by limited land lines of
                           communication. The boats are used in operations conducted by forces organized to cope
                           with and exploit the unique characteristics of a riverine area to locate and destroy hostile
                           forces, achieve control of the area, or both.




                           Page 3                                                        GAO-12-421 Navy Small Boats
                                       perform, which include maritime interdiction, antiterrorism, force
                                       protection, and oil spill response operations, as well as riverine operations
                                       in Iraq. Table 1 provides the inventory and mission descriptions for
                                       various types of Navy small boats. Appendix II contains photographs of
                                       selected Navy small boats.

Table 1: Overview of Navy Small Boat Inventory as of November 2011

                                   Number in
Boat type                           inventory                 Description
Amphibious landing boats                                      Landing craft to bring troops, tanks, trucks, supplies, and equipment to
                                            79                and across the beach
Dive boats                                 117                Used for tethered diving operations and scuba operations
Oil spill response boats                                      Oil skimmers, platform boats, and utility boats for the oil spill response
                                           366                program
Rigid inflatable boats                                        Standard ship’s boats and others used for various missions, including
                                           966                search and rescue and visit/boarding/search
Security boats                                                Used for fleet protection, maritime interdiction, law enforcement
                                           588                operations, special operations, and others (riverine boats are included)
Ship’s boats                                                  Personnel and utility boats with some configured as gigs and barges
                                                              (gigs are boats assigned to commanding officers and used for visiting
                                           114                ships or hosting dignitaries in an afloat setting)
Utility boats                              271                Shore-based utility boats
Work boats                                                    Tugboats and multipurpose work boats with a variety of applications,
                                           171                including cargo carrying and harbor cleaning
Other boats                                200                Includes ferry boats, unmanned craft, training craft, and others
Total                                   2,872
                                       Source: GAO analysis of Navy data.



                                       Navy small boats are military equipment and are centrally procured,
                                       managed, and tracked by Naval Sea Systems Command (Program
                                       Executive Office, Ships, Support Ships, Boats and Craft Program Office). 6
                                       Naval Surface Warfare Center (Carderock Division, Detachment Norfolk,
                                       Combatant Craft Division) is responsible for boat inventory management
                                       and other activities, including boat allocation changes for certain
                                       activities. 7 A small boat may be assigned to and carried aboard a ship as



                                       6
                                        See Naval Sea Systems Command, Naval Ships’ Technical Manual, ch. 583, vol. 1 (Apr.
                                       1, 2010).
                                       7
                                        See id.




                                       Page 4                                                               GAO-12-421 Navy Small Boats
                         a ship’s boat. Also, small boats may be assigned to an expeditionary
                         command, shore station, or fleet operating unit. Navy officials reported
                         that currently the Navy has assigned small boats to over 320 separate
                         commands and activities (e.g., Navy Expeditionary Combat Command).
                         According to Chief of Naval Operations Instruction 4780.6E, these
                         commands and activities are responsible for proper maintenance of their
                         small boats and for establishing a boat maintenance program for them. 8


Small Boat Storage and   The Navy utilizes several techniques to store and harbor small boats,
Harboring                including trailers and lifts. The Navy may use trailers, which can be
                         purchased as an accessory to the boat and may allow for the boat to be
                         kept out of the water and then launched back into the water via a boat
                         ramp. According to the Navy, the use of trailers can also facilitate timely
                         logistical movement. The Navy has over 1,800 boat trailers in stock.
                         Another technique is to use boat lifts, which are designed to raise a boat
                         out of the water to reduce the effects of the saltwater environment on the
                         hull, appendages, and exposed machinery components. The Navy has 72
                         boat lifts in stock located at Navy installations around the world (e.g.,
                         Norfolk, Virginia; Pearl Harbor, Hawaii; and Bahrain). These lifts were
                         acquired from fiscal year 2007 to fiscal year 2010 at a cost of about $7
                         million. Small boats can also be stored in the water or on a ship. Figure 1
                         displays various techniques the Navy uses to store and harbor small
                         boats.




                         8
                          See Office of the Chief of Naval Operations Instruction 4780.6E, Policy for Administering
                         Service Craft and Boats in the U.S. Navy, § 5(b)(6) (Jan. 25, 2006).




                         Page 5                                                       GAO-12-421 Navy Small Boats
Figure 1: Small Boat Storage and Harboring Techniques




                                       The Navy report addressed four of the five elements specified in the
Navy Report                            House report, while partially addressing one of the five elements. Figure 2
Addressed Four of the                  identifies the five elements the House report directed the Navy to address
                                       and our assessment of the degree to which the Navy report addressed
Five Elements                          each of them.
Specified in the House
Report




                                       Page 6                                            GAO-12-421 Navy Small Boats
Figure 2: GAO Assessment of the Extent to Which the Navy Small Boat Report
Addressed the House Report-Directed Elements




The Navy report addressed the following elements:

•   Investigate the potential for reduced maintenance and repair costs for
    the Navy’s small boat fleet by using advanced boat lifts: The report
    discussed potential benefits associated with using boat lifts to remove
    boats from water during periods of nonuse. These potential benefits
    included reducing some types of corrosion and lowering maintenance
    costs by eliminating the need to remove the boat from the water for
    inspection.
•   Include a recommendation regarding the potential establishment of
    improved boat corrosion control and prevention as a key performance
    parameter for the selection of boat maintenance and storage
    equipment: The report did not recommend improved boat corrosion
    control and prevention as a key performance parameter for the




Page 7                                               GAO-12-421 Navy Small Boats
    selection of boat maintenance and storage equipment. 9 It noted that
    boat maintenance and storage equipment should be selected based
    on its potential benefit to corrosion control and prevention on boats
    and craft, but added that improved corrosion control and prevention
    will be hard to clearly define and measure, making them inappropriate
    for key performance parameters.
•   Include a recommendation regarding the potential establishment of
    improved boat corrosion control and prevention as a key performance
    parameter for sustainment: The report did not recommend improved
    boat corrosion control and prevention as a key performance
    parameter for sustainment. It stated that boat corrosion control and
    prevention is certainly an important aspect of sustainment; however, it
    is not sufficiently definable to be used as a key performance
    parameter. Specifically, the report noted that the boat corrosion and
    control prevention aspect of sustainment is not a stand-alone testable
    quantity; therefore it fails to meet an important criterion for a key
    performance parameter.
•   Include a recommendation regarding the potential establishment of
    improved boat corrosion control and prevention as a requirement for
    Naval Sea Systems Command to incorporate into its acquisition
    strategies: The report stated that corrosion control and prevention are
    already a well-established part of the requirements used by Naval Sea
    Systems Command in its acquisition strategies for procurement
    contracts for small boats. It noted that corrosion control and planning
    are addressed through performance requirements, design
    requirements, and contractual requirements to the extent possible. A
    review of current fleet repair and maintenance procedures and
    records does not reflect a need for additional requirements, according
    to the Navy report.
The Navy report partially addressed the following element:

•   Include an evaluation and business case analysis of the impact of
    advanced boat lifts for potential improvements to small boat
    acquisition costs and life-cycle sustainment: The report’s business
    case analysis evaluated potential improvements to life-cycle


9
 The Navy report defined key performance parameters as those attributes or
characteristics of a system that are considered critical or essential to the development of
an effective military capability and those attributes that make a significant contribution to
the characteristics of the future joint force, as defined in the Capstone Concept for Joint
Operations. Naval Sea Systems Command, Report to Congress: Study on Small Boat
Maintenance Costs at 16 (October 2011).




Page 8                                                          GAO-12-421 Navy Small Boats
                             sustainment, focusing on potential maintenance cost savings
                             associated with boat lifts. However, this business case analysis did
                             not evaluate the impact of the use of advanced boat lifts on potential
                             improvements to small boat acquisition costs. Navy officials told us
                             that the use of advanced boat lifts would not significantly contribute to
                             extending the service life of the boats or produce any other additional
                             benefits that would lead to reduced small boat acquisition costs. This
                             is primarily because a critical feature of current procurement
                             strategies is to select, specify, or design boats that are made from
                             corrosion-resistant materials and use components that are corrosion
                             resistant. Nonetheless, the Navy did not include this justification in the
                             report or analyze the potential effects of the use of boat lifts on small
                             boat acquisition costs in the report’s business case analysis.

                        While the Navy completed a business case analysis of the impact of
Navy Would Benefit      reduced maintenance and repair costs for the Navy’s small boat fleet
from More               through the use of advanced boat lifts, we found several areas in which
                        more complete information could have been included to better support the
Comprehensive           findings of the Navy study. Navy officials told us that they broadly used
Information in Future   service experience and general guidance from the Naval Center for Cost
                        Analysis to structure and execute the business case analysis. The Navy
Analyses                collected data from the existing boat inventory; maintenance procedures
                        and practices, such as inspections; and maintenance actions to
                        determine potential maintenance cost savings associated with boat lifts
                        and compared them with data collected on lift installation and lift
                        maintenance costs to determine the payback on a boat lift investment.
                        The Navy assigned risk ranges to each data input and ran them through a
                        software program that used Monte Carlo simulation techniques and ran
                        5,000 simulations. 10 Based on this analysis, the Navy concluded that it
                        was unlikely that implementing boat lifts would provide a positive return
                        on investment.



                        10
                          To address the uncertainties inherent in the analysis, the Navy used a commercially
                        available risk analysis software program called Crystal Ball to incorporate uncertainties
                        associated with the data. The program allowed the Navy to explore a wide range of
                        possible values for all the input costs and assumptions it used to build its model. The
                        Crystal Ball program uses a Monte Carlo simulation process, which repeatedly and
                        randomly selects values for each input to the model from a distribution specified by the
                        user. Using the selected values for cells in the spreadsheet, Crystal Ball then calculates
                        the total cost of the scenario. By repeating the process in thousands of trials, Crystal Ball
                        produces a range of estimated total costs for each scenario and the likelihood associated
                        with any specific value in the range.




                        Page 9                                                         GAO-12-421 Navy Small Boats
The April 2011 DOD Product Support Business Case Analysis Guidebook
presents a uniform methodology for developing accurate, consistent, and
effective support of value-based decision making while better aligning the
acquisition and life-cycle product support processes. 11 The guidebook
provides standards for the DOD business case analysis process used to
conduct analyses of costs, benefits, and risks. We identified several areas
in which more comprehensive information, consistent with the DOD
guidebook, could have been included in the business case analysis. For
example:

•     The Navy did not utilize discounting in the business case analysis and
      did not document its reasons for not doing so within the report or in
      additional documentation provided to us. The DOD guidebook
      indicates that as a general rule, discounting should be done unless
      there is a documented rationale not to discount. Discounting future
      benefits and costs using an appropriate discount rate illustrates the
      time value of money, as benefits and costs are worth more if they are
      experienced sooner. Discounting benefits and costs transforms gains
      and losses occurring in different time periods to a common unit of
      measurement. 12
•     The Navy did not include comprehensive data from Navy installations
      that are using 72 recently acquired boat lifts on (1) actual lift
      installation and maintenance cost data or (2) qualitative data on other
      potential costs and benefits associated with the use of boat lifts. Navy
      officials reported that they contacted one primary boat lift user
      command to gather a significant amount of data for the study and
      relied on boat lift vendors’ estimates for lift cost and maintenance
      data. The DOD guidebook indicates that authoritative data sources—
      those used to conduct the financial and nonfinancial analysis for a
      business case analysis—should be comprehensive and accurate.
      Navy officials explained that because the way boat lifts are used and
      any benefits associated with their use are location and mission
      specific, qualitative data would be particularly valuable. For example,
      Navy officials told us that boat lifts may improve the operational
      availability of small boats at installations that have limited access to
      boat ramps that allow boat trailers to launch boats in the water.



11
    Department of Defense, DOD Product Support Business Case Analysis Guidebook.
12
 Office of Management and Budget Circular No. A-94, Guidelines and Discount Rates for
Benefit-Cost Analysis of Federal Programs at 4 (Oct. 29, 1992).




Page 10                                                  GAO-12-421 Navy Small Boats
              Navy officials responsible for conducting the business case analysis were
              unaware of the DOD Product Support Business Case Analysis
              Guidebook, but acknowledged its applicability to their analysis. Navy
              officials recognized that more comprehensive information would have
              been useful, but noted that they were unable to systematically survey all
              current boat lift users within the few months they had to complete their
              business case analysis. Navy officials reported that including this
              information would likely not have changed the study’s conclusions, as the
              analysis showed that the opportunity for a positive return on investment
              from implementing boat lifts for storage and harboring was so low. 13 Navy
              officials also noted that the business case analysis did not address other
              potential costs associated with the use of boat lifts, such as the cost of
              adding new pier space to accommodate boat lifts. Although a more
              comprehensive analysis may not reverse this study’s conclusions,
              decision makers would benefit from collecting and including more
              complete information in future analyses, particularly when evaluating
              investment decisions at individual locations, such as using discounting
              and conducting comprehensive surveys of boat lift users to obtain all
              potential costs and benefits associated with implementing boat lifts. The
              Navy noted in its report that a significant number of boat lifts have
              recently entered service in the fleet and that the Navy will monitor service
              experience, data that may provide a basis for future decisions regarding
              the use of boat lifts. Without more complete information, the Navy may
              not be fully informed when it considers making future investments in boat
              lifts or other storage and harboring techniques at individual locations.


              The Navy continues to rely on small boats to meet emerging fleet,
Conclusions   antiterrorism, and force protection needs and support ongoing operations.
              While these boats vary widely in the missions they perform and the
              approaches for maintaining them, fiscal challenges require DOD to
              maximize its investment in small boats by reducing maintenance and
              repair costs where appropriate. Making informed decisions on effective
              and efficient small boat storage and harboring options will play a key role
              in doing so. While the Navy report addressed nearly all of the elements
              specified in House Report 112-78, additional information would better


              13
                For example, since usually the benefits of acquiring a boat lift are spread over a number
              of future years while the lift costs are primarily realized in year one, incorporating
              discounting into the business case analysis would reduce future benefits more while
              leaving cost essentially the same; thus it would not likely affect the study’s conclusions.




              Page 11                                                      GAO-12-421 Navy Small Boats
                     inform Navy decision makers. In particular, collecting and including more
                     complete information—such as using discounting and conducting
                     comprehensive surveys of boat lift users to obtain all potential costs and
                     benefits associated with implementing boat lifts—would better inform the
                     Navy when it considers making future investments in boat lifts or other
                     storage and harboring techniques at individual locations.


                     To enable the Navy to make informed decisions when it considers making
Recommendation for   future investments in boat lifts or other storage and harboring techniques,
Executive Action     we recommend that the Secretary of Defense direct the Secretary of the
                     Navy to collect and include more complete information when evaluating
                     investment decisions at individual locations, for example, by using
                     discounting and conducting comprehensive surveys of boat lift users to
                     obtain all potential costs and benefits associated with implementing boat
                     lifts.


                     We provided a draft of this report to DOD for comment. DOD concurred
Agency Comments      with our recommendation to have the Secretary of Defense direct the
                     Secretary of the Navy to collect and include more complete information
                     when evaluating investment decisions at individual locations (DOD’s
                     comments are reprinted in app. III). DOD provided technical comments
                     during the course of the engagement, and these were incorporated as
                     appropriate.


                     We are sending copies of this report to the Secretary of Defense, the
                     Secretary of the Navy, and appropriate congressional committees. In
                     addition, the report is available at no charge on the GAO website at
                     http://www.gao.gov.




                     Page 12                                           GAO-12-421 Navy Small Boats
If you or your staff have any questions about this report, please contact
me at (202) 512-5257 or merrittz@gao.gov. Contact points for our Offices
of Congressional Relations and Public Affairs may be found on the last
page of this report. Key contributors to this report are listed in appendix
IV.




Zina Merritt
Director
Defense Capabilities and Management




Page 13                                           GAO-12-421 Navy Small Boats
Appendix I: Scope and Methodology


             To determine the extent to which the Navy’s report addressed the House
             Armed Services Committee’s direction, we analyzed House Report 112-
             78 to identify each element of the committee’s direction for the Navy
             report. We developed an evaluation tool based on House Report 112-78
             to assess the extent to which the Navy’s report addressed these
             elements. Using scorecard methodologies, two GAO analysts
             independently evaluated the Navy report against the elements specified
             in the House report. The analysts rated compliance for each element as
             “addressed,” “partially addressed,” or “not addressed.” We considered the
             element to be addressed in the report when the Navy explicitly addressed
             all parts set forth in the element. We considered the element partially
             addressed in the report when the Navy addressed at least one or more
             parts of the element, but not all parts of the element. We considered the
             element not addressed by the Navy when the report did not explicitly
             address any part of the element. After the two analysts had completed
             their independent analyses, they compared the two sets of observations
             and discussed and reconciled any differences. The final assessment
             reflected our consensus. We also interviewed Navy subject matter
             experts to obtain additional information and corroborate the statements
             made in the Navy report, and we obtained the officials’ opinions of our
             assessments. We interviewed officials from the Office of the Deputy
             Assistant Secretary of the Navy for Ships, Naval Sea Systems Command,
             and the Naval Surface Warfare Center.

             To determine the extent to which the findings in the Navy’s study are
             supported by the data and information examined, we reviewed the study
             and obtained information on the objectives, scope, and methodology
             officials used to conduct it. We evaluated the Navy study’s business case
             analysis using criteria found in the DOD Product Support Business Case
             Analysis Guidebook, which provides standards for the Department of
             Defense’s (DOD) business case analysis process as well as generally
             acceptable economic methodologies. 1 We reviewed the Navy’s study to
             determine the extent to which the Navy incorporated elements of the
             DOD guidebook into the planning, design, and execution of the study. We
             also obtained and analyzed key data sources, such as maintenance cost
             savings inputs and boat lift cost data, for information included in the
             study. We interviewed Navy officials to obtain their views on key aspects



             1
              Department of Defense, DOD Product Support Business Case Analysis Guidebook (April
             2011).




             Page 14                                                 GAO-12-421 Navy Small Boats
of the study, findings and conclusions, and any limitations that may have
affected the study’s findings. We also interviewed officials responsible for
procuring and maintaining Navy small boats, to determine the extent to
which the Navy factored appropriate costs and benefits into the study’s
key assumptions and related findings. We assessed the reliability of the
data we analyzed by reviewing existing documentation related to the data
sources and interviewing knowledgeable agency officials about the data
that we used. We found the data sufficiently reliable for the purpose of
evaluating the planning, design, and execution of the Navy’s business
case analysis.

We conducted this performance audit from November 2011 to March
2012 in accordance with generally accepted government auditing
standards. Those standards require that we plan and perform the audit to
obtain sufficient, appropriate evidence to provide a reasonable basis for
our findings and conclusions based on our audit objectives. We believe
that the evidence obtained provides a reasonable basis for our findings
and conclusions based on our audit objectives.




Page 15                                            GAO-12-421 Navy Small Boats
Appendix II: Photographs of Selected Navy
Small Boats

                                  Figures 3 through 5 contain photographs of different types of Navy small
                                  boats in use.

Figure 3: Riverine Command Boat




Figure 4: Rigid Inflatable Boat




                                  Page 16                                          GAO-12-421 Navy Small Boats
Figure 5: Harbor Security Boat




                                 Page 17   GAO-12-421 Navy Small Boats
Appendix III: Comments from the
              Appendix III: Comments from the Department
              of Defense



Department of Defense




              Page 18                                      GAO-12-421 Navy Small Boats
Appendix IV: GAO Contact and Staff
                  Appendix IV: GAO Contact and Staff
                  Acknowledgments



Acknowledgments

                  Zina Merritt, (202) 512-5257 or merrittz@gao.gov
GAO Contact
                  In addition to the contact named above, Carleen Bennett, Assistant
Staff             Director; Tarik Carter; Joanne Landesman; Mehrzad Nadji; Terry
Acknowledgments   Richardson; Mike Shaughnessy; Amie Steele; and Chris Watson made
                  key contributions to the report.




(351689)
                  Page 19                                            GAO-12-421 Navy Small Boats
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