oversight

Review of the Navy's Fiscal Year 1978 Appropriation Request for Trident Support Facilities Construction Program

Published by the Government Accountability Office on 1977-06-22.

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

                          DOCUMENT RESUE

02439 - [A1812833]   ,&a-Z&ret%*-

[Review of the Navy's Fiscal Year 1978 Appropriation Request for
Trident Support Facilities Construction Program]. LCD-77-350;
B-178056. June 22, 1977. 2 pp. + enclosure (10 pp.).

Report to Rep. George H. Mahon, Chairman, House Comaittee on
Appropriations; by Elmer B. Staats, Comptroller General.

Issue Area: Facilities and Material Nanagement (700); Facilities
    ant Material Ma.agqement: Design and Construction of Federal
    Facilities (707).
Contact: Logistics and Communications Div.
Budget Function: National Defense: Department of Defense -
    Military (except procurement & contracts) (051).
Organizati c Concerned: Department of Defense; Department of the
    Navy.
Congressional Relevance: House Committee on Appropriations.
         The Navy's fiscal year 1978 appropriation request to
construct support facilities at Bangor, Washington, for Trilent
submarines was reviewed, including the $109.4 million for 14
different Trident-related construction projects and $11.5
million for increased municipal facilities and services
resulting from the Trident support base. Findings/Conclusions:
The need for on-base retail facilities (estimated to cost $4.8
million) was questioned, since a substantial number of retail
outlets currently exist close to the base. The Navy overstated
its request by about $1.1 million, as the facilities requested
exceed Defense Department and Navy space allowances. The Navy
has shown no convincing economic reasons for not deferring
funding of explosive handling wharf #2 (estimated cost $26.3
million); based on its scheduled use, this project could be
deferred. A questionable note for postcontract award services
overstated the request by about $0.9 milli-n. About $1.7 million
in prior funds had not been allocated to specific projects;
these could be made available to this request. (Author/DJN)
               COMPTROLLER GENERAL OF THE UNITED      TATES
                          WASHINGTON. D.C. Ws" ,


                                  bV th97bffk ot&~/    JUN 2   191
B-178056      RESTRICTED         Not to be released outdel-d   he General
              ABecffice
                      _t'85A     except on the basis of spocitic approval
              by fthrOffice o!f (Grigr-ssiqonal Relations.
The Honorable George H. Mahon, Chairman
Committee on Appropriations
House of Representatives
Dear Mr. Chairman:
     On August 30, 1976, you asked that we review the Navy's
fiscal year 1978 appropriation request to construct support
facilities for Trident submarines. The request included
$109.4 million for 14 different Trident-related construction
projects and $11.5 million for increased municipal services
and facilities resulting directly from constructing and op-
erating the Trident support base.
     Your office also requested any information that would
benefit the Subcommittee on Military Construction Appropria-
tions during its evaluation of the Navy's request and asked
us to brief the subcommittee's staff on our findings. We
briefed the subcommittee staff on April 27, 1977, and agreed
to provide you a written report. Findings discussed at-that
time are summarized below and discussed in detail in the
enclosure:
     -- We question the need for onbase retail facilities
        (estimated to cost $4.8 million) since a substantial
        number of retail outlets currently exist close to
        the base. (See p 2.)
     -- The Navy has overstated its request by about $1.1
        million. The size of the requested facilities ex-
        ceeds Defense Department and Navy space allowances.
        (See p. 5.)
     -- The committee may want to defer funding explosive
        handling wharf #2 (estimated cost $26.3 million)
        based on its scheduled use. (See p. 6.)
     ---rheNavy included a questionable rate in its cost
       estimates which overstates the request by about
       $0.9 million. (See p. 9.)
     -- About $1.7 million in prior funds have not beer.
        allocated to specific projects. These funds could
        be made available for the fiscal year 1978 request.
        (See p. 10.)
                                                    LCD-77-350
B-178056



     As your office directed, we did not obtain formal com-
ments on this report from the Navy. Howevez, we have dis-
cussed its contents with Navy officials and included their
comments where appropriate. We are sending copies of this
report to the Secretaries of Defense and the Navy.

                                 sl. g   ly your




                                 Comptroller General
                                 of the United S.ates
Enclosure




                             2
ENCLOSURE I                                        ENCLOSURE I


          NAVY'S FUNDS REQUEST IN FISCAL YEAR 1978

             TO CONSTRUCT TRIDENT SUPPORT FACILITIES

INTRODUCTION

     On August 30, 1976, the Chairman, House Committee on
Appropriations, asked that we review the Navy's fiscal year
1978 appropriation request for the Trident support facili-
ties at Bangor, Washington. Specifically, we were asked to
review

     -- the justification for projects supporting the appro-
        priation request,

     -- the cost data used to estimate the amounts requested
        for projects,

     -- whether delays in construction schedules would affect
        whether projects could be deferred,

     -- changes in construction projects for Trident support
        facilities funded in prior years,

     -- whether prior year appropriations could be use in lieu
        of new appropriations.

     We discussed our findings with the subcommittee's staff
on April 27, 1977.

BACKGROUND

     In fiscal year 1974, the Congress started incremental
funding for the Navy's program to construct facilities to
support Trident submarines. The program is to be funded
for 8 years. As of March 1977 the Navy estimated total pro-
gram costs to be $727 million. That estimate did not in-
clude both $63 million for military family housing at the
support site and $3.5 million for the Trident program's
share of a regional naval hospital.

     Since fiscal year 1973, the Congress has appropriated
about $484 million to construct Trident support facilities.
The Navy's fiscal year 1978 appropriation request, shown
below, includes $109.4 million for 14 Trident-related proj-
ects and $11.5 million to help local governments pay for
increased municipal services and facilities resulting di-
rectly from construction and operation of the Trident sup-
port site.
 ENCLOSURE I                                      ENCLOSURE I


                                                  Funds
                                                requested
                                              (000 omitted)
     Dry dock, phase II
     Delta access trestle (dry dock)            $ 48,817
     Explosive handling wharf #2                     614
     Service pier and port control office         26,280
                                                   6,959
     Off crew administration building              4,533
     Base cafeteria
     Consolidated open mess                          834
     Service station                               4,459
                                                     665
     Auto hobby shop
     Missile motor magazines                       1,114
                                                   7,051
     Alarm :ontrol center
       (3d increment)                                177
     Utilities and site improvements
       (5th increment)                             3,500
     Exchange complex
     Tennis courts                               a/4,176
                                                     181
         Total construction                     $109,360
     Community impact assistance
       (3d increment)                             11,500
         Total FY 1978 request                  $120,860
a/The Navy has reduced its request for the exchange
                                                    complex
  by $250,000.  (See p. 6 for more details.)
JUSTIFICATION FOR INDIVIDUAL PROJECTS

Are retail service facilities needed?

     Tnhe Navy's fiscal year 1978 appropriations request
cludes about $4.8 million to construct an exchange        in-
and an automobile service station. We question      complex
                                                 the need
for these facilities since numerous retail outlets
near the base.                                      exist

      Retail service outlets became a part of military
when military pay was extremely low; however,           life
                                               as a result
of recent salary increases, military pay is nearly
surate with civilian pay. Further, in the Fast,     commen-
retail outlets were necessary because local retailmilitary
                                                    services
were relatively inaccessible. The Bangor area
                                                has retail
services and outlets relatively close to the
                                              base--in the
communities of Bremerton, East Bremerton, Silverdale,
Poulsbo.                                               and



                              2
ENCLOSURE I                                         ENCLOSURE I


     The following lists available retail outlets:

                          Number of facilities               Total
                          .n community (note a)              shops
                               East     Silver-                by
  Facility        Bremerton Bremerton    dale      Poulsbo    type

                  (14 miles  (10 miles  (4 miles   (5 1/2
                  from base) from base) from base) miles from
                                                   base)

Barber shop           4            S       2           2          14
Shoe repair shop      1            1       0           1           3
Beauty salon          3            2       4           2          11
Tailor shop           1            0       0           0           1
Laundry/dry-
  cleaning shop       1            5       2           3          11
TV repair shop        0            4       2           1           7
Portrait studio       1            2       1           1           5
Watch repair
  sho'p               6            2       2           1          11
Optical shop                       ].      1           0           5
Garden shop           1            2       1           2           6
Supermarket           0            4       3           3          10
Retail depart-
  ment store          6            4       2           2          14
Florist shop          2            2       2           3           9
Bank                  9            3       4           2          18
Auto service
  station            3          11         6          13          33
    Total shops                                                 158
a/This data was provided by Kitsap County officials.

     The services provided by these facilities are the same as
those the Navy requested in fiscal year 1978.  (See p. 6.)
Although there are no bus routes to the base at this time, Kit-
sap County officials are developing plans for a mass transit
system to link the base with the community.
     In addition to these community retail outlets there are
also military service outlets near Bremerton. The main Navy
exchange/commissary is at the Puget Sound Navy Shipyard,
Bremerton, about 12 miles from the Trident Base. It has
38,000 square feet of exchange space and 18,500 square feet
of commissary space. There are also smaller exchange branches
at the naval torpedo st:ation at Keyport and the Trident Base.
These facilities serve a military community of 14,290 active
and 11,700 retired military personnel and dependents.

                               3
ENCLOSURE I                                     ENCLOSURE I

Commentsof the Trident
project manager
     The Trident project manager provided the following com-
ments about onbase retail facilities:
     -- It would be unfair to deprive Tridert Base military
        personnel of retaii┬▒facilities available at other
        bases.
     -- It would become more difficult to retain highly quali-
        fied personnel without this incentive.
     -- Military personnel without automobiles would find it
        difficult to shop at the civilian retail outlets.
     -- An opportunity to generate '"avyexchange profits,
        customarily used for operating recreation programs,
        would be foregone.
     -- Shopping facilities should be provided for the con-
        venience of an onbase residential population of about
        7,400 military personnel and dependents.
     -- Traffic cnd fuel consumption would be reduced with
        onbase retail facilities.
     Such arguments for providing retail service facilities
as well as recreation programs and open messes co not rule
out the legitimate question of whether the user or the Gov-
ernment should pay for them.
     We estimate that up to $900 million a year is appro-
priated to subsidize military morale, welfare, and recrea-
tion programs throughout the world. These are direct
expenses and do not include many more millions in tax exemp-
tions and free land and space that these activities use.
Subsidies of this magnitude have allowed the activities to
become entities of substantial economic consequence; with
their ability to become more self-sufficient and offer their
customers a price advantage at the same time.
     In this regard, retail facility construction from non-
appropriated funds is not unusual, Several years ago the
joint-service Army and Air Force exchange and motion pic-
ture services launched majoz lorj-term construction programs
with nunappropriated funds, and in 1974 the Congress passed
legislation authorizing the commissaries of all services to
levy a surcharge to be used for building new stores.



                              4
 ENCLOSURE I                                                           ENCLOSURE I

     There is also more emphasis in the Defense Department
to rely on the community for military personnel support. The
Defense Department's policy is to rely primarily on civilian
communities for housing. The House Committee on Appropria-
tions has concurred with this policy on numerous occasions,
and has taken several steps to enable the civilian sector
to provide Detter support for military families.

Conclusion

     Because of the proximity and number of military and com-
munity retail facilities, we question the need for the funds
requested for the exchange complex and service station.

OVERSTATED APPROPRIATIONS REQUEST

     Should the committee decide not to delete the Navy's re-
quest for the exchange complex and service station discussed
above, we believe reductions should be made in the retail
facilities request. These facilities are larger than the
allowance established by the Defense Department and the Navy.
This has resulted in an overstatement of about $1.1 million
in the appropriations request.


                                                           Our             Navy
                     Space      Space                   estimate of     estimate of
     Project       requested   allowed       Excess    overstatement   overstatement
Exchange complex
  (notes a, b)     68,266      54,615        13,651     $   885.057        $S41,000
Service station     3,900       3,780           12C          20,462          11,000
Base cafeteria      8,971       7,400         1,571         146,U50          84,000
Auto hobby shop    10,364       9,880           484          52,024    '      7,000
    Total          91,501      75,675     15,826      c/$51,103,593    c/$963,000
a/The exchange complex includes a retail store, warehouse, administration
  space, package store, maintenance shop, barber shop, beauty shop, gar-
  den shop, beverage store, shoe repair store, optical shop, tailor shop,
  valet service, laundry and drycleaning store, TV repair s' re, and
  personal services facility.
b/Subsequent to the completion of our audit work, the Navy eeleted the
  package store from i.t -equest, reducing its request for the exchange
  complex by $250,000.
c/Our computation of the overstatements is based on an allocation ~f
  the excess square footage against the amount requested. The Navy
  disagreed with our estimate of the overstatements. Subsequent to
  the comafletion of our audit, the Navy gave us their estimate of the
  overstatements. The Navy's estimate corresponds to our computation
  of the excess space.




                                         5
ENCLOSURE I                                     ENCLOSURE I

     In supporting its request, the Navy computed the square
footage allowances for retail facilities by using an autho-
rized military personnel strength of 5,488. This figure
represents the entire complement of officers and enlisted
personnel permanently assigned to the base.  The Navy also
requested funding for certain retail facilities not specifi-
cally authorized.

     It is Defense Department policy that onbase retail fa-
cilities meet specific requirements and not be arbitrarily
programed to meet maximum allowances. We computed the ex-
cess space in the exchange complex by excluding three fa-
cilities which are not specifically authorized by Defense
Department and Navy criteria--a package store (4,000 sq. ft.),
a beverage store (3,000 sq. ft.), and a garden shop (1,400
sq. ft.).  In addition, in computing excess space (7,426 sq.
ft.) for the remaining retail facilities, we used a military
strength of 4,410, which does not include the crews that
will be on patrol at sea. The Trident submarines will be
at sea on a rotating basis, and 1,078 crew members at any
given time will not be using 'the onbase retail facilities.

     The Navy disagrees with Your exclusion of the crews at
sea because their dependents will be using the facilities.
However, as required by Navy criteria, our computations in-
cluded crew dependents. For example, our computation of
the space allowance for the retail store takes into account
these dependents.

Conclusions

     In our opinion the Navy's appropriation request is over-
stated by $850,000 ($1,100,000 less $250,000 for the package
store).
PROJECT DEFERRALS

     The fiscal year 1978 request includes about $26.3 mil-
lion for the second explosive handling wharf required for
the Trident program. Both wharfs are used to load and/or
unload missiles from submarines during refit and before de-
ployment. After reviewing the scheduled use of explosive
handling wharf #2, we believe it could be deferred from
this year's program.
     The Navy plans to have explosive handling wharf #2 com-
pleted in July 1980 and ready to use by early 1981. It be-
lieves that the second wharf will eliminate schedule con-
flicts when two submarines are due to nave missile handling
work performed at the same time. According to the Navy, if
ENCLOSURE I                                     ENCLOSURE I


explosive nandling wharf %2 is not constructed, severe de-
lays would occur in the 25-day refit cycle and deployment
schedules world be jeopardized.

     An analysis of the deployment and refit schedules through
1983 shows that there are only three times when two submarines
are expected to require missile handling at the same time:

 Ships                Requirement               Dates
SSBN 726       Unload for refit                       1/07/82
SSBN 729       Load prior to deployment   12/25/81 to 1/09/82

SSBN 727       Load after refit               8/14 to 8/15/83
SSBN 729       Load after refit               8/15 to 8/16/83

SSBN 728       Load after refit                       9/08/83
SSBN 731       Load prior to deployment       8/27 to 9/11/83

     As shown above, the first conflict does not occur until
January 1982 and would cause SSBN 726 only a 3-day delay in de-
parting on patrol. The next conflict does not occur until
August 1983.  However, the Navy feels conflicts could occur
earlier because the schedules are subject to change.

     The Navy also believes that the second wharf is needed
in the fiscal year 1978 program to provide a backup capability
should explosive handling wharf #1 become inoperable because
of equipment breakdown.

     The Navy also contends that if explosive handling wharf
#2 is approved as a fiscal year 1978 facility it can bid the
job while other major waterfront contractors are still mobi-
lized at the site, thus enabling most of the job to be com-
pleted before Trident submarines begin operating.  If con-
struction of explosive handling wharf #2 is deferred 1 year,
the Navy estimates that program costs will increase by about
$5.1 million. Below are comments on the factors which make
up this increase:
     -- $2.6 million due to escalation.  The Navy's estimate
        is based on 10 percent of the $26 million fiscal
        year 1978 request for this project. In our op.nion,
        possible project costs escalation is not sufficient
        reason for funding a project before a demonstrated
        need for the project exists. In this regard, in testi-
        mony before the House Appropriations Committee's
        Subcommittee on Defense, the Secretary of Defense
        stated:



                              7
ENCLOSURE I                                      ENCLOSURE I

         "I discount that [inflation]   because if
         you don't discount that then   what it says
         is you should buy everything   now that you
         would ever buy because it is   always go-
         ing to cost more."
    -- $0.5 million due to contractor shutdowns. The Navy's
       estimate is based on Government-directed contractor
       shutdowns during missile handling operations at ex-
       plosive handling wharf #1. These operations would
       cause construction of explosive handling wharf #2
       be halted because of security and explosive safety to
       requirements. The shutdowns are based on the de-
       livery schedule of the first submarine, therefore,
       fewer shutdowns would occur if the submarine is not
       delivered on schedule.  The first submarine is cur-
       rently 23 weeks behind delivery schedule.

    -- $2.0 million for contractor competitive advantage.
       The Navy estimate is based on a contractor's com-
       petitive advantage in owning a giant pile-driving
       rig. This contractor is currently onbase and is
       constructing the refit delta with this rig. The
       Navy contends that (1) the giant rig is tailormade
       for the piles and conditions at the refit delta
       (similar to those for explosive handling wharf #2),
       (2) it is a very sophisticated and efficient rig
       with a high capital cost, and (3) its pile-driving
       production rate is about twice that experienced
       by the smaller rig previously used at explosive
       handling wharf #1. The Navy believes that this
       contractor will probably bid on the explosive han-
      dling wharf #2 project. The Navy feels that, since
       this contractor will not have to assemble and con-
      struct a new rig, the Navy could save up to $2 mil-
      lion eie to the keen competition.

     In our opinion, much of the $2 million cited by
     the Navy as potential savings may be reflected
     as profit in the bid of the contractor that has
     this competitive advantage. In addition, because
     of this competitive advantage, the competition
     for the explosive handling wharf #2 project may
     be less keen than anticipated by the Navy.  In
     any event, since construction of explosive han-
     dling wharf #2 is a major project, the contrac-
     tor in question will likely make a bid regardless
     of the project's timing.
ENCLOSURE I                                      ENCLOSURE I


Conclusion

     In our opinion, the Navy has shown no convincing eco-
nomic reasons for not deferring the explosive handling wharf
#2 project. Based on the scheduled use of explosive handling
wharf #2, this project could be deferred.

QUESTIONABLE CO£TLEST   IMATES

     In its fiscal year 1977 request, the Navy included a
10-percent contingency factor for repetitive projects to
                                                       changes.
cover unforeseen construction difficulties and design
                                           was excessive   and
The committee believed the 10-percent rate
appropriated only 5 percent. According to the  Nav',  a 5-
percent contingency rate was used for all projects in the
fiscal year 1978 program, except for the service pier/port
control office and utilities and site improvements where
10 percent was used. However, a factor for anticipated post-
contract award services, ranging from 1/2 to 1-1/2 percent,
                                                     Post-
was added to the basic 5-percent contingency rate. support"
contract award service is defined as "engineering
for preparation of construction amendments necessary for
contract change orcers. Prior year project cost estimates
did not include specific amounts for postcontract  award
services.  The Navy stated that this cost was included   as
part of the 10-percent contingency rate used in prior year
project cost estimates. However, it was not specifically
identified as a separate item.
     The Assistant Officer in Charge of Construction for
Engineering, Trident, stated that no fixed rules exist
concerning whicn factors should be included in appropria-
tion requests. The postcontract award service amounts
vary, depending on the technical complexities ol. each
projec.. This officer believed that the amounts for
postcontract award services are necessary because the 5-
percent contingency factor cannot cover these costs.
 Conclusion
      We question the $0.9 million for postcontract award
 services because this amount seems to be provided for in.
 the allocation for contingencies--the cost-of-change Inorders
                                                          ef-
 resulting from unforeseen construction conditions.
 fect,   it appears to be a restatement of what is essentially
 a contingency and, therefore, may be contrary to the com-
 mittee's desire last year to reduce contingency estimates.




                                 9
ENCLOSURE I                                     ENCLOSURE I


DELAY IN SUBMARINE
COSTRUCTION SCHEDULES

     The Trident support site is being constructed to sup-
port a force of 10 submarines. The first submarine is
scheduled to be deployed in September 1979, based on a
December 1978 delivery plus a 9-month predeployment operat-
ing period.  As of December 1976, the first submarine was
23 weeks behind schedule.  Alternative plans to solve the
delivery problems have been or are being prepared. These
plans will indicate .he steps to be taken and the rates of
progress which would have to be made to recover the planned
December 1978 ship delivery date.

CHANGES TO PRIOR YEAR PROGRAMS

      During hearings on the fiscal year 1978 appropriations
request, the Navy provided the cormmittee with working esti-
mates, as of February 28, 1977, of projects funded in prior
years, and explanations of principal causes for cost esti-
mate changes of $1 million or more since last year's hear-
ings.

     For the committee's information, the Navy gave us some
additional reasons for the changes to working estimates
which it had not provided to the committee.   Changes to
cost estimates for the refit pier #1, explosive handling
wharf #1, Trident training facility (2d increment), Indian
Island wharf, refit pier #2, and missile motor magazines
were also caused by further design progress which allowed
a better base for cost estimating. Changes to the utili-
ties and site improvements (3d increment) cost estimates
were also caused by construction progress which facilitated
better definition of construction conditions.

FUN-S AVAIiABLE FROM
PRIOR 'EAR APPROPRIATIONS

     The Congress has appropriated $468.6 million for Tri-
dent support facilities construction and $15 million for
community impact assistance for a total of $483.6 million.
Navy working estimates, as of February 28, 1977, showed
$1.7 million not being allocated to specific projects.

Conclusion

     These funds could be made available for the 1978 ap-
propriation request. However, the Navy has an additional
$5 million cost identified in this year's hearings for
launch complex 37. The Navy would like to apply the $1.7
million to this project.


                             10