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
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)