oversight

Depot Maintenance: Army Report Provides Incomplete Assessment of Depot-Type Capabilities

Published by the Government Accountability Office on 1999-10-15.

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

                  United States General Accounting Office

GAO               Report to the Chairman and Ranking
                  Minority Member, Committee on Armed
                  Services, House of Representatives


October 1999
                  DEPOT
                  MAINTENANCE

                  Army Report Provides
                  Incomplete
                  Assessment of
                  Depot-type
                  Capabilities




GAO/NSIAD-00-20
Contents



Letter                                                                                           3


Appendixes             Appendix I: Repair Parts Obtained at Local Levels Bypassing
                         Normal Supply Process                                                  30
                       Appendix II: Potential Providers of Depot Maintenance-Type
                         Services Maintenance Program Within the Continental United
                         States                                                                 35
                       Appendix III: Local Maintenance Facilities and Depots Visited
                         by GAO                                                                 39
                       Appendix IV: Comments From the Department of Defense                     40
                       Appendix V:   GAO Contacts and Staff Acknowledgments                     42


Related GAO Products                                                                            43


Table                  Table 1: Historical Workload Data for the Repair and Overhaul of
                         Various Military Engines at Three Army Depots                          31


Figure                 Figure 1: Location of the Army’s Maintenance Facilities Within the
                         Continental United States                                               9




                       Abbreviations

                       AMC        Army Materiel Command
                       BRAC       Base Realignment and Closure
                       DOD        Department of Defense
                       SRA        Special Repair Authority




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Page 2   GAO/NSIAD-00-20 Depot Maintenance
United States General Accounting Office                                                          National Security and
Washington, D.C. 20548                                                                    International Affairs Division



                                    B-283179                                                                                   Leter




                                    October 15, 1999

                                    The Honorable Floyd Spence
                                    Chairman
                                    The Honorable Ike Skelton
                                    Ranking Minority Member
                                    Committee on Armed Services
                                    House of Representatives

                                    Under 10 U.S.C. 2460, depot maintenance and repair involves the overhaul,
                                    upgrade, and rebuilding of military systems, subsystems, parts, and
                                    assemblies. In recent years, some depot maintenance workloads have
                                    become fragmented—that is, some depot maintenance workloads have
                                    shifted to non-depot facilities—leading to uncertainty about the magnitude
                                    of depot maintenance-type capabilities, workforce requirements, and the
                                    distribution of work to public and private sector facilities.

                                    In response to direction from your Committee, the Army submitted a report
                                    on April 14, 1999, on its study of the proliferation of depot
                                    maintenance-type activities at non-depot facilities.1 You also required that
                                    we report on the completeness and adequacy of the Army’s report along
                                    with any other relevant information. 2 Specifically, this report determines
                                    the extent to which the Army’s report (1) identifies the total amount of
                                    depot maintenance-type work conducted at local maintenance facilities
                                    and the cost efficiency of such work in view of the Army’s overall
                                    requirements and (2) addresses plans for consolidating fragmented
                                    maintenance operations. Additionally, this report highlights continuing
                                    challenges the Army faces in its efforts to resolve proliferation issues.




                                    1
                                     In this report we refer to depot maintenance-type activities as work performed by local
                                    maintenance and repair facilities that meets the definition for depot maintenance in
                                    10 U.S.C 2460.
                                    2
                                     The Committee (report number 105-532) also required that we evaluate the completeness
                                    and adequacy of the Army’s report on the Army’s Workload and Performance System, an
                                    automated system for identifying workforce requirements. We plan to issue a separate
                                    report addressing implementation of this system.




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Results in Brief   The Army’s report did not sufficiently identify the extent of depot
                   maintenance-type work performed at non-depot facilities. The Army
                   reported that 40 staff years of depot maintenance-type work was
                   performed outside of the formal depot system by non-depot maintenance
                   providers operating under special repair authorities. However, other
                   sources of information indicate that additional amounts of depot
                   maintenance-type work and capabilities exist at various non-depot
                   facilities. Further, the Army was unable to develop accurate and consistent
                   estimates of its depot maintenance-type work because its reporting criteria
                   are not consistent with the definition in 10 U.S.C. 2460, and management
                   information systems and procedures are not equipped to assess the
                   magnitude and cost-effectiveness of all maintenance and supply functions.

                   Citing inadequate data on the subject, the Army’s report did not make any
                   recommendations for consolidating depot maintenance-type facilities to
                   the public depots. Nonetheless, the report did outline a number of ongoing
                   initiatives, and it recommended other actions to improve the management
                   of information on facilities performing depot maintenance-type tasks.
                   These actions should provide some of the data and management
                   improvements needed to support future consolidation recommendations.
                   Although not specifically addressed in the Army’s report, the Army has
                   developed a draft strategic plan for its depot maintenance facilities.
                   However, key details for implementing many of the planned actions remain
                   to be developed, including plans to assess the current capabilities of and
                   future requirements for the Army’s maintenance support structure.

                   We identified a number of continuing challenges the Army faces in
                   attempting to address the fragmentation of depot maintenance work and
                   the proliferation of depot maintenance-type facilities. Key among them is
                   the amount of depot maintenance-type capabilities controlled by major
                   commands in the active Army and the Army National Guard. For various
                   reasons, these commands are reluctant to reduce their present capability
                   for performing depot maintenance-type workloads. Eliminating the
                   fragmentation, duplication, and excess capacities within the Army’s
                   maintenance infrastructure—while implementing solutions that are best
                   from a warfighting perspective and most cost-effective to the Army as a
                   whole—represents a formidable challenge for Army leadership.

                   This report makes recommendations to the Secretary of Defense intended
                   to strengthen the Army’s abilities to address the fragmentation of depot




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             maintenance work and the proliferation of depot maintenance-type
             facilities.



Background   The Army assigns maintenance and repair work to four different levels. 3
             From the least to the most intensive, they are unit level, direct support,
             general support, and depot level.

             Unit and direct support workload categories are assigned to deployable
             military units located at various field locations. Maintenance at these two
             levels generally focuses on day-to-day and routine recurring maintenance,
             but it is not expected to go beyond the removal and replacement of
             components.

             General support maintenance is conducted by military personnel,
             government civilians, or contractor employees, usually at fixed
             (non-mobile) industrial-type facilities located on Army posts, camps, and
             stations.4 Maintenance at this level involves the repairing and overhauling
             of parts and assemblies and some end items, such as trucks. General
             support maintenance units are under the command and control of major
             operating commands; as with lower-level maintenance facilities, these units
             are supported by direct appropriations for operations and maintenance.5

             Depot-level support is the most intensive level of maintenance and repair;
             as noted, it involves overhauling, upgrading, and rebuilding of military
             systems, subsystems, parts, and assemblies. When compared to general
             support maintenance, depot-level maintenance work generally involves the
             use of higher skilled technicians and more sophisticated test and plant
             equipment. Depot-level maintenance has traditionally been performed by
             government civilians working at government-owned industrial facilities
             under the command and control of the Army Materiel Command (AMC) or
             by contractor personnel working in contractor-owned and -operated


             3
              However, the maintenance structure for Army aircraft and components is comprised of
             three levels—unit, intermediate, and depot.
             4
                 Military personnel operate general support units that are deployable for theater operations.
             5
              Such funding is used to pay for most costs associated with establishing and operating
             maintenance facilities at this level. One key exception is the cost of military personnel that
             may be involved in such work. The cost of military personnel are accounted for in a
             separate, centrally managed, Military Personnel appropriations account.




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facilities performing work specified by AMC-managed maintenance
contracts. The Army’s five government-operated maintenance depots are
managed within the Army Working Capital Fund. Contract depot
maintenance work is not managed under the working capital fund.

Army maintenance facilities obtain repair parts through a two-tiered,
wholesale and retail logistics support system. Despite long-standing efforts
to merge the wholesale and retail supply systems, each system continues to
operate independently. Under the current system, Army retail supply
managers may arrange for unserviceable repair parts to be repaired by
local maintenance facilities or they may order replacement parts from the
wholesale system.

Responsibility for the Army’s wholesale system is assigned to four major
commands subordinate to the Army Materiel Command. The subordinate
commands manage repairable item inventories, arranging for the repairs of
unserviceable items returned to the supply system and for the procurement
of new items directly from vendors. 6 In addition, the Defense Logistics
Agency arranges for the procurement and distribution of various supplies
used in the maintenance process. 7

Responsibility for the Army’s retail supply system is assigned to
field-operating commands. Retail supply activities may draw repair parts
from wholesale inventories that are held in government warehouses to
meet the demands of retail customers or arrange for the repair of items
through local maintenance facilities. Since April 1992, Army wholesale
inventory managers have been charging retail customers, such as combat
units and retail supply support activities, for repairable items that they
previously provided at no cost. This change was implemented as a cost-
reduction effort to encourage retail customers to order no more than they
needed and to fully diagnose equipment malfunctions and repair items
within their capability.




6
 The four subordinate commands are the Tank-Automotive and Armaments Command, the
Communications-Electronics Command, the Soldier Biological and Chemical Command,
and the Aviation and Missile Command.
7
 In some instances, the Army may rely on prime vendors for repair items. Prime vendors are
contractors that buy inventory from a variety of suppliers, store it in commercial
warehouses, and ship it to customers when ordered.




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Depot Maintenance         In recent years the amount of work assigned to the Army’s major industrial
Workloads Declining and   maintenance depots has declined significantly. 8 Work at the major
                          maintenance depots has declined for a number of reasons, including
Fragmented                reduced force structure, increased emphasis on outsourcing, and DOD and
                          Army policies that advocate placing maintenance and repair workloads at
                          the lowest level maintenance facility with capability to perform the task. In
                          addition, as we have previously reported, operating units sometimes
                          believe they can obtain repairs at less cost at non-depot facilities that do
                          not operate under the working capital fund and that are not required to
                          recoup from customers the full costs of providing goods and services.9
                          Likewise, we have reported that in recent years the Army’s Forces
                          Command and Training and Doctrine Command have operated an
                          increasing number of regional repair facilities at active Army installations
                          that siphon depot maintenance-type workloads from regular depot
                          facilities. The Army National Guard also operates regional repair facilities
                          at state-owned National Guard sites. Categorized as integrated sustainment
                          maintenance (ISM) facilities, they repair Army equipment above the direct
                          support level, including general support and depot-level support tasks.
                          Current Army policy allows some ISM sites to perform depot-level tasks
                          under a Special Repair Authority (SRA).10 While some Army officials told us
                          the ISM program involves only a small amount of depot maintenance-type
                          work based on their understanding of the Army’s 4-level maintenance
                          process, other sources told us the amount of depot maintenance-type work
                          would be substantial, given the depot maintenance definition enacted in
                          1997, and codified at 10 U.S.C. 2460.

                          Despite declining workloads, the Army’s maintenance organizations
                          employ a large number of skilled personnel, some of which are


                          8
                           As a result of these declining workloads, the number of operating maintenance depots
                          decreased from 10 to 5 between 1976 and 1995. Even so, Army officials have recognized that
                          they continue to retain excess capacity in their depot system and that factor, along with
                          continuing reductions in programmed maintenance work, results in higher operating costs.
                          The Army has previously proposed reducing the number of government-owned and
                          -operated maintenance depots from five to three, but actions of the 1995 Base Realignment
                          and Closure (BRAC) Commission resulted in five depots being retained.
                          9
                           Army Industrial Facilities: Workforce Requirements And Related Issues Affecting Depots
                          and Arsenals (GAO/NSIAD-99-31, Nov. 30, 1998).
                          10
                            Special repair authorities are approved after AMC determines that the repair sites have
                          adequate facilities, equipment, and sufficient trained personnel to accomplish the tasks.
                          Overall cost-effectiveness to the Army is not evaluated.




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underutilized. As we previously reported, at the end of fiscal year 1998 the
Army’s five depots reportedly employed about 11,200 persons that were
involved in depot maintenance-type work utilizing about 68 percent of
available production capacity. While detailed information is not currently
available to document the capabilities, capacity utilization, and size of the
Army’s network of potential local maintenance providers, Army records
show that in fiscal year 1998 about 9,800 persons were employed at
133 different local maintenance facilities worldwide. About 46 percent of
the local maintenance personnel are employed by the National Guard,
22 percent by the Forces Command, 12 percent by the Training and
Doctrine Command, 19 percent by the European Command, and 1 percent
by the Army Reserve. In fiscal year 1998, the Army reportedly spent about
$1.7 billion on depot-level maintenance work, of which $941 million, or
about 54 percent, was provided to government-operated facilities and
$788 million, or about 46 percent, to contractor-operated facilities.

Figure 1 shows the location of the Army’s five working capital funded
maintenance depots and the locations of the Army’s direct appropriation
funded local maintenance facilities within the continental United States.




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Figure 1: Location of the Army’s Maintenance Facilities Within the Continental United States




                                           Note: In addition to the sites shown above, the Army National Guard operates one or more sites in
                                           each state. See appendix II for a complete list.




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Concerns About Identifying   With changes in sources of repair and what appeared to be movement of
All Depot-Level Work and     some depot-level work to below-depot level facilities in recent years,
                             questions have arisen concerning the definition of depot-level work and the
Determining Work Force       allocations of depot maintenance workloads between the public and
Requirements                 private sector facilities. The Congress enacted legislation specifying the
                             characteristics of depot maintenance workloads, and requiring annual
                             reports on workload allocations between the public and private sectors.11
                             As we have previously pointed out, under the statutory definition, depot
                             maintenance work was not limited to a specific level or category of repair
                             activity.12 Therefore, depot maintenance-type work performed at non-depot
                             facilities that meets the definition contained in 10 U.S.C. 2460 should be
                             included as part of the Army’s assessment of its maintenance programs and
                             activities.

                             The House National Security Committee, in its report accompanying the
                             Defense Authorization Act for Fiscal Year 1999 (report number 105-532),
                             voiced concern over the Army’s active and reserve component installations
                             developing depot-like capabilities without assessing the impact on the
                             Army’s overall maintenance infrastructure. Further, the Committee
                             questioned the process the Army used to determine workforce
                             requirements for depot facilities.




                             11
                               Section 2460 of title 10 as amended by the Strom Thurmond National Defense
                             Authorization Act for Fiscal Year 1999, provides that depot maintenance workloads include
                             maintenance and repair requiring the overhaul, upgrade, or rebuilding of parts, assemblies,
                             or subassemblies and the testing and reclamation of equipment as necessary, regardless of
                             the source of funds or the location where work is performed. DOD is required by 10 U.S.C.
                             2466 to prepare an annual report of public and private sector workload allocations.
                             12
                              Defense Depot Maintenance: Public and Private Sector Workload Distribution Reporting
                             Can Be Further Improved (GAO/NSIAD-98-175, July 23, 1998).




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Depot Work Performed   In April 1999, the Army reported that in fiscal year 1998 local maintenance
                       facilities, operating under special repair authorities, completed 40
by Local Maintenance   staff-years of depot maintenance-type work at a reported cost of $17.6
Facilities Is          million. The Army’s report acknowledged that its report did not take into
                       consideration the most current definition of depot maintenance work
Understated, and       contained in 10 U.S.C. 2460, and it recognized significant limitations in
Financial Impact Is    systems and procedures to fully quantify and assess the cost efficiency of
Uncertain              depot maintenance-type work being done outside the formal depot system.
                       A separate DOD report sent to the Congress on February 5, 1999, 13 as well
                       as our own assessment of other depot maintenance-type workloads being
                       conducted by local maintenance providers, indicates that the amount of the
                       Army’s depot-level work being performed at non-depot facilities is much
                       greater than the Army’s April report indicates.




                       13
                         DOD’s annual report of public and private sector workload allocations required by
                       10 U.S.C. 2466.




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Army’s Process for           The Army has not yet revised its maintenance policies and technical
Identifying Depot-Level      manuals to reflect recently enacted legislation defining depot maintenance
                             workloads. In this context, any attempt by the Army to estimate the amount
Maintenance Workload         of depot maintenance work conducted at local maintenance facilities likely
Does Not Reflect Statutory   would be misleading. Army officials at the local maintenance facilities that
Definition and Masks Total   we visited had limited knowledge of the definition of depot maintenance
Workload Volume              contained in 10 U.S.C. 2460. When questioned about the amount of depot
                             maintenance work conducted at the local level, they routinely referred to
                             technical maintenance manuals and the maintenance allocation charts that
                             assigned detailed work tasks according to the four levels of Army
                             maintenance. These manuals and allocation charts did not address the
                             statutory definition. They stated that depot-level work tasks were not
                             performed unless higher commands had granted special repair
                             authorities.14 Nonetheless, they acknowledged that in some instances local
                             repair activities were overhauling or rebuilding various Army equipment.
                             Officials said that maintenance manuals specified that the individual work
                             tasks did not require that work be performed in a depot. Further, in their
                             way of thinking, maintenance work that is not performed in a depot is not
                             depot maintenance.15

                             Army headquarters officials told us they were revising maintenance
                             regulations and technical manuals to reflect the statutory definition. In
                             commenting on a draft of this report, Army officials stated that they
                             planned to publish revised regulations during the first quarter of fiscal year
                             2000 that will include the statutory definition for identifying and reporting
                             depot maintenance-type workloads. However, efforts to update the Army’s
                             technical manuals, will require significant labor intensive reviews and
                             analyses by numerous maintenance technicians, and therefore completion
                             dates are dependent upon approval of necessary funding to support the
                             work.




                             14
                               Special repair authorities are granted after AMC determines that repair sites have
                             adequate facilities, equipment, and trained personnel. Once approved, they enable local
                             repair sites to perform depot-level tasks on specific items for as long as 3 years.
                             15
                               Our recent report on depot workload allocations provides additional information
                             concerning limitations associated with the Army’s depot workload data. See: Depot
                             Maintenance: Workload Allocation Reporting Improved, but Lingering Problems Remain
                             (GAO/NSIAD-99-154, July 15, 1999.)




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Special Repair Authority      The Army’s report based its estimate of depot maintenance-type workloads
Data Files Are Inconsistent   at non-depot facilities on work conducted under special repair authorities.
                              However, the report noted that inconsistencies existed between automated
and Incomplete                SRA databases maintained by various Army headquarters and field-level
                              organizations. For example, the Army’s April 1999 report shows 2,233
                              approved SRAs based on information obtained from the Army Materiel
                              Command’s database and about 1,274 SRAs based on information obtained
                              from major operating commands’ automated databases. Further, our
                              discussions with members of the Army’s depot proliferation study team
                              indicate that the major operating commands have not developed complete
                              and accurate reports of SRA expenditure data. For example, the Forces
                              Command reported that Fort Hood, Texas, completed SRA workloads
                              costing about $369,000, while Fort Hood’s records value the SRA work at
                              about $487,000. Further, the reserve components reported only limited
                              involvement with SRA workloads, but the actual amount could be higher
                              than reported because they routinely performed depot-level tasks that were
                              not specifically authorized by a special repair authority. For example,
                              during our January 1999 visit to the Aviation Classification Repair Activity
                              Depot in Gulfport, Mississippi, we learned that National Guard personnel
                              routinely performed depot-level work on older non-mission critical
                              helicopters without seeking authority from higher headquarters. An official
                              at the Gulfport facility stated that about 10 percent of their workload could
                              be considered depot maintenance tasks. However, based on their
                              understanding of internal operating procedures formulated by the National
                              Guard Bureau, the aviation depots thought they were not required to seek
                              approval or report on the value of SRA-related workloads for non-mission
                              critical aircraft. Subsequent to our visit, the Gulfport facility initiated
                              requests for about 34 individual SRAs, as of July 1999.


Examples of Significant       While the Army’s report was focused on quantifying the amount of depot
Depot Maintenance             maintenance work conducted under special repair authorities, it identified
                              several examples of significant equipment overhaul and rebuild programs
Workloads Conducted at        that were assigned to local maintenance facilities and that could be
Non-Depot Facilities          considered as depot maintenance work under the 10 U.S.C. 2460 definition.
                              However, due to uncertainties and inconsistencies in the Army’s criteria for
                              categorizing and reporting depot maintenance-type workloads and
                              ineffective management information systems, the Army’s April 1999 report
                              did not identify the total magnitude of work being conducted, or the
                              number of local repair facilities and personnel performing depot
                              maintenance-type services. Specifically, our review of these programs
                              shows the following:


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• The Army overhauls and rebuilds numerous components—including
  engines, transmissions, circuit cards, and generators—at more than
  100 local maintenance facilities managed under the integrated
  sustainment maintenance program. In fiscal year 1998 the integrated
  sustainment maintenance program coordinated secondary item repair
  programs with a reported cost exceeding $260 million. While much of
  this work meets the definition of depot maintenance as specified by
  10 U.S.C. 2460, current Army policies and procedures allow it to be done
  at non-depot locations. 16 Appendix II provides a list of the maintenance
  organizations currently involved in the Army’s integrated sustainment
  maintenance program within the continental United States.
• The Army authorizes 20 different local maintenance facilities to repair
  and rebuild tank engines and modules. The Army does not maintain
  records indicating the costs associated with each engine repair action or
  the number of units being repaired at each of the facilities. Army
  officials told us the M1 tank engine work was traditionally assigned to
  the Anniston Army Depot, but later it was partially assigned to the local
  level to avoid the perceived higher prices charged by the working capital
  funded depot. Additionally, Army officials cited readiness advantages in
  having maintenance resources located close to the end users. We noted
  that in some instances M1 engine maintenance capabilities have been
  established and continue to operate in relatively close proximity to one
  another. For example, three units operate in the area of Fort Hood,
  Texas, while two operate in the area of Fort Riley, Kansas, and two
  within the Korean theater of operations. Further, we found that
  capabilities at one of the Fort Riley facilities were recently expanded to
  enable the Kansas National Guard to perform depot-level overhauls that
  will provide work for about 55 full-time employees. A Kansas National
  Guard official estimated that his repair activity has capacity to
  completely overhaul 100 M1 engines per year and plans to become the
  maintenance provider of choice within the National Guard community
  by offering lower rates than can be obtained from working capital
  funded depots.




16
  Over time, the Army’s major operating commands developed extensive local maintenance
facilities at multiple installations that supported similar capabilities and workloads. In 1996
the Army established the integrated sustainment maintenance program to consolidate
workloads and to eliminate some of the proliferation that had occurred.




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• Local maintenance facilities are receiving millions of dollars to repair
  and rebuild tactical wheeled vehicles. For example, between fiscal years
  1995 and 1999 contractor-operated repair facilities at Fort Polk and Fort
  Riley received about $48 million to rebuild and refurbish 1,586
  semi-trailers; 225 fuel tankers; 802 cargo trucks and tractors; and 712
  general-purpose vehicles. The contractor operated facilities received
  funding through the Army Forces Command. Further, the Mississippi
  National Guard was completing a multiyear program to repair and
  refurbish 1,182 vehicles under the European retrograde program at a
  budgeted cost of $64 million.17 Also, the Army’s supporting
  documentation for the fiscal year 1998 workload allocations shows that
  the Maine, Mississippi, Kansas, and Texas National Guard organizations
  received about $2 million to rebuild 5-ton trucks. Army officials said
  they were assigned this work because the Army’s remaining depots were
  unaffordable. Based on the Army’s current workload allocation process,
  Army officials commented that the work did not need to be performed
  in a depot. Following the Base Realignment and Closure Commission
  (BRAC) directed closure of the Tooele Army Depot in 1993, the Army
  downgraded all of its tactical-wheeled vehicle maintenance work,
  directing that it be performed at the general support level and below.
  More recently, Army headquarters officials told us they were
  considering changing some of the tactical-wheeled vehicle workload
  classifications to once again reflect depot-level tasking, but it is unclear
  how this change in policy will impact future workload assignments.
• AMC has established several forward repair activities18 to perform
  depot-level tasks at local installations having a high concentration of
  fielded equipment within a selected geographic area. Personnel assigned
  to the forward repair activities are depot employees paid by the Army
  working capital fund. For example, in fiscal year 1997, the Command
  established a forward repair activity at Fort Bliss, Texas, to support field
  artillery repair programs. As of December 1998, the forward repair
  activity employed 25 civilian personnel under the control and
  supervision of the Army’s Letterkenny, Pennsylvania, depot. Army


17
  This work was accomplished on vehicles that had been returned to the United States as a
result of downsizing initiatives within the European Theater. The work was intended to
return the vehicles to operating condition and, according to National Guard officials,
involved mostly general support and direct support tasks.
18
  The forward repair activities are also called logistics centers of excellence. These
activities are funded, directed, and controlled by the Army Materiel Command and provide
depot-level support at non-depot locations to lower operating costs at the unit level.




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                                briefing documents indicate that concentrating equipment specialists in
                                close proximity to users reduced repair costs by 30 percent and repair
                                turnaround times by 50 percent. While potentially beneficial, the Army
                                has not completed such an analysis on a broader scale. Army officials
                                explained that the forward repair activity concept reduced costs and
                                repair turnaround times through use of higher skilled personnel and
                                more sophisticated test equipment than are normally available at local
                                maintenance facilities. To enhance warfighting readiness, AMC is
                                planning to establish a forward repair activity in Korea for support of
                                various aviation and missile systems.

                             While we were unable to fully evaluate the costs associated with these
                             maintenance providers, they do suggest the presence of significant
                             depot-level repair capabilities in the Army’s non-depot facilities.


Overall Cost Efficiency of   The Army’s report stated that major operating commands were taking
Local Repair Programs Is     extraordinary measures to avoid placing orders for repair parts with
                             wholesale inventory managers due to the perceived higher cost of the
Uncertain                    depot repair programs, but did not evaluate the cost efficiency of the
                             alternative local repair sources in view of the Army’s overall requirements.
                             Further, the report stated that the Army lacks effective management
                             information and procedures to determine the cost tradeoffs of more
                             frequent local repair programs versus less frequent and more extensive
                             depot overhaul programs.

                             Although the Army was unable to fully evaluate the cost benefits of local
                             repair programs, the current separation of the wholesale and retail supply
                             support systems sub-optimizes resources, leading to the accumulation of
                             excess stocks and duplication of repair workloads and infrastructure. For
                             example, we found that multiple local maintenance facilities were repairing
                             items for which the Army’s wholesale inventory managers already had
                             supplies of serviceable items on hand in excess of requirements. As
                             indicated in appendix I, the Army’s current fragmented depot maintenance
                             management and workloading process may not lead to the most
                             cost-effective decisions and can undermine efforts to maximize
                             cost-effectiveness of the Army’s overall logistics support.

                             In commenting on a draft of this report, Army officials acknowledged that
                             local maintenance facilities were repairing items when the Army’s overall
                             inventory of serviceable items exceeded requirements. However, they
                             stated that this practice would cease upon implementation of the evolving



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                        national maintenance program. While the national maintenance program
                        will likely reduce the volume of unnecessary and uneconomical local
                        repairs, the evolving program is dependent upon timely and effective
                        completion of ongoing initiatives to consolidate wholesale and retail level
                        stocks. Further, as currently planned, the evolving national maintenance
                        strategy will allow local repair activities to continue performing depot
                        maintenance-type workloads if repaired items are returned to using
                        organizations rather than a supply system shelf. Thus it is unclear to what
                        extent these ongoing initiatives will resolve the fragmentation and
                        duplication problems we have discussed in this report.



No Consolidation        The Army’s report noted that better data about the amount and nature of
                        the maintenance performed by local repair and maintenance facilities is
Recommendations         needed before any conclusions can be drawn regarding the potential for
Made, but Ongoing       consolidation of depot maintenance-type facilities. Consequently, the
                        report did not include any recommendations for consolidations.
Initiatives Should      Nevertheless, the report did outline a number of ongoing initiatives and
Strenghten              recommended actions to improve the management of information on
Management              facilities performing depot maintenance-type tasks, which could provide
                        management information and organizational controls to identify and
Information and         implement future options for consolidating fragmented depot
Promote Consolidation   maintenance-type workloads. In summary, these initiatives include plans to
Efforts                 implement a new maintenance strategy and a centralized process for
                        evaluating logistics requirements. Although not specifically addressed in
                        the report, the Army is implementing a recommendation we made in a
                        previous report to develop a strategic plan for depot maintenance-type
                        facilities.19 However, key details for implementing many of the planned
                        actions remain to be developed.




                        19
                          Army Industrial Facilities: Workforce Requirements and Related Issues Affecting Depots
                        and Arsenals (GAO/NSIAD-99-31, Nov. 30, 1998).




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Army Plans to Group          The Army is drafting changes to its maintenance policies and procedures
Maintenance Requirements     that will group the four levels of maintenance into two maintenance
                             categories—field-level maintenance and national-level maintenance.20 The
Into Two Broad Categories,   current plans are as follows:
but Impact on Maintenance
Depots and Local Repair      • The field-level maintenance category will include support from
Facilities Is Uncertain        non-depot activities, including unit level, direct support, and general
                               support maintenance facilities. Field-level maintenance will be focused
                               on the repair and return of parts and assemblies to the users. Field-level
                               maintenance is intended to support the near term readiness of military
                               units and will be controlled and financed by the users.
                             • The national-level maintenance category will include support from
                               regular maintenance depots, industrial base contractors, and qualified
                               local maintenance providers. National-level maintenance will be
                               focused on the repair and return of parts and assemblies to the supply
                               system. National-level maintenance will be distributed by a single
                               manager and require the total overhaul of items to like new condition.

                             The planned policy revision will more closely align the Army’s maintenance
                             categories with the 10 U.S.C. 2460 definition of depot maintenance work.
                             As a result, the total range of depot maintenance-type workloads will be
                             more visible, which will enable Army leaders to better identify
                             opportunities for consolidating fragmented and duplicative workloads.
                             Army headquarters officials told us the Army’s major operating commands
                             received notice of these emerging changes in a message issued on July 14,
                             1999, and estimated that the Army would formally publish the policy
                             change in November 1999. We were advised that the Army was developing
                             phased implementation plans for this change. However, at this point,
                             completion dates and the affect on workload distributions to the regular
                             maintenance depots and the Army’s network of local maintenance facilities
                             are unclear. Army headquarters officials told us the policy change could
                             possibly result in shifting some work from local maintenance providers to
                             regular depots. However, commanders may be reluctant to change sources
                             of repair, given the perceived lower costs offered by local maintenance
                             providers and the existing capabilities and capacity of local providers to
                             accomplish necessary repair tasks.



                             20
                               The Army’s four levels of maintenance are unit level, direct support, general support, and
                             depot level. The Army’s maintenance policies and structure are described in Army
                             Regulation 750-1.




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Army Plans to Centralize    Key to the Army’s ongoing maintenance restructuring is the
Maintenance and Logistics   implementation of a single stock fund to replace the current dual system. In
                            November 1997 the Army’s Vice Chief of Staff approved a strategy to
Management Practices        implement a centralized management process for evaluating logistics
                            requirements and managing maintenance facilities. Army officials stated
                            that by fiscal year 2001 the current wholesale and retail repair parts
                            inventories will be centrally owned and managed; thus customers will no
                            longer have financial incentives to seek and obtain maintenance support
                            from alternative repair sources. The goal is that future repair program
                            requirements will be based on the overall needs of the Army, rather than
                            the sub-optimized needs of individual commands.

                            In July 1999 the Army designated the Commander of the Army Materiel
                            Command as the National Maintenance Manager with responsibility for
                            overseeing the Army’s logistics and maintenance support programs. To gain
                            purview over the maintenance capabilities and work being performed by
                            the Army National Guard and major operating commands within the active
                            duty component, the national maintenance office is developing plans to
                            transfer command and control of a small number of employees from the
                            major operating commands to AMC. Army officials told us they initially
                            identified 210 personnel spaces for transfer from the operating commands
                            to AMC; however, more recent information indicates the number will be
                            substantially lower. Army headquarters officials told us the major operating
                            commands are reluctant to transfer resources to AMC because they fear
                            such transfers could adversely affect readiness. Additionally, the major
                            operating commands do not have visibility over the impact of the
                            maintenance actions they take with regard to the Army’s total logistics
                            costs. It is unclear to what extent the major operating commands may
                            erode the authority of the national maintenance program.

                            Upon implementation, the national maintenance management office plans
                            to centrally coordinate the allocation of depot maintenance-type work to
                            private sector contractors, regular working capital funded maintenance
                            depots, and a relatively small number of local maintenance facilities. As the
                            national maintenance office gains purview over the full range of potential
                            providers of depot maintenance-type services, it plans to award future
                            maintenance workloads on the basis of best value analysis, and consolidate
                            duplicative and redundant workloads as appropriate. Army officials told us
                            that ultimately this approach could result in several “mini depots” being
                            strategically placed throughout the continental United States to provide for
                            the repair and overhaul of items for which the regular depots and
                            maintenance contractors lack sufficient capability or capacity. However, at



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                          this point it is unclear how these facilities would be organized or the basis
                          on which such decisions would be made. In addition, the national
                          maintenance office has no firm plans or procedures for assessing the
                          capabilities or cost-effectiveness of each depot maintenance-type facility—
                          critical information that the Army needs for assessing opportunities for
                          consolidating or eliminating unneeded maintenance infrastructure.



Army Report Recommended   The Army’s report to the Congress recognized opportunities for additional
Actions to Improve        improvements to the management of information and coordination of work
                          performed by depot maintenance-type facilities. For example, it
Maintenance Management    recommended that senior Army leaders and major Army commands
and Oversight
                          • expand and institutionalize the Army’s definition of depot maintenance
                            in accordance with 10 U.S.C. 2460 and also clarify and reach agreement
                            with the Congress on the distinction between field-level repair and
                            depot-level maintenance;
                          • modify and standardize Army data systems to provide for the full
                            accounting of depot maintenance-type work at all locations;
                          • improve processes, procedures, and accounting systems for managing
                            SRAs and require all active and reserve component maintenance
                            organizations to submit annual SRA production reports to the Army
                            Materiel Command; and
                          • establish policies, decision structure, and analysis tools for determining
                            whether opportunities exist for reaching specific conclusions on the
                            consolidation of local depot maintenance-type facilities to the depots.

                          These actions recognize the Army’s inability to provide sufficient
                          information on the proliferation of depot maintenance-type work at
                          non-depot facilities. The report does not provide a time frame for
                          accomplishing these actions; therefore it is uncertain when the Army will
                          be able to formulate plans for consolidating duplicative and fragmented
                          depot maintenance-type workloads.




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Strategic Plan Being   Our November 1998 report on Army industrial facilities recommended that
Developed              the Army develop a strategic plan to guide future downsizing of regular
                       depots and manage the full spectrum of local maintenance facilities with
                       capabilities to perform depot maintenance-type work. 21 While the Army’s
                       April 1999 report on depot proliferation did not address the Army’s ongoing
                       efforts to develop a strategic plan for its depot maintenance-type facilities,
                       we reviewed draft documents associated with the development of the
                       strategic plan, and we found that its goals and objectives would be key to
                       addressing the proliferation issue, although specific implementation details
                       are not yet developed. The five strategic goals, objectives, and performance
                       measures associated with the Army’s draft strategic plan are summarized
                       as follows:

                       • Centrally identify and manage all depot maintenance requirements. The
                         current depot customer base is fragmented between various commands
                         and does not provide an accurate estimate of future work. To achieve
                         this goal, the Army plans to develop a process within 1 year to
                         coordinate Army-wide depot requirements, improve information
                         systems, and evaluate and analyze customer satisfaction. Customers
                         will also be required to commit resources to deliver at least 80 percent
                         of the forecasted workload to the designated source of repair, and
                         depots will be required to rightsize their workforces to support the
                         forecasted workload estimates.
                       • Develop processes and procedures to ensure that source-of-repair
                         decisions support overall Army goals and objectives. This process
                         affects the amount of work the central depot maintenance manager has
                         to distribute across the full spectrum of potential providers and affects
                         the stability of workload forecasts, depot maintenance costs, and
                         mission readiness. To achieve this goal, the Army plans to develop
                         revised source-of-repair processes and policies within 1 year.
                       • Maintain a sustainable, multiskilled workforce capable of meeting
                         future depot requirements. The depots have been faced with a hiring
                         freeze for the last 13 years and are in danger of losing significant
                         numbers of skilled personnel as large numbers of employees become
                         eligible for retirement. To achieve this goal, the Army will determine and
                         publicize the core competencies for each depot and establish a timeline
                         for depots to have their workforces proficient in the selected
                         competencies. The depots will work with employee unions to establish

                       21
                         Army Industrial Facilities: Workforce Requirements and Related Issues Affecting Depots
                       and Arsenals (GAO/NSIAD-99-31, Nov. 30, 1998).




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                         employment practices that rely more heavily on cross-trained artisans
                         and temporary employees to supplement the regular depot workforce.
                         Within 1 year the Army will draft a plan for hiring and training new
                         workers to replace skilled workers that will likely retire in the near
                         future.
                       • Improve the management of material (parts) to provide for more
                         efficient depot operations. Currently, the unavailability of high value,
                         long-lead time parts prevents the depots from completing maintenance
                         work on time. To achieve this goal, the Army plans to improve parts
                         forecasting techniques and revise parts ordering policies to enable
                         depots to place higher priority requisitions with supply system
                         managers.
                       • Improve the competitiveness of organic depots by making their rates
                         more comparable with private sector contractors. To lower depot rates,
                         the Army plans to eliminate one half of the non-value added costs from
                         depot rates within 2 years and validate the costs and requirements for
                         maintaining unutilized plant capacity during peacetime for use during
                         contingencies.

                       Army officials told us they expect to finalize their plan by September 1999,
                       but the final plan’s degree of specificity is unclear. As of June 1999 the draft
                       planning documents contained limited implementing details, milestones, or
                       funding requirements necessary to achieve the plan’s objectives. Further,
                       the plan did not address specific goals and objectives concerning the
                       allocation of depot maintenance-type workloads between regular
                       maintenance depots and local maintenance providers in both the active and
                       reserve component forces, nor did it address methods and goals for
                       reducing excess capacity—concerns that we highlighted in our November
                       1998 report.



Ongoing Challenges     Although the Army is taking actions designed to achieve better control over
                       its maintenance resources and increase operating efficiencies at its regular
Must Be Addressed to   maintenance depots, we identified several factors that could significantly
Eliminate              limit its progress unless they are adequately addressed. For example, the
                       Army has not clearly articulated plans for evaluating options for effectively
Fragmentation and      utilizing maintenance resources at the various types of depot
Proliferation          maintenance-type facilities, including plans for downsizing or
                       consolidating unneeded infrastructure. Also, until the Army completes
                       ongoing efforts to fully integrate its logistics systems, Army customers may
                       continue to choose local sources of repair, rather than ordering depot-
                       repaired items from the Army supply system.



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Specifically, our work showed that the physical plant infrastructure of the
Army’s regular maintenance depots and local repair facilities were
generally sized to accomplish a volume of work in excess of current
requirements. As already noted, we found that the Army’s major operating
commands have developed and continue to operate modern and extensive
industrial maintenance facilities that are similar in appearance when
compared to the five major maintenance depots, but smaller in size. In
some cases, active and reserve components independently operate similar
sized maintenance and repair facilities in close proximity to one another.
We visited local maintenance facilities at active and reserve component
units located in five states. (Comparative organizational, staffing, and other
information for these local repair and maintenance organizations and the
Army’s five maintenance depots is shown in appendix III.)

Plans for reducing fragmentation and inefficiencies in depot maintenance
capabilities will likely be hampered by the Army’s lack of information
concerning its full capacity for completing depot maintenance-type work at
existing depot facilities as well as at other locations. Likewise, information
is lacking on the comparative cost-effectiveness of each category of facility.
Such information is essential to formulating optimum plans for
consolidating fragmented, duplicative, and excessive capabilities and
infrastructure.

Significant reductions in excess capacity, to the extent it involves
elimination of facilities, will likely be difficult absent legislation authorizing
future BRAC rounds. As the Army and the Department of Defense (DOD)
continue to seek authority from the Congress for additional BRAC rounds
to reduce excess facilities, the Army will need to develop more complete
information on its depot capabilities and their cost-effectiveness if it is
going to realistically determine the full extent of its excess facilities. In the
past, the Army has stated that it only needed to retain three of its
maintenance depots, but more recent actions indicate that excess capacity
could be much greater if all depot repair capabilities, as well as greater
reliance on the private sector for this work were considered. Complete and
reliable cost information will be essential to sound decisions about the
most cost-effective location and source for depot-level maintenance.

Progress has been limited in reforming the Army’s logistics supply system
that supports maintenance facilities. Army officials told us they are
continuing with plans announced several years ago to integrate the
wholesale- and retail-level logistics systems; however, completion has been
delayed until fiscal year 2001. The primary reasons given for delay are



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              (1) the inability of the Army’s outdated computer systems to share
              information and (2) the need for approval of financial resources to support
              system changes. While the Army has been slow in implementing logistic
              reform initiatives, actions taken a few years ago to charge customers for
              repairable items previously provided at no cost continue to stimulate
              efforts of field-level customers to seek alternate sources of supply through
              the use of local maintenance and repair facilities. Our work shows that
              customers have minimized their local equipment support costs, even
              though inefficiencies were created in the larger maintenance support
              system (see app. I). Therefore, any plan to reduce the proliferation of depot
              maintenance-type capabilities at the local level is highly dependent upon
              timely implementation of the Army’s logistics support system reforms.



Conclusions   The Army incompletely quantified the extent of depot maintenance-type
              work performed at non-depot facilities. Data was not obtained using the
              recently enacted statutory definition of depot maintenance work.
              Consequently, the Congress and Army managers do not know the extent to
              which depot repair capabilities have spread to other locations. However,
              our work indicates the extent of proliferation is greater than reported by
              the Army and is contributing to excess depot repair capabilities within the
              Army.

              The Army’s report, citing inadequate data on the subject, did not make any
              recommendations for consolidating depot-type facilities to the public
              depots. Nonetheless, the report did present a number of related initiatives
              and recommendations to improve the management of information on
              organizations performing depot maintenance-type work, reforms which
              could provide a framework for developing information in support of future
              consolidations. These initiatives include actions to centralize maintenance
              and logistics management practices under a national manager responsible
              for overseeing the program; however, it is unclear how or when the
              national manager will gain authority over maintenance capabilities and
              work currently provided by the Army National Guard and major operating
              commands within the active duty component. The Army recognizes that it
              needs to modify and standardize Army data systems to fully account for
              depot maintenance-type work at all locations, but it has not established
              clear action plans, milestones, and funding requirements for doing so. The
              Army is also taking steps to develop a strategic plan for depot maintenance
              facilities. However, key details for implementing many of the planned
              actions have not been supplied.




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                      Lastly, we identified a number of ongoing challenges the Army faces in
                      attempting to address the fragmentation of depot maintenance-type
                      workloads. Key among them is the significant amount of depot
                      maintenance-type capabilities operated by major commands in the active
                      Army and the National Guard, each with its own high-level proponents.
                      Further, the Army currently lacks complete information on the magnitude
                      of its capabilities for performing depot-level maintenance at various
                      locations, and it lacks information on the cost-effectiveness of each
                      category of maintenance and repair facility, including related supply
                      support. Accordingly, Army leaders are faced with a formidable challenge
                      as they attempt to eliminate fragmentation, duplication, and excess
                      capacities, and at the same time implement solutions that are best from a
                      warfighting perspective and, most cost-effective to the Army as a whole.



Recommendations       We recommend that the Secretary of Defense require that the Secretary of
                      the Army, in developing and implementing the Army’s strategic plan for
                      depot maintenance facilities, ensure that the strategic plans and tactical
                      implementing plans

                      • identify requisite action items, time frames, and funding requirements
                        for improving the Army’s information management systems to fully
                        identify the magnitude and cost-effectiveness of depot
                        maintenance-type work at various locations within the Army;
                      • establish (1) clear time frames and action plans for assessing
                        requirements for the various types of depot maintenance facilities and
                        (2) plans for achieving necessary consolidations and reductions of
                        excess capabilities; and
                      • incorporate the depot maintenance-type capabilities of both active and
                        reserve components under the national maintenance program and
                        assign the national maintenance manager with requisite responsibility
                        and authority for depot maintenance capabilities in active and reserve
                        components.



Agency Comments and   The Department of Defense provided written comments that are included
                      as appendix IV and technical comments that have been incorporated in the
Our Evaluation        body of the report as appropriate. DOD’s comments stated that the
                      Department generally concurred with our recommendations.




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With regard to the first two recommendations, DOD said that the Army has
developed a strategic plan for improving its depot maintenance program
from a corporate perspective. Further, the next step in this planning
process is to establish timelines and assign responsibility for each goal and
objective to specific organizations. More specific strategic action plans are
expected to be developed through a series of project action teams by the
second quarter of fiscal year 2000. We believe the completion of a
corporate strategic plan is a step in the right direction. However, we are
concerned that available information about this plan does not confirm how
the Army plans to identify and obtain necessary funding to support
implementation of effective management information systems for
determining the magnitude and analyzing the cost-effectiveness of depot
maintenance-type work at various locations within the Army. Further, the
Army has not determined how or when it might develop plans and goals for
achieving consolidations of redundant maintenance infrastructure and
reductions in costly excess industrial capabilities.

With regard to the third recommendation, DOD stated that the Army is
implementing a national maintenance manager program that will be the
focal point for sustainment maintenance requirements. As currently
planned, the national maintenance program, which will be managed by the
Army Materiel Command, includes plans for consolidating future
requirements for the overhaul of component parts returned to the supply
system. These workloads will be competitively distributed to maintenance
activities with existing capability and capacity. Under this concept the
Materiel Command could choose to distribute some portion of work to
local maintenance activities remaining under the command and control of
active and reserve component operating forces. The evolving national
maintenance program concept appears to be a reasonable start toward
addressing problems identified in our report. However, a variety of factors
make it unclear to what extent this concept can be successfully
implemented to achieve desired consolidations and reductions in excess
capacity within the Army’s maintenance infrastructure. For example, while
the evolving national maintenance program is intended to consolidate and
distribute overhaul work for components returned to the supply system,
the evolving management framework will continue to allow local
maintenance activities to repair items returned directly to using
organizations—work which could meet the statutory definition of depot
maintenance. Additionally, some other depot maintenance-type work is not
covered by the national maintenance program. For example, it does not
address the allocation of depot maintenance-type requirements for
overhauling, rebuilding, or upgrading of major end items, such as tactical



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              wheeled vehicles, that are currently being overhauled in field-level
              maintenance activities or by contracts managed by field-level organizations
              even though this work meets the statutory definition of depot
              maintenance-type work.



Scope and     To evaluate the completeness and accuracy of the Army’s report to the
              Congress on the proliferation of depot maintenance-type facilities—
Methodology   including (1) the amount of depot maintenance-type work assigned to local
              maintenance facilities and the cost efficiency of such work and (2) plans
              for consolidating fragmented maintenance operations—we interviewed
              officials and obtained documentation from the Office of the Army’s Deputy
              Chief of Staff for Logistics, Army Materiel Command, Army Forces
              Command, Army Training and Doctrine Command, Army Reserve
              Command, National Guard Bureau, and the Eighth U. S. Army (Korea). We
              also interviewed members of the Army’s study group to gain insight into the
              varying approaches that exist within the Army community for identifying
              the detailed characteristics of depot maintenance-type workloads and
              reviewed copies of backup documentation supporting the Army’s depot
              proliferation study. We reviewed copies of current and proposed changes to
              Army maintenance regulations and compared current and emerging policy
              statements with the depot maintenance definition in 10 U.S.C. 2460. We
              also reviewed the Army’s report to the Congress concerning the allocation
              of depot maintenance-type workloads to public and private sector
              providers. We made site visits to observe ongoing work and discussed
              depot proliferation issues with officials at three of the Army’s five working
              capital funded maintenance depots and selected local maintenance
              facilities located in Texas, Kansas, Louisiana, North Carolina, Mississippi,
              and several locations in Korea. In addition, we obtained summary
              information from a recently completed analysis by the Army’s Materiel
              Systems Analysis Agency and judgmentally selected and analyzed 43 items
              repaired by local maintenance facilities under the integrated sustainment
              program during fiscal year 1998. We also discussed and obtained comments
              from inventory management officials as deemed appropriate.

              To determine the challenges the Army faces in its efforts to resolve depot
              maintenance proliferation and infrastructure fragmentation, we
              interviewed officials representing the Army’s Deputy Chief of Staff for
              Logistics, the Army Materiel Command, and Army contractors assisting in
              the development of the Army’s draft strategic plan. We reviewed
              background documentation describing the Army’s tentative strategic goals
              and objectives for the depot maintenance enterprise, and we relied heavily



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on information obtained in prior GAO reviews of Army depot maintenance
programs.

We conducted our review from October 1998 to June 1999 in accordance
with generally accepted government auditing standards.


We are sending copies of this report to Senator John W. Warner, Chairman,
and Senator Carl Levin, Ranking Minority Member, Senate Committee on
Armed Services; the Honorable William S. Cohen, Secretary of Defense; the
Honorable Louis Caldera, Secretary of the Army; and the Honorable Jacob
J. Lew, Director, Office of Management and Budget. We will also make
copies available to others on request.

Please contact me at (202) 512-8412 if you or your staff have any questions
concerning this report. Other GAO contacts and acknowledgments are
listed in appendix V.




David R. Warren, Director
Defense Management Issues




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Page 29   GAO/NSIAD-00-20 Depot Maintenance
Appendix I

Repair Parts Obtained at Local Levels
Bypassing Normal Supply Process                                                              Appendx
                                                                                                   Ii




               Retail supply managers and local combat units claim substantial cost
               avoidance by having items repaired locally versus ordering replacement
               items from the wholesale supply system. Wholesale system managers store
               items in government warehouses that have been repaired in regular
               maintenance depots and new items purchased from private contractors.
               For example, in fiscal year 1998, the retail supply customers had 19 UH-1
               helicopter engines repaired by local maintenance organizations. (These
               engines have a replacement price of $167,500 per unit or approximately
               $75,000 when repairable carcasses are returned to the wholesale manager.)
               As an alternative, the retail supply managers arranged for the unserviceable
               engines to be repaired by direct-funded local repair facilities at a reported
               unit cost of $5,000 per engine. The cost avoidance, at the user activity level,
               totals $1.3 million, or 19 engines with a cost avoidance of $70,000 per
               engine.

               To the user, the local source appears to be a less costly alternative to more
               centrally managed supply sources operating under the Army’s working
               capital fund—a funding source that, unlike direct- or mission-funded
               facilities, seeks to recoup the full costs of the products and services it
               provides to customers. Whether the local source is less expensive is
               unclear since comparable cost and performance data are not readily
               available. However, the perception of lower costs for maintenance repairs
               and parts obtained at below depot levels was followed by a downward
               trend in workloads at Army depots following the change in policy that
               required retail customers, such as combat units, to pay for depot repairs
               that were previously provided at no cost. Table 1 shows such decreases in
               workloads involving various military engines at three of the Army’s depots.




               Page 30                                       GAO/NSIAD-00-20 Depot Maintenance
                                          Appendix I
                                          Repair Parts Obtained at Local Levels
                                          Bypassing Normal Supply Process




Table 1: Historical Workload Data for the Repair and Overhaul of Various Military Engines at Three Army Depots

                          Tank turbine engines at                  Helicopter turbine engines at               APCa diesel engines at
Fiscal year             Anniston, Alabama, depot                   Corpus Christi, Texas, depot               Red River, Texas, depot
1991                                              506                                     1,518                                1,721
1992                                              348                                     1,063                                1,646
1993                                               57                                       853                                   52
1994                                               33                                       740                                   77
1995                                                5                                       440                                  741
1996                                               76                                       393                                  816
1997                                               55                                       472                                  721
1998                                              100                                       295                                  186


                                          a
                                              Armored Personnel Carriers.
                                          Source: Army depots.


                                          Our work shows that local maintenance facilities were expected to rebuild
                                          end items and components and return them to normal operating
                                          condition—a maintenance concept the Army refers to as
                                          reliability-centered, inspect and repair only as necessary. In comparison,
                                          depots are expected to overhaul and rebuild items to like new condition—a
                                          maintenance concept requiring that most assemblies or sub-assemblies be
                                          rebuilt or replaced with little or no regard to current operability and
                                          remaining useful life.



Army Lacks Data to                        We found that the Army currently has only limited historical data to
                                          evaluate the cost benefits of more frequent local repairs versus less
Adequately Compare                        frequent but more comprehensive depot overhaul programs. For example,
Cost-Effectiveness of                     information recently developed at the Army’s National Training Center at
                                          Fort Irwin, California, shows a reported 21-percent reduction in operating
Local Repairs and                         and support costs for Abrams tanks supported by more extensive depot
Depot Overhauls                           overhauls compared to operating costs of tanks repaired under the
                                          reliability-centered maintenance process. Army documents indicate that
                                          overhauled tanks are completely disassembled and rebuilt to like new
                                          condition, including replacement or refurbishment of all components with
                                          any evidence of wear. In comparison, local maintenance and repair
                                          facilities performing work under the reliability-centered maintenance
                                          concept generally do not replace or refurbish component parts until they
                                          fail.



                                          Page 31                                                  GAO/NSIAD-00-20 Depot Maintenance
                             Appendix I
                             Repair Parts Obtained at Local Levels
                             Bypassing Normal Supply Process




                             For several reasons, the Army lacks comparative information on the
                             relative cost-effectiveness of the two sources of repair for its other weapon
                             systems. First, the Army does not routinely track maintenance and
                             operating costs for individual supply items. Further, many of the Army’s
                             current weapon systems are designed on a modular basis; therefore
                             operating costs for such items (e.g. aircraft and tank engines) cannot be
                             easily tracked due to regular and routine exchanges of modular
                             components.

                             The Army’s April 1999 report to the Congress stated that major operating
                             commands were taking extraordinary measures to avoid placing orders
                             with wholesale inventory managers due to the perceived higher cost of the
                             depot repair programs. Further, the report stated that local repair and
                             maintenance organizations were not actively seeking to take work formerly
                             assigned to major depots, but the report did not assess the
                             cost-effectiveness and need for local repair programs in relation to the
                             Army’s overall requirements. A study by the Army’s Materiel Systems
                             Analysis Activity showed that 42 percent of the items repaired by local
                             maintenance facilities during the first three quarters of fiscal year 1998
                             could have been avoided if the Army had issued replacement items from
                             existing inventories of serviceable items. Our work shows that wholesale
                             item managers were generally not aware of the local repair programs, and
                             they commented that these actions contribute to excessive stock build-up.
                             In one instance, we found that a wholesale item manager had sent excess
                             engines to disposal that were subsequently reclaimed by a retail supply
                             manager, repaired outside the formal depot system, and entered into the
                             retail stock accounts for later sale to retail customers at reduced prices.


Inefficiencies in Multiple   While the Army’s report did not adequately address the inefficiencies
Uncoordinated Supply         inherent to the Army’s current logistics systems, our work shows that
                             multiple local maintenance facilities were repairing items for which Army
Sources                      wholesale managers already had supplies of serviceable items on hand in
                             excess of requirements. Such inefficiencies could have been avoided if the
                             Army had integrated management responsibility for its wholesale- and
                             retail-level inventories. Our limited review of selected items managed by
                             three of the Army’s wholesale inventory management commands shows
                             repairs of some items were being accomplished by local maintenance
                             facilities even though central logisticians had available stocks of usable
                             items. The following examples illustrate this problem:




                             Page 32                                      GAO/NSIAD-00-20 Depot Maintenance
Appendix I
Repair Parts Obtained at Local Levels
Bypassing Normal Supply Process




• We reviewed the wholesale supply records for 10 items managed by the
  Army’s Communications-Electronics Command, but which had been
  repaired by local maintenance facilities. For 7 of the 10 items, we found
  that existing wholesale inventories would have likely satisfied
  retail-level requirements. For example, Army records show that local
  maintenance facilities at Forts Riley and Gordon repaired a total of 57
  power supplies at an estimated cost of $5,000 when the wholesale
  inventory contained 6,932 serviceable units to support a total
  requirement of 2,052 units. Additionally, Army records indicate that Fort
  Hood repaired 25 radios used on weather radar systems at an estimated
  cost of about $30,000 when the wholesale-level inventory contained 314
  serviceable units to support a requirement of only 25. In both instances,
  the item managers were unaware that repairs were being accomplished
  at field locations.
• We reviewed the wholesale supply records for 19 items managed by the
  Army’s Aviation and Missile Command, but which had been repaired by
  local maintenance facilities. For 8 of the 19 items, we found that existing
  wholesale inventories would have likely satisfied some of the retail-level
  requirements. For example, Army records show that Forts Carson and
  Bragg repaired a total of 65 flutter dampeners used on the UH-60 aircraft
  for a total estimated cost of about $25,500 when wholesale inventory
  contained 1,459 units on hand to support a requirement of 784.
  Additionally, Army records indicate that Fort Hood repaired 5 night
  sensor assemblies for a total estimated cost of about $60,000 when the
  wholesale inventory contained 25 units to support estimated
  requirements of 6.
• We reviewed the wholesale supply records for 14 items managed by the
  Army’s Tank-Automotive and Armaments Command, but which had
  been repaired by local maintenance facilities. For 6 of the 14 items, we
  found that existing wholesale inventories would have likely satisfied
  some of the retail-level requirements. For example, Forts Bliss and
  Bragg repaired 18 engines for 5-ton trucks in fiscal year 1998 at a total
  estimated cost of $40,674 during which time the wholesale item manager
  determined that 37 serviceable items were excess to the Army’s needs
  and had them sent to disposal yards.




Page 33                                     GAO/NSIAD-00-20 Depot Maintenance
                            Appendix I
                            Repair Parts Obtained at Local Levels
                            Bypassing Normal Supply Process




Reclamation and Repair of   The Army’s Forces Command currently has contractor operated materiel
Excess Items Further        management and repair centers at seven active Army installations. These
                            contractor-operated facilities repair and refurbish more than
Indicates Degree of         350 component parts and maintain inventories that were reportedly valued
Inefficiencies Present in   at about $40 million near the end of fiscal year 1998. In fiscal year 1998, the
Logistics System            contractor-operated centers withdrew excess material from the Defense
                            Marketing and Reutilization Service with an estimated replacement value
                            of about $60 million, of which items valued at about $41 million were
                            considered unserviceable. During the same period, the repair centers
                            received about $1.8 million to repair and refurbish unserviceable items.
                            Forces Command representatives told us that none of the repair work was
                            considered depot level and most involved only limited testing and servicing
                            to ensure operability. Once the items are repaired, the Forces Command
                            offers them for resale to customers at reduced prices.

                            This practice has the potential for creating significant inefficiencies in the
                            wholesale supply system. It is essentially a duplicate wholesale supply
                            system that operates without coordination with the formal system. While
                            the Forces Command has claimed cost avoidance totaling
                            $195 million over a 4-½ year period, we cannot be certain of the
                            cost-effectiveness of such logistics practices to the Army as a whole, given
                            the duplication in repair capabilities and wholesale inventory management
                            functions. Further, this practice likely contributes to inventory items being
                            declared as excess because actual demands are not known to the
                            wholesale inventory managers.




                            Page 34                                       GAO/NSIAD-00-20 Depot Maintenance
Appendix II

Potential Providers of Depot Maintenance-
Type Services Maintenance Program Within
the Continental United States                                               Appendx
                                                                                  Ii




                                               Number of personnel
              Maintenance activity            Direct labor     Indirect labor
              National Guard
              CSMS Montgomery, Ala.                    92                 19
              CSMS Windsor Locks, Conn.                33                 14
              CSMS New Castle, Del.                    10                  4
              CSMS Starke, Fla.                        57                 14
              CSMS Atlanta, Ga.                        61                 17
              CSMS Springfield, Ill.                   36                 11
              CSMS Riverside, Ill.                     27                  9
              CSMS Indianapolis, Ind.                  66                 15
              CSMS Frankfort, Ky.                      49                 13
              CSMS Pineville, La.                      75                 17
              CSMS Augusta, Maine                      26                  9
              CSMS Havre De Grace, Md.                 42                 10
              CSMS Fort Devens, Mass.                  69                 13
              CSMS Lansing, Mich.                      65                 19
              CSMS Hattiesburg, Miss.                  99                 28
              CSMS Concord, N.H.                       12                  5
              CSMS Bordentown, N.J.                    48                  9
              CSMS West Orange, N.J.                   35                  9
              CSMS Peekskill, N.Y.                     35                 17
              CSMS Staten Island, N.Y.                 37                 16
              CSMS Rochester, N.Y.                     39                 11
              CSMS Raleigh, N.C.                       81                 20
              CSMS Newark, Ohio                        64                 19
              CSMS Annville, Pa.                       86                 17
              CSMS Eastover, S.C.                      85                 27
              CSMS Smyrna, Tenn.                       85                 17
              CSMS Richmond, Va.                       32                 14
              CSMS Point Pleasant, W.Va.               20                  9
              CSMS Edinburgh, Ind.                     19                  7
              CSMS Cullman, Ala.                       50                 18
              CSMS Coraopolis, Pa.                     26                  6
              MATES Fort Stewart, Ga.                 152                 48
              MATES Camp Grayling, Mich.               57                 21
                                                                  (continued)




              Page 35                      GAO/NSIAD-00-20 Depot Maintenance
Appendix II
Potential Providers of Depot Maintenance-
Type Services Maintenance Program Within
the Continental United States




                                                Number of personnel
Maintenance activity                           Direct labor     Indirect labor
MATES Fort Polk, La.                                    88                 19
MATES Fort Pickett, Va.                                 86                 24
MATES Fort Knox, Ky.                                    47                 20
MATES Fort Bragg, N.C.                                  95                 28
MATES Fort Drum, N.Y.                                   69                 28
CSMS Phoenix, Ariz.                                     42                  8
CSMS Little Rock, Ark.                                  69                 18
CSMS Stockton, Calif.                                   45                 28
CSMS Long Beach, Calif.                                 65                 13
CSMS Longmont, Colo.                                    26                 10
CSMS Boise, Idaho                                       57                 33
CSMS Johnston, Iowa                                     53                 16
CSMS Topeka, Kans.                                      26                 10
CSMS Little Falls, Minn.                                68                 14
CSMS Jefferson City, Mo.                                58                 15
CSMS Helena, Mont.                                      27                  8
CSMS Lincoln, Nebr.                                     20                 13
CSMS Santa Fe, N. Mex.                                  43                  8
CSMS Norman, Okla.                                      51                 18
CSMS Clackamus, Oreg.                                   70                 17
CSMS Mitchell, S. Dak.                                  22                  9
CSMS Fort Worth, Tex.                                   61                 22
CSMS Austin, Tex.                                       79                 20
CSMS Draper, Utah                                       42                 19
CSMS Tacoma, Wash.                                      47                 19
CSMS Camp Douglas, Wis.                                 51                 16
CSMS Rapid City, S. Dak.                                 9                  6
MATES Colorado Springs, Colo.                           27                 15
MATES San Miguel, Calif.                               159                 29
MATES Fort Irwin, Calif.                                69                 23
MATES Fort Sill, Okla.                                  17                  6
MATES Fort Hood, Tex.                                  190                 49
MATES Yakima, Wash.                                    125                 45
MATES Sparta, Wis.                                      45                 21
MATES Fort Riley, Kans.                                 84                 23
AVCRD Gulfport, Miss.                                   84                 21
                                                                   (continued)




Page 36                                     GAO/NSIAD-00-20 Depot Maintenance
Appendix II
Potential Providers of Depot Maintenance-
Type Services Maintenance Program Within
the Continental United States




                                                Number of personnel
Maintenance activity                           Direct labor      Indirect labor
AVCRD Groton. Conn.                                    105                   26
AVCRD Springfield, Mo.                                 100                   25
AVCRD Fresno, Calif.                                    81                   20
Army Reserve
DOL Fort Dix, N.J.                                      19                   21
DOL Fort McCoy, Wis.                                    59                   34
Active Army-government operated
DOL Fort Bragg, N.C.                                    90                   88
GS MAINT Fort Bragg, N.C.                              215                  104
DOL Fort Benning, Ga.                                   18                  251
DOL Fort Campbell, Ky.                                  55                   81
DOL Fort Drum, N.Y.                                     56                   44
DOL Fort Eustis, Va.                                    57                   53
DOL Fort Gordon, Ga.                                    66                   51
DOL Fort Jackson, S.C.                                  24                   55
DOL Fort Knox, Ky.                                      29                  133
DOL Fort Lee, Va.                                       13                   34
DOL Fort Polk, La.                                     231                   67
DOL Fort Rucker, Ala.                                   47                   25
DOL Fort Stewart, Ga.                                   61                   70
DOL Fort Bliss, Tex.                                    66                  154
DOL Fort Carson, Colo.                                  95                   51
DOL Fort Huachuca, Ariz.                                87                   18
DOL Fort Hood, Tex.                                    113                  139
GS MAINT Fort Hood, Tex.                               120                  147
DOL Fort Leonard Wood, Mo.                              55                   62
DOL Fort Riley, Kans.                                  158                   55
DOL Fort Sill, Okla.                                   101                   36
Active Army-contractor operated
DOL Fort Campbell, Ky.                                  48                   11
DOL Fort Stewart, Ga.                                   29                   29
DOL Fort Bragg, N.C.                                    27                     3
DOL Fort Bliss, Tex.                                    34                     8
DOL Fort Hood, Tex.                                    125                   93
DOL Fort Polk, La.                                      51                     9
DOL Fort Sill, Okla.                                   106                   69

                                                       Table notes on(continued)
                                                                       next page.




Page 37                                     GAO/NSIAD-00-20 Depot Maintenance
Appendix II
Potential Providers of Depot Maintenance-
Type Services Maintenance Program Within
the Continental United States




DOL—Directorate of Logistics
CSMS—Consolidated Support Maintenance Shop
MATES—Maneuver Area Training Site
GS Maint—General Support Maintenance Companies (active duty military)
AVCRAD—Aviation Classification Repair Activity Depot
Source: U.S. Army Materiel Command.




Page 38                                                GAO/NSIAD-00-20 Depot Maintenance
Appendix III

Local Maintenance Facilities and Depots
Visited by GAO                                                                                                                          AppendxIi




                                                                                                                             Year facility
                                                                Government            Contractor         Facility size in   constructed/
Location                     Organization                             staff                 staff           square feet       renovated
Fort Bliss, Texas            DOL-Surface                                    113                    6            160,747             1997
Fort Hood, Texas             DOL-Surface                                    188                    0            462,000       1980/1990s
                             DOL-Aviation                                     0               385               211,000            1970s
                             National Guard MATES                           243                    0            252,000        1980/1992
                             190th General Support                          267                10                33,848             1958
Fort Riley, Kansas           DOL-Surface                                     10               139               186,000            1980s
                             National Guard MATES                            83                    0            130,000        1981/1993
Fort Polk, Louisiana         DOL-Surface                                    220                    9            175,673             1995
                             DOL-Aviation                                     1                59               250,600             1989
                             National Guard MATES                           106                    0            207,119        1976/1995
Fort Bragg, North Carolina   DOL-Surface                                    165                18               318,000             1994
                             DOL-Aviation                                    21                30               115,000             1995
                             National Guard MATES                           116                    0             87,500             1992
Mississippi National Guard   AVCRAD−Gulfport                                112                31               356,000             1988
                             Camp Shelby− CSMS                               93                    0             79,301             1995
                             Camp Shelby− GSM                                63                    0            113,598       1940s/1999
                             Camp Shelby− MATES                             108                    0            138,000             1983
Anniston Army Depot          Maintenance depot                             1,771                   0          1,392,000      1950s/1990s
Corpus Christi Army Depot    Maintenance depot                             2,690               88             2,119,652        1941/1999
Letterkenny Army Depot       Maintenance depot                             1,090                   0            894,232      1940s/1990s
Red River Army Depot         Maintenance depot                              841                25               556,262      1940s/1980s
Tobyhanna Army Depot         Maintenance depot                             2,506                   0          1,400,000        1951/1994


                                            DOL—Directorate of Logistics
                                            AVCRAD—Aviation Classification Repair Activity Depot
                                            MATES—Maneuver Area Training Equipment Sites
                                            CSMS—Consolidated Support Maintenance Shop
                                            GSM—General Support Maintenance




                                            Page 39                                                    GAO/NSIAD-00-20 Depot Maintenance
Appendix IV

Comments From the Department of Defense                      Appendx
                                                                   iIV




              Page 40        GAO/NSIAD-00-20 Depot Maintenance
Appendix IV
Comments From the Department of Defense




Page 41                                   GAO/NSIAD-00-20 Depot Maintenance
Appendix V

GAO Contacts and Staff Acknowledgments                                                      Appenx
                                                                                                 dV
                                                                                                  i




GAO Contacts      Barry Holman, (202) 512-8412
                  Julia Denman, (202) 512-8412



Acknowledgments   In addition to those named above, Glenn Knoepfle, David Epstein, Bonnie
                  Carter, Paul Newton, Edward Waytel, David Marks, and Kate Monahan
                  made key contributions to this report.




                  Page 42                                   GAO/NSIAD-00-20 Depot Maintenance
Related GAO Products


             Depot Maintenance: Status of the Navy’s Pearl Harbor Pilot Project
             (GAO/NSIAD-99-199, Sept. 10, 1999).

             Depot Maintenance: Maintenance of T700 Series Engines for U.S. Forces in
             Korea (GAO/NSIAD-99-234R, Aug. 13, 1999).

             Depot Maintenance: Workload Allocation Reporting Improved, but
             Lingering Problems Remain (GAO/NSIAD-99-154, July 13, 1999.

             Air Force Logistics: C-17 Support Plan Does Not Adequately Address Key
             Issues (GAO/NSIAD-99-147, July 8, 1999).

             Army Logistics: Status of Proposed Support Plan for Appache Helicopter
             (GAO/NSIAD-99-140, July 1, 1999).

             Air Force Depot Maintenance: Management Changes Would Improve
             Implementation of Reform Initiatives (GAO/NSIAD-99-63, June 25, 1999).

             Public-Private Competitions: Reasonable Processes Used for San Antonio
             Engine Depot Maintenance Award (GAO/NSIAD-99-155, May 27, 1999).

             Public-Private Competitions: Reasonable Processes Used for Sacramento
             Depot Maintenance Award (GAO/NSIAD-99-124, May 12, 1999).

             Navy Ship Maintenance: Allocation of Ship Maintenance Work in the
             Norfolk, Virginia, Area (GAO/NSIAD-99-54, Feb. 24, 1999).

             Army Industrial Facilities: Workforce Requirements and Related Issues
             Affecting Depots and Arsenals (GAO/NSIAD-99-31, Nov. 30, 1998).

             Navy Depot Maintenance: Weaknesses in the T406 Engine Logistics
             Support Decision (GAO/NSIAD-98-221, Sept. 14, 1998).

             Defense Depot Maintenance: Public and Private Sector Workload
             Distribution Reporting Can Be Further Improved (GAO/NSIAD-98-175,
             July 23, 1998).

             Defense Depot Maintenance: Contracting Approaches Should Address
             Workload Characteristics (GAO/NSIAD-98-130, June 15, 1998).

             Defense Depot Maintenance: Use of Public-Private Partnering
             Arrangements (GAO/NSIAD-98-91, May 7, 1998).



             Page 43                                    GAO/NSIAD-00-20 Depot Maintenance
                   Related GAO Products




                   Navy Ship Maintenance: Temporary Duty Assignments of Temporarily
                   Excess Shipyard Personnel Are Reasonable (GAO/NSIAD-98-93, Apr. 21,
                   1998).

                   Public-Private Competitions: DOD’s Additional Support for Combining
                   Depot Workloads Contains Weaknesses (GAO/NSIAD-98-143, Apr. 17,
                   1998).

                   Defense Depot Maintenance: DOD Shifting More Workload for New
                   Weapon Systems to the Private Sector (GAO/NSIAD-98-8, Mar. 31, 1998).

                   Depot Maintenance: Lessons Learned From Transferring Alameda Naval
                   Aviation Depot Engine Workload s (GAO/NSIAD-98-10BR, Mar. 25, 1998).

                   Force Structure: Army’s Efforts to Improve Efficiency of Institutional
                   Forces Have Produced Few Results (GAO/NSIAD-98-65, Feb. 26, 1998).

                   Defense Depot Maintenance: Information on Public and Private Sector
                   Workload Allocations (GAO/NSIAD-98-41, Jan. 20, 1998).

                   Outsourcing DOD Logistics: Savings Achievable but Defense Science
                   Board’s Projections Are Overstated (GAO/NSIAD-98-48, Dec. 8, 1997).

                   Navy Regional Maintenance: Substantial Opportunities Exist to Build on
                   Infrastructure Streamlining Progress (GAO/NSIAD-98-4, Nov. 13, 1997).

                   Defense Depot Maintenance: Challenges Facing DOD in Managing Working
                   Capital Funds (GAO/T-NSIAD/AIMD-97-152, May 7, 1997).

                   Defense Depot Maintenance: Uncertainties and Challenges DOD Faces in
                   Restructuring Its Depot Maintenance Program (GAO/T-NSIAD-97-112,
                   May 1, 1997) and (GAO/T-NSIAD-97-111, Mar. 18, 1997).

                   Defense Outsourcing: Challenges Facing DOD as It Attempts to Save
                   Billions in Infrastructure Costs (GAO/T-NSIAD-97-110, Mar. 12, 1997).

                   High-Risk Series: Defense Infrastructure (GAO/HR-97-7, Feb. 1997).

                   Army Depot Maintenance: Privatization Without Further Downsizing
                   Increases Costly Excess Capacity (GAO/NSIAD-96-201, Sept. 18, 1996).




(709375)   Leter   Page 44                                    GAO/NSIAD-00-20 Depot Maintenance
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