oversight

DOD Contracting: Air Force and Navy Maintenance of Training Aircraft and Training Equipment

Published by the Government Accountability Office on 1989-03-20.

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

                            United   States   General   Accounting   Office   *

GAO                         Report to the Chairmen, Committees on
                            Armed Services, House of Representatives
                            and U.S. Senate


March   1989
                            DOD CONTRACTING
                            Air Force and Navy
                            Maintenance of
                            Training Aircraft and
                            Training Equipment




                        -
               ..
                    .




GAO/NSIAD-89-114
          United States

GAO       General Accounting  Office
          Washington, D.C. 20548

          National Security and
          International Affairs Division

          B-230508

          March 20, 1989

          The Honorable Les Aspin
          Chairman, Committee on Armed Services
          House of Representatives

          The Honorable Sam Nunn
          Chairman, Committee on Armed Services
          United States Senate

          This report is in response to the Conference Report to the National
          Defense Authorization Act for Fiscal Year 1989, which directed us to
          perform a study of the contracting for maintenance of training aircraft
          and training equipment at Lowry Air Force Base (AFB), Colorado, and
          Columbus AFB and Meridian Naval Air Station (NAS), Mississippi. The
          study was to provide an assessment of the following issues associated
          with the contracting out of these functions:

      l The validity of projected cost savings from contracting out.
      l The potential impact on personnel and equipment readiness.
      l The economic impact on the local communities.
      . The impact on wartime mobilization requirements, the ship-to-shore
        rotation schedule for Navy maintenance personnel, and the overseas
        rotation schedule for Air Force maintenance personnel.
      l Other impacts on base functions caused by the reduction of the military
        population (reduction of base medical facilities; commissary; exchange;
        and morale, welfare, and recreation facilities).

          Office of Management and Budget Circular A-76 requires executive
          branch agencies to procure commercial services from the private sector
          when the same quality work can be accomplished at less cost than gov-
          ernment operation. The circular requires that a cost comparison be made
          to determine whether the commercial activities should be performed in-
          house using government personnel or under contract by commercial
          sources.

          After Circular A-76 cost comparisons, the Air Force converted the main-
          tenance of training support equipment to contractor operations at
          Lowry AFB in May 1988 and the maintenance of training aircraft at
          Columbus AFB in April 1988. As part of two consolidated contracts
          involving a number of bases, the Navy converted the maintenance of T-2
          and A-4 training aircraft to contractor operations at Meridian NAS in
          August 1985 and April 1988, respectively.


           Page 1                                      GAO/NSIAD-89-114   DOD Contracting
        B-230608




        With regard to the issues raised, we found the following.

l It appears that the projected savings of $3.4 million at Lowry AFB and
  most of the $52.6 million projected savings for the two consolidated
  Navy contracts will be realized. However, because of less-than-satisfac-
  tory contractor performance, Columbus AFBis not likely to achieve the
  $4.2 million projected savings and could possibly incur additional costs
  beyond those initially estimated for in-house maintenance.
9 Most civilian government employees obtained other government employ-
  ment. Military personnel were transferred to other military installations,
  retired, or left the service.
l According to the services, the economic impact on the local communities
  appears to be minimal.
. According to Air Force and Navy officials, contracting the functions will
  not affect wartime mobilization requirements, the Navy ship-to-shore
  rotation schedule, or the Air Force overseas rotation schedule for main-
  tenance personnel. Air Force and Navy officials told us that the mainte-
  nance positions have the same peacetime and wartime role and would
  not be deployed.
  Since the maintenance functions at the bases were being performed pri-
    l


   marily by military personnel, the loss of these personnel had some
   impact on other base functions, but the impact has not been significant.


        As requested by your offices, we did not obtain official agency com-
        ments on this report. However, the views of responsible Air Force and
        Navy officials were sought during the course of our work and are incor-
        porated where appropriate.

        Our findings are discussed in more detail in appendix I. Our objectives,
        scope, and methodology are described in appendix II. GAO staff members
        who made major contributions to this report are listed in appendix III.

        Unless you publicly announce its contents earlier, we plan no further
        distribution of this report until 30 days after its issue date. At that time
        we will send copies to the Secretaries of Defense, the Air Force, and the




        Page 2                                         GAO/NSIAD-SS-114   DOD Contracting
B-230508




Kavy; the Director, Office of Management and Budget; and the Adminis-
trator, Office of Federal Procurement Policy. We will also make copies
available to other interested parties upon request.




Harry R. Finley
Director, Air Force Issues




Page 3                                     GAO/NSIAD89-114   DOD Contracting
Contents


Letter
Appendix I                                                                                                6
Review of Contracting ~;~b;~~;;l;;~;slppl
                                       . . . .                                                            6
                                                                                                          8
For Maintenance of    Meridian NAS, ‘Mississippi                                                         12
Training Aircraft and
Training Equipment at
Lowry AFB, Columbus
AFB, and Meridian
NAS
Appendix II                                                                                              18
Objectives, Scope,and
Methodology
Appendix III                                                                                             20
Major Contributors to      National Security and International Affairs Division,
                                Washington, D.C.
                                                                                                         20
This Report                Denver Regional Office                                                        20

Tables                     Table 1.1: Disposition   of Personnel at Lowry APB                             7
                           Table 1.2: Disposition   of Personnel at Columbus APB                         10
                           Table 1.3: Disposition   of T-2 Maintenance Personnel at                      14
                               Meridian NAS
                           Table 1.4: Disposition   of A-4 Maintenance Personnel at                      14
                               Meridian NAS




                            Abbreviations

                            AFB       Air Force Base
                            An:       Air Training Command
                            DOD       Department of Defense
                            GAO       General Accounting Office
                            NAS       Naval Air Station


                            paee4                                        GAO/NSIAIM9-114   DOD Contrrcting
Page 5   GAO/NSIA.D-W114   DOD Contracting
Appendix I

Review of Contracting For Maintenanceof
Training Aircraft and Training Equipment at
Lowry AFIB,ColumbusAF’B, and Meridian NAS
                          The results of our review of the issues relevant to the contracting for
                          maintenance of training aircraft and training equipment functions at
                          Lowry Air Force Base (AFB), Columbus AFB, and Meridian Naval Air Sta-
                          tion (NAS) are discussed below.


                          The Air Force performed an Office of Management and Budget Circular
Lowry AFB, Colorado       A-76 cost comparison for the maintenance of aircraft, missiles, muni-
                          tions, and avionics assigned to technical training groups; unique trainers
                          used to support technical training; and the calibration and maintenance
                          of precision measurement equipment assigned to the Air F’orce and other
                          agencies in the local area. The cost comparison showed that over a
                          4-l/2-year period in-house costs would be $26.4 million and contracting
                          costs would be $23 million, or a savings of $3.4 million by contracting. In
                          December 1987 the Air Force awarded a contract to perform the work,
                          which was being performed by government personnel, and the function
                          was converted to contractor performance on May 16,1988.

                          A union appeal of the Air Force comparison of in-house and contractor
                          cost was made in January 1988. The appeal alleged that

                      l two military personnel were improperly employed by the apparent suc-
                        cessful contractor, thus influencing the outcome of the cost study;
                      . the proposed in-house civilian work force was too large and positions
                        were graded too high, thus making the government in-house “bid” non-
                        competitive; and
                      l certain other costs were either erroneously added or excluded from the
                        study.

                          An installation appeal review team examined each of the appeal items
                          and determined that no grounds existed for changing the results of the
                          cost comparison. The union was advised that the cost comparison study
                          was accurate and complete and that the decision to convert to a contrac-
                          tor operated function was fair, equitable, and in accordance with estab-
                          lished policy. Air Training Command (ATC) Headquarters also reviewed
                          the allegations and found that the cost comparison study was properly
                          conducted and upheld the initial decision to convert the maintenance
                          function to contract.




                          Page 6                                        GAO/NSIADJ39-114   DOD Contracting
                                         Appendix I
                                         Review of Contract&g    For Maintenance of
                                         Trainhg Aircraft   and Trahing Equipment at
                                         Lowry AFB, Columbus AFB, and Meridian
                                         NAS




Validity of Projected                    Changes to the contract through 1988 have resulted in a decrease of
                                         $558,000 in contract price because the contractor began work May 16,
Savings                                  1988, instead of April 1, 1988. The Air Force concluded that the contrac-
                                         tor had been providing satisfactory service during the period in accord-
                                         ance with the contract terms and conditions. Therefore, it appears that
                                         the $3.4 million savings will be realized.


Impact on Personnel                      A June 1987 Air Force study showed 244 military personnel were
                                         assigned to the function when it was being considered for contracting.
                                         Attrition reduced the number in succeeding months, but records were
                                         not available to determine the specific disposition of all 244 military
                                         personnel. ATC provided documentation for 191 reassignments of the
                                         military personnel. The dispositions of the remaining 53 military person-
                                         nel who left the organization after data were obtained for the June 1987
                                         study, but who were not on the reassignment listing, could not be posi-
                                         tively determined. However, ATC stated that these 53 individuals proba-
                                         bly retired, were separated from military service, or were cross-trained
                                         into another specialty.

                                         The June 1987 study also showed that 46 civilian employees were
                                         assigned to this function. Although records were not available to docu-
                                         ment their dispositions, a Lowry AFES official provided the information
                                         shown in table I. 1.

Table 1.1: Disposition of Personnel at
Lowry AFB                                Military                                                      Civilian
                                         Reassigned Lowry AFB                        48                Placed at Lowry AFB                        33
                                         Reassigned United States                   114                Placed at other federal
                                         Reassigned overseas                         29                   government locatlons                        2
                                                                                                       Retired                                        a
                                                                                                       Resigned                                    3
                                         Total                                     191=                                                           46
                                         aAccordlng to Air Force offlclals. reasslgnments   were to unfilled authorized posItIons


                                         Air Force officials advised us that they expended considerable effort to
                                         place civilian employees and accommodate the wishes of military per-
                                         sonnel regarding their location preferences. The civilian staffing special-
                                         ist at Lowry AFB stated that no civilian employees were involuntarily
                                         separated. Of the three civilians who resigned, two were believed by the
                                         staffing specialist to have been hired by the contractor.




                                         Page 7                                                             GAO/NSIAD-89-114        DOD Contracting
                            Appendix1
                            Review of Contracting   For Maintenance  of
                            Training Aircraft  and Training Equipment at
                            Lowry AFB, Columbus APB, and Meridian
                            NAS




Impact on Personnel and     An official in resource planning at Lowry AFB said he does not believe
                            there has been an impact on readiness. He explained that maintenance
Equipment Readiness         personnel were only intended to provide training support, and the
                            squadron had not been tasked for wartime deployment. He added that
                            the contractor has been responsive to needs for maintenance and that
                            instructors and students have reported that they are satisfied with the
                            support being provided.


Economic Impact on Local    The Air Force estimated that the annual economic impact on the local
                            community would be a decrease in annual spending by Lowry AFB of
Community                   $3.8 million, or 1 percent.


Impact on Wartime           The Air Force annually matches funded personnel authorizations to
                            wartime and overseas rotation base requirements to identify shortfalls
Mobilization Requirements   and/or overages by specialty. This match is performed by the Air Force
and Overseas Rotation       before a function is considered for cost comparison. In the case of Lowry
Schedules                   AFB, this match was completed before the training equipment mainte-
                            nance function was announced to the Congress in October 1986 for cost
                            comparison. Analyses of Air Force’s personnel requirements continued
                            to indicate that there were sufficient aircraft maintenance personnel
                            resources to meet wartime tasking and satisfy overseas rotation needs.
                            Also, the Lowry AFEI training equipment maintenance function has no
                            military wartime mobility role, and, therefore, military personnel are
                            not required to perform the maintenance function.


Impact on Other Base         Air Force officials said the phase-out of the 244 military personnel had
                             no significant impact on base functions such as the commissary,
Functions                    exchange, clinic, and recreational activities. Lowry AFB services about
                             4,000 permanent military personnel including those at nearby Buckley
                             Air National Guard Base. We were told that the student population is
                             normally in the 1,800 to 2,000 range and as many as 18,000 military
                             retirees are estimated to live in the vicinity.


                             On February 14, 1986, the Department of Defense (DOD) Inspector Gen-
Columbus AFB,                era1 issued a report, Maintenance of Training Aircraft (No. 86-066). The
Mississippi                  report concluded that (1) aircraft maintenance performed by govern-
                             ment personnel (predominantly military) at five of six ATC pilot training
                             bases was not as cost effective as the contractor operations performed
                             at the other base, (2) the Air Force could save $43 million annually if


                             Page 8                                        GAO/NSIAD99-114   DOD Contracting
                        Review of tin-        For Maintenance    of
                        ‘hainhg  Ahcraft and Trainhg Equipment at
                        Lowry AFB, C&unbw     AF’B, and Meridian
                        Fus




                        the aircraft maintenance operations at the five bases using government
                        personnel were as cost effective as the contractor maintenance opera-
                        tion, and (3) ATC should perform a study under Office of Management
                        and Budget Circular A-76 to develop and implement a cost-effective
                        maintenance work force for the T-37 and T-38 training aircraft.

                        As a result of the DOD Inspector General report, the Air Force performed
                        a Circular A-76 cost comparison of the training aircraft maintenance
                        function for T-37 and T-38 aircraft at Columbus AFB,’ which showed
                        that over a 4-l/2-year period in-house costs would be $62.9 million and
                        contracting costs would be $58.7 million, or a savings of $4.2 million by
                        contracting rather than performing the work in-house with civilian
                        employees. In November 1987 the Air Force announced a decision to
                        contract for the aircraft maintenance function, and it was converted to
                        contractor performance on April 1, 1988.


Validity of Projected   As of December 15, 1988, 10 modifications were made to the contract;
                        only 1 resulted in a contract price increase. The amount of the increase
Savings                 was $140. However, the contract cost could increase further because Air
                        Force officials told us that the contractor’s performance has been less
                        than satisfactory and, as a result, the Air Force advised the contractor
                        in February 1989 that it will not exercise the option to renew the con-
                        tract for fiscal year 1990. The Air Force plans to resolicit bids for the
                        maintenance work. It appears likely that this will result in costs higher
                        than the current contract costs. Therefore, the projected $4.2 million
                        savings could be reduced and costs could possibly be greater than if the
                        function had initially remained in-house. Air Force officials told us the
                        contractor’s problems stemmed from inexperienced personnel, a high
                        turnover rate, and using a lesser number of personnel to hold down
                        costs.


Impact on Personnel     Contracting out affected 144 civilian employees and 837 military per-
                        sonnel. Air Force officials advised us that they expended considerable
                        effort to place civilian employees and accommodate the wishes of mili-
                        tary personnel regarding their relocation preferences. Table I.2 shows
                        what happened to employees affected by contracting out.



                        ‘Contracting of this function was the subject of an earlier report, Air Force Contracting: Contracting
                        for Maintenance of Training Aircraft at Columbus AFB (GAO/NS~DSS-136BR, April 6, 1988).



                        Page 9                                                         GAO/NSIAD-W114        DOD Contracting
                                         Appendix I
                                         Review of Contracting  For Maintenance  of
                                         Training Aircraft and Training Equipment at
                                         Lowry AFB, Columbus AFB, and Meridian
                                         NAS




Table 1.2: Disposition of Personnel at
Columbus AFB                             Militarv                                                      Civilian
                                         Reassigned Columbus AFB                    42                 Placed at Columbus AFB                     31
                                         Reassigned United States                  612                 Placed at other DOD locations              23
                                         Reassigned overseas                       106                 Involuntarily separated
                                         Retired                                    27                    (55 went with contractor)               57
                                         Early out                                   50”               Regular retirement                         32
                                                                                                       Resigned                                    1
                                         Total                                     837ab                                                         144

                                         %ome early outs may have resulted from an Air Force-wide early-out program to meet reduced
                                         personnel levels
                                         bAccordmg to Air Force offioals,   reassignments   were to unfilled authorized positions.




Impact on Personnel a.nd                 According to Air Force officials, Columbus AFFS’S  wartime mission is to
                                         train pilots, the same as its peacetime mission. Therefore, the base has
Equipment Readiness                      no mobility tasking for either maintenance personnel or training air-
                                         craft. We were also told that even though the contractor has been
                                         experiencing some backlog on aircraft maintenance, it has not yet
                                         affected mission capability. However, Air Force officials stated that
                                         there is concern this could happen in the future.


Economic Impact on Local                 The Air Force estimated that the economic impact on the local commu-
                                         nity (within a 50-mile radius of the center of Columbus AFB) would be a
Community                                decrease in annual spending by Columbus AFBof $1.4 million, or 1.3
                                         percent.


Impact on Wartime                        The February 1986 DOD Inspector General report questioned the neces-
Mobilization Requireme lnts              sity for military personnel to perform maintenance of training aircraft.
                                         The report found that (1) there was no evidence in the personnel track-
and
-~ Overseas
      ~.      Rotation                   ing system that ATC maintenance authorizations had a direct combat
Schedules                                support role, (2) excluding the ATC authorizations (5 percent of total Air
                                         Force maintenance authorizations), the Air Force still had more than
                                         enough authorizations to maintain a satisfactory overseas rotation base,
                                         and (3) the majority of the ATE maintenance positions have the same
                                         peacetime and wartime requirements and will not be deployed to other
                                         sites.

                                          As a result of this report, the Air Force conducted an analysis of AZ
                                          aircraft maintenance personnel resources to determine the degree to



                                          Page 10                                                            GAO/NSIAD-&ll4          DOD CkW.racting
                           Appendix   I
                           Review  of Contracting For Maintenance  of
                           Training Aircraft and Training Equipment at
                           Lowry AFB, Columbus AFB, and Meridian
                           NAS




                           which these resources would be needed to support Air Force wartime
                           needs. The Air Force concluded that military personnel were not essen-
                           tial to perform ATC aircraft maintenance in wartime because there was
                           no combat theater role, no deployment role, and no casualty replacement
                           role. In addition, when wartime aircraft maintenance requirements were
                           compared to total wartime supply (active, reserves, retirees), the supply
                           exceeded the wartime demand for aircraft maintenance personnel, even
                           when ATC maintenance personnel were excluded. Also, since military
                           personnel are not required to perform training aircraft maintenance in
                           either wartime or peacetime, the Air Force concluded that an Air Force
                           civilian or private contractor work force would fully meet its wartime
                           maintenance capabilities.


Impact on Other Base       According to Air Force officials, the reduction in the number of autho-
                           rized military positions-from    2,126 in January 1988 to 1,238 in Janu-
Functions                  ary 1989, or 42 percent-did    not generally reduce services provided by
                           other base functions. The officials told us the following.

                       . There has been no overall effect on hospital services. Any increased
                         availability of services caused by the loss of maintenance personnel has
                         been filled by retirees.
                       . Commissary sales have fluctuated greatly since the conversion. This is
                         partly due to the maintenance conversion and partly due to two major
                         supermarkets opening in Columbus. There has been no reduction in ser-
                         vice or operating hours.
                       . The Army and Air Force Exchange Service has had a decrease in sales,
                         which has resulted in a decrease in staffing. The Military Clothing Sales
                         Store and Shopette (convenience store) will be moved to the main store
                         for economy and efficiency.
                       l There has been no reduction in morale, welfare, and recreation facilities
                         hours or services other than the Enlisted Club. The number of members
                         has dropped from about 1,700 before the conversion to about 900 mem-
                         bers. As a result, the Enlisted Club has eliminated operations on Sun-
                         days and reduced operating hours during the week. Also, even though
                         there is less involvement in intramural sports programs, such as fielding
                         fewer intramural softball teams, the basic programs are the same.




                            Page 11                                      GAO/NSIAD-88114   DOD Contracting
                       Appendix I
                       Review of Contracting  For lkintenance of
                       Training Aircraft and Trahing Equipment at
                       Lowry APB, Columbue AFB, and Meridian
                       NAS




                       The Navy contracted out organizational maintenance’ of T-2 training
Meridian NAS,          aircraft in 1985 and A-4 training aircraft in 1987 after performing Cir-
Mississippi            cular A-76 cost comparisons, which showed contracting would be less
                       costly than performing the maintenance in-house. The T-2 maintenance
                       contract involves three bases, and the A-4 contract involves four bases;
                       Meridian NAS is included in both contracts.

                       A third cost comparison, which is expected to be completed in April
                       1989, involves T-2 and A-4 intermediate maintenance at six bases,
                       including Meridian NAS. Since this cost comparison has not been final-
                       ized, we limited our work primarily to the two contracts currently in
                       effect.


T-2 Organizational     The Navy performed a cost comparison of the T.-2 maintenance function,
                       which included the requirements for Meridian NAS; Chase Field NAS,
Maintenance Contract   Texas; and Kingsville NAS, Texas. The cost comparison showed that the
                       in-house costs would be $107.6 million and contracting costs would be
                       $71.8 million, or a savings of $35.9 million over the 4-l/2-year contract
                       period. The maintenance functions at the three bases were converted to
                       contractor operations at various times in 1985; Meridian NAS was con-
                       verted in August.


A-4 Organizational     The cost comparison for the A-4 maintenance function encompassed the
                       requirements for Meridian NAS; Chase Field NAS; Kingsville NAS; and Pen-
Maintenance Contract   sacola NAS, Florida. The cost comparison showed the in-house costs to
                       perform the work would be $92 million over a 3-l/2-year period,
                       whereas contracting costs would be $75.3 million, or a savings of $16.7
                       million. The maintenance functions at the bases were converted to con-
                       tract at various times in 1987 and 1988; Meridian NAS was converted in
                       April 1988.




                        ‘This type of maintenance is the responsibility of and performed by a using organization on its
                        assigned equipment. Its phases normally consist of inspecting, servicing, lubricating, adjusting, and
                        replacing parts, minor assemblies, and subassemblies.

                        “This type of maintenance is the responsibility of and performed by designated maintenance activi-
                        ties for direct support of using organizations. Normally, its phases consist of calibrating, repairing, or
                        replacing damaged or unserviceable parts, components, or assemblies; the emergency manufacturing
                        of nonavailable parts; and providing technical assistance to using organizations.



                        Page 12                                                          GAO/NSIAD-W114        DOD Contracting
                             Appendix I
                             Review of Contracting  For Maintenance  of
                             Training Aircraft and Training Equipment at
                             Lowry AFB, Columbus AFB, and Meridian
                             NAS




Status of T-2 and A-4        A cost comparison is in process for intermediate maintenance for the T-2
Intermediate Maintenance     and A-4 training aircraft, which includes requirements for Meridian NAS;
                             Chase Field NAS; Kingsville NAS; Pensacola NAS; Corpus Christi NAS,
Cost Comparison              Texas; and Whiting Field NAS, Florida. The tentative contract award date
                             is May 1, 1989, and conversion to full performance by the contractor is
                             expected on September 1, 1989.


Validity of Projected        Projected savings over the 4-l/2-year contract period for T-2 mainte-
                             nance were estimated to be $35.9 million. Changes to the T-2 contract
Savings on the T-2 and A-4   since it started in 1985 through January 1989 have resulted in a net
Contracts                    increase in the contract of $13.7 million-from    $55.9 million to $69.6
                             million. However, most of the increase resulted from new work require-
                             ments such as increased flying requirements, including weekend flying,
                             and increases in wages authorized by the Service Contract Act.J If the
                             functions had remained in-house, the additional work load and costs
                             would likely have increased as well. Costs of $2.2 million resulting from
                             changes to resolve contract ambiguities, $1.4 million for projected
                             increases in contract administration, and $341,000 for a termination set-
                             tlement for fiscal year 1985 (minimum flying requirements in contract
                             were not met) will result in a $3.9 million reduction in the projected sav-
                             ings. Therefore, it appears that about $32 million of the projected sav-
                             ings will be realized.

                             Changes to the A-4 contract since it started in May 1987 through Janu-
                             ary 1989 have resulted in a net increase of $10.2 million in the contract
                             price-from    $40 million to $50.2 million. (These figures do not include
                             $20.8 million for the fiscal year 1990 option period.) The increase
                             resulted from new work requirements, such as establishing a detach-
                             ment at El Centro, California, and changing from a 5- to a g-day flying
                             week. The additional work would have been required, and costs would
                             have increased, regardless of whether the work remained in-house or
                             was contracted out. Therefore, it appears that the projected savings of
                             $16.7 will be realized.




                             ‘The Service Contract Act of 1965, as amended (41 USC. 351 et seq.), requires federal contractors to
                             pay their employees not less than the prevailing minimum wage, as determined by the Department of
                             Labor, based on the type of work and the locale. Contractor bids and in-house cost estimates do not
                             include costs for future wage increases. Consequently, when the prevailing minimum wage increases,
                             contracts are modified to reimburse contracton for the increased wages.



                             Page 13                                                      GAO/NSIAD-W-114      DOD Contracting
                                            Appendix I
                                            Review of Chtracthg     For Maintenance   of
                                            Trainhg Aircraft   and Trahing   J3quipment at
                                            Lmvry AF’B, Columbus AF3, and Meridian
                                            NAS




                                            Since indications are that most of the projected savings will be realized
                                            under the T-2 and A-4 contracts, we did not break out costs and pro-
                                            jected savings between the various bases involved in each of the
                                             contracts.


Impact on Personnel at                      Contracting out of the T-2 and A-4 maintenance functions at Meridian
                                            NAS affected 17 civilian employees and 543 military personnel-8  civil-
Meridian NAS                                ian and 218 military for T-2 maintenance and 9 civilian and 325 military
                                            for A-4 maintenance. Table I.3 shows what happened to employees
                                            affected by contracting out T-2 maintenance, and table I.4 shows what
                                            happened to employees affected by contracting out A-4 maintenance.

Table 1.3: Disposition of T-2 Maintenance
Personnel at Meridian NAS                   Military                                                     Civilian
                                            Reassigned Meridian NAS                    30                 Placed at Meridian NAS                     8
                                            Reassianed Umted States                   188
                                            TOM                                       21Sa
                                            aAccordtng to Navy offlctals, reassignments   were to unfilled authorized posltlons.


Table 1.4: Disposition of A-4 Maintenance
Personnel at Meridian NAS                   Military                                                      Civilian
                                            Reassigned Meridian NAS                    23                 Placed at Meridian NAS                     5
                                            Reassigned United States                  302                 Placed at other DOD locations              3
                                                                                                          Reaular retirement                         1
                                            Total                                     329                                                            9
                                            aAccordmg to Navy officials, reassignments    were to unfilled authorized positions.




Impact on Personnel and                     Navy officials told us that even if the training aircraft maintenance
Equipment Readiness                         functions at the pilot training bases were not contracted out, these bases
                                            could not be looked upon to provide military personnel in case of an
                                            emergency because the personnel would be needed at the bases during
                                            wartime and peacetime. Navy officials told us that the contractor’s work
                                            has been satisfactory and that the quality of service has been better
                                            with contractor personnel than it was previously with military person-
                                            nel. We were also told that the condition of the aircraft improved under
                                            contract maintenance.




                                            Page 14                                                           GAO/NSIAD89114       DOD Contracting
                           Appendix I
                           Review of Contracting   For Maintenance  of
                           Training Aircraft  and Training Equipment at
                           Lowry AFB, Columbus AFB, and Meridian
                           NAS




Economic Impact on Local   The Navy’s economic impact statement regarding the contracting out of
                           the T-Z aircraft maintenance function stated that, in the combined three
Communities                communities, the contract was expected to add a total of 5 11 new civil-
                           ian jobs. The statement also said that indirect benefits to each comrnu-
                           nity in increased real estate sales and rentals; purchases of local goods,
                           services, and utilities; increased local banking; and an increase to the
                           local tax base were expected as military personnel were replaced by con-
                           tractor personnel.

                           In addition, the statement said that contracting would add $3.3 million
                           to total personal income over the contract period ($660,000 annually).
                           Navy officials were unable to recall how this figure was derived. Based
                           on the projected savings of $35.9 million over the 4-l/2-year contract
                           period, it appears that the average annual dollars available in the local
                           communities would be about $8 million less than if the functions were
                           performed in-house. However, as discussed earlier, contract amounts
                           have increased to some extent, which would offset some of this
                           reduction.

                           Navy documents stated that because the A-4 aircraft maintenance func-
                           tion would continue to be performed in the same areas by local
                           residents, it was anticipated that the economic effect on the business
                           volume of the local communities will be a positive one, since the contrac-
                           tor would be providing more than 600 new jobs in a wide range of skills.
                           The documents contained no information regarding the economic impact
                           on the local communities. Using the same methodology as that above for
                           the T-2, the projected savings of $16.7 million over a 3-l/2-year period
                           would result in an average annual reduction of $4.8 million available in
                           the local communities. Again, contract amounts have increased to some
                           extent, which would offset some of this reduction.

                           Navy officials told us that performance of the maintenance functions in-
                           house by civilian employees or by contractor personnel would be of
                           greater benefit to the local communities than if military personnel per-
                           formed the work because civilians would live and shop in the communi-
                           ties, whereas many military personnel live, shop, and use other facilities
                           at the bases.




                            Page 15                                       GAO/NSIAD&W-114   DOD Contracting
                             Appendix I
                             Review of Contracting   For Maintenance of
                             Training Aircraft  and Trahing Equipment at
                             Lowry AFB, Columbus AFB, and Meridian
                             NAS




Impact on Wartime            Navy officials told us that pilot training is required during wartime and
Mobilization Requirements    peacetime. If the maintenance function were not contracted out, military
                             personnel performing this function would not be called upon in an emer-
and Ship-to-Shore Rotation   gency because they would be required to perform maintenance on the
Schedules                    training aircraft. Navy officials told us that there is no impact on the
                             ship-to-shore rotation schedule. Sufficient aircraft maintenance person-
                             nel are available at other naval air stations to meet their requirements.


Impact on Other Base         We were told by Navy officials that the reduction of military personnel
Functions                    from contracting out the maintenance function did not have a significant
                             impact on other base functions at Meridian NAS. The number of military
                             personnel (including students) has fluctuated after the contracting of
                             the maintenance functions from 2,746 on September 30, 1985, to 3,017
                             on September 30, 1987, to 2,579 on January 31, 1989. About 575 retir-
                             ees also use the base facilities. The activities that have been somewhat
                             affected are morale, welfare, and recreation, since they are nonap-
                             propriated fund activities that generate fees for operation.




                             Page 16                                       GA0/NSL4D-8!%114   DOD Contracting
Page 17   GAO/NSIAD-g&114   DOD Co~~tmcting
Appendix II

Objectives,Scope,and Methodology


              The Conference Report (100-989, September 28, 1988) to the National
              Defense Authorization Act for Fiscal Year 1989 directed us to perform a
              study concerning the contracting out of maintenance of training aircraft
              and training equipment at Lowry AFB, Colorado, and Columbus AFB and
              Meridian NAS, Mississippi.

              The objectives of our work were to provide an assessment of the follow-
              ing issues associated with the contracting out of these functions: (1) the
              validity of projected cost savings from contracting out, (2) the potential
              impact on personnel and equipment readiness, (3) the economic impact
              on the local communities, (4) the impact on wartime mobilization
              requirements, the ship-to-shore rotation schedule for Navy maintenance
              personnel, and the overseas rotation schedule for Air Force maintenance
              personnel, and (5) other impacts on base functions caused by the reduc-
              tion of the military population (reduction of base medical facilities; com-
              missary; exchange; and morale, welfare, and recreation facilities).

              To accomplish our objectives, we reviewed Office of Management and
              Budget Circular A-76, the summary statistical data from the Air Force
              and Navy cost comparisons that were used to justify conversions to con-
              tract, and other related documents. We did not evaluate the cost com-
              parisons or their underlying support. We also obtained information from
              the Air Force and the Navy pertaining to the economic impacts on the
              local communities, impacts on personnel and equipment readiness, war-
              time mobilization requirements, rotation schedules, and impacts on
              other base functions caused by the reduction in the number of military
              personnel. We did not verify that reassigned military personnel were
              placed in unfilled authorized positions. Reassignments that exceed
              authorizations would reduce savings because the government would be
              paying contractor personnel as well as the additional cost of reassigned
              military personnel that were placed in organizations where there was no
              apparent need.

              To obtain Air Force data relevant to Lowry and Columbus AFBS, we vis-
              ited and interviewed Air Force officials responsible for the activities at
              Air Force Headquarters, Washington, D.C., and Lowry and Columbus
              AFBS.

              To obtain Navy data relevant to Meridian NAS, we visited and inter-
              viewed officials responsible for the activities at Navy Headquarters,
              Washington, D.C., and Chief of Naval Air Training, Corpus Christi,
              Texas. We also interviewed the Base Commander, Meridian NAS; officials



              Page 18                                       GAO/NSIADM-114   DOD Contracting
Appendix II
Objectives, Scope, and Methodology




of the Naval Aviation Depot Operations Center, Patuxent River, Mary-
land; and Chief of Naval Education and Training, Pensacola NAS, Florida.

We performed our work from September 1988 to February 1989 in
accordance with generally accepted government auditing standards.




Page 19                                     GAO/NSIAD-W-114   DOD Contracting
Appendix III

Major Contributors to This Report


                        Paul L. Jones, Associate Director, Air Force Issues, (202) 275-4268
National Security and   Richard J. Price, Assistant Director
International Affairs   Harold C. Andrews, Evaluator-in-Charge
Division, Washington,
D.C.

                        Frederick G. Day, Regional Management Representative
Denver Regional         William P. Brown, Regional Assignment Manager
Office




(392447)                Page 20                                      GAO/NSIAD-lW114   DOD Chtmcting
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