Depot Maintenance: Workload Allocation Reporting Improved, but Lingering Problems Remain

Published by the Government Accountability Office on 1999-07-13.

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

                   United States General Accounting Office

GAO                Report to Congressional Committees

July 1999

                   Workload Allocation
                   Reporting Improved,
                   but Lingering
                   Problems Remain

United States General Accounting Office                                                  National Security and
Washington, D.C. 20548                                                            International Affairs Division

                                    B-282668                                                                 Letter

                                    July 13, 1999

                                    The Honorable John Warner
                                    The Honorable Carl Levin
                                    Ranking Minority Member
                                    Committee on Armed Services
                                    United States Senate

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

                                    On February 5, 1999, as required by 10 U.S.C. 2466 (e)(1), the Department
                                    of Defense (DOD) submitted a report to Congress on the distribution of
                                    depot maintenance workloads for fiscal year 1998. The statute provides
                                    that not more than 50 percent of the funds made available in a fiscal year to
                                    a military department or defense agency for depot maintenance and repair
                                    can be used for performance by contractors. As required by 10 U.S.C. 2466
                                    (e)(2), we reviewed DOD’s report on the percentage of depot maintenance
                                    funding used by the public and private sector activities. This report (1) sets
                                    forth our view on DOD’s compliance with the percentage requirement in
                                    10 U.S.C. 2466; (2) compares the results of DOD’s recent report of fiscal
                                    year 1998 workload with prior years’ reports; (3) discusses continuing
                                    weaknesses in the accuracy, completeness, and consistency of reported
                                    data; and (4) discusses improvements in DOD’s guidance, data collection
                                    processes, oversight, and opportunities to further improve the quality of
                                    future reports.

Results in Brief                    As submitted, DOD’s report covering fiscal year 1998 depot workloads
                                    would indicate that each of the covered military departments and the one
                                    reporting defense agency are in compliance with the 50-percent ceiling set
                                    by section 2466. However, because of errors and inconsistencies in
                                    reporting, we could not determine whether DOD’s departments and
                                    agencies were in compliance with the 50-percent ceiling for private sector
                                    performance. Further, consistent with DOD’s stated plans, the private

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                     sector’s portion of such work is continuing to increase. DOD is collecting
                     projected out-year obligation data that likely would have provided a more
                     definitive outlook for future workload allocations, but has not yet
                     completed its data collection and analysis of this data.

                     Notwithstanding limitations in DOD’s data, its report covering fiscal year
                     1998 depot workloads was more comprehensive than prior years’ reports
                     because of improved guidance and, in the case of the Air Force, use of its
                     audit agency to review its data. DOD reported obligating a total of
                     $14.1 billion for depot maintenance in fiscal year 1998—about 37 percent
                     more than was reported for fiscal year 1997. The percentage reported
                     going to the private sector increased from 37 to 42 percent between fiscal
                     year 1997 and 1998, with much of the increase resulting from contractor
                     logistics support and interim contractor support.

                     The Office of the Secretary of Defense (OSD), the Air Force, and the Army
                     have provided improved guidance and oversight for this year’s report, and
                     these actions resulted in more comprehensive reporting. However,
                     reporting requirements are unclear in certain areas such as distinctions
                     between depot and other levels of maintenance and repair activities. Also,
                     problems occurred in this reporting cycle because guidance was not
                     communicated to and understood by all organizational levels responsible
                     for reporting. Further, data were not always reviewed for consistency and
                     completeness within each service prior to submission to the OSD. Even
                     once these issues are addressed, some subjectivity would likely continue
                     because of difficulties in categorizing certain maintenance repair actions.

                     This report includes some recommendations for improving the quality of
                     DOD’s public-private sector workload reporting.

Background           DOD spent about 5 percent of its $272 billion fiscal year 1998 budget on
                     depot maintenance activities. Depot-level maintenance involves the
                     overhaul, repair, upgrade, and rebuilding of military systems, subsystems,
                     parts, and assemblies and requires extensive shop facilities, specialized
                     equipment, and highly skilled technical and engineering personnel.
                     Traditionally, public sector maintenance activities have been performed at

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                              22 major government-owned and -operated depots 1 and a number of
                              othergovernment-owned facilities, including post-production software
                              support activities, naval warfare centers, and Army arsenals. According to
                              DOD officials, private sector maintenance and repair are conducted at
                              about 1,100 contractor-operated facilities at various geographic locations.
                              However, current DOD guidance calls for increasing reliance on the private
                              sector to meet support needs to the extent authorized by law.

Legislative Requirements on   Section 2466 of title 10 of the United States Code governs the allocation of
Public and Private Sector     depot maintenance workload between the public and private sectors. The
                              statute provides that not more than 50 percent of funds made available in a
Workload Distribution         fiscal year to a military department or defense agency for depot-level repair
                              and maintenance can be used to contract for performance by nonfederal
                              personnel. This percentage applies to each individual military department
                              and defense agency.

                              The statute also requires that the Secretary of Defense submit to Congress
                              a report concerning performance during the preceding fiscal year and that
                              we report our views on whether DOD complied with the public-private
                              sector percentage requirements. Congress has required DOD to report
                              public and private sector distribution data in all years except one since
                              1991, and the reporting requirement was made permanent by the National
                              Defense Authorization Act for Fiscal Year 1998 (P.L. 105-85) as codified at
                              10 U.S.C. 2466. Results of our reviews of DOD’s public-private sector
                              workload allocation reports for fiscal years 1995, 1996, and 1997 are
                              discussed in appendix I.

                              The 1998 legislation further provided a new provision, 10 U.S.C. 2460,
                              which defined depot-level maintenance and repair workloads. The
                              provision specified that depot-level maintenance and repair includes
                              (1) overhaul, upgrading, or rebuilding of parts, assemblies, or
                              subassemblies; (2) testing and reclamation of equipment; (3) all aspects of
                              software maintenance classified by DOD as depot maintenance as of July 1,
                              1995; and (4) interim contractor support (ICS) and contractor logistics
                              support (CLS) to the extent they involve depot-level maintenance services.
                              The provision also specified that all depot-level maintenance and repair

                               Major depots employ at least 400 personnel. Two major Air Force logistics centers (San Antonio and
                              Sacramento) are in the process of closing and a naval warfare center (Keyport) is being downsized to
                              less than 400 employees.

                              Page 3                                                    GAO/NSIAD-99-154 Depot Maintenance

                                   workloads were to be included, regardless of funding source and location
                                   where the work was performed. It excluded from counting as depot-level
                                   maintenance workload the (1) nuclear refueling of aircraft carriers,
                                   (2) procurement of major modification or upgrades of weapon systems that
                                   are designed to improve program performance, and (3) procurement of
                                   parts for safety modifications but included the installation of parts for
                                   safety modifications.

                                   Before 10 U.S.C. 2460 was enacted, depot-level maintenance and repair had
                                   not been defined in statute. Working definitions were provided in a variety
                                   of DOD directives, regulations and publications. The services applied these
                                   definitions using ad hoc procedures to prepare the prior-year reports.

Uncertainty Exists                 DOD’s report, as presented, indicates that each of the covered military
                                   departments and the one reporting defense agency were in compliance
Over Compliance With               with the statute; each reported that less than 50 percent of its depot
Ceiling on Private                 workload was performed by contractors. However, as discussed later,
                                   because of errors and inconsistencies in reporting, we were unable to fully
Sector Work, Even                  validate the data. Consequently, we could not determine whether DOD’s
Though Reporting Is                departments and agencies were in compliance with the 50-percent ceiling
More Comprehensive                 for private-sector performance. Notwithstanding limitations in DOD’s data,
                                   its March 1999 report was more comprehensive than previous ones. On the
Than Ever                          other hand, consistent with its stated policies and plans, DOD appears to be
                                   moving toward increased reliance on the private sector for depot
                                   maintenance support. DOD is working to develop future projections of its
                                   depot workload allocations, but it had not completed its efforts to obtain
                                   this information at the time we completed our report.

DOD’s Fiscal Year 1998 Report Is   For fiscal year 1998, DOD reported total obligations of $14.1 billion for
More Comprehensive Than            depot maintenance and repair. This is a 37-percent increase over the
Before                             $10.3 billion reported for fiscal year 1997. Much of the increase resulted
                                   from reporting CLS and ICS. DOD has collected this information before
                                   for internal management purposes, but this was the first time it was
                                   included in the annual congressional report. In addition, more
                                   organizations and weapon system acquisition offices are now reporting
                                   depot maintenance workloads. For example, the number of Army major
                                   commands reporting increased from 4 to 11, the TRICARE Management
                                   Activity reported this year for the first time, and the U.S. Special

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                                         Operations Command2 expanded its reporting to include reparable
                                         components funded through the service stock funds.

                                         DOD submitted its workload report for fiscal year 1998 to Congress on
                                         February 5, 1999. The amounts and percentage distributions between the
                                         public and private sectors reported by DOD organizations are shown in
                                         table 1.

Table 1: Reported Fiscal Year 1998 DOD Depot Maintenance Workload Distributions
Dollars in millions
                                                                             Public           Public            Private               Private
                                              Total fiscal year              sector           sector            sector                 sector
                                             1998 obligations                  total         percent               total              percent
Army                                                   $1,729.4              $941.2              54.4            $788.2                    45.6
Navy (and Marine Corps)                                  6,430.9            3,748.2              58.3           2,682.7                    41.7
Air Force                                                5,736.8            3,328.6              58.0           2,408.2                    42.0
Defense Intelligence Agency                                0.061              0.061             100.0                  0                      0
U.S. Special Operations Command                            195.4              137.2              70.2              58.2                    29.8
TRICARE Management Activity                                 30.7                   0                 0             30.7                  100.0
Total DOD                                             $14,122.4            $8,155.3              57.7         $5,968.0                     42.3
                                         Source: DOD’s Feb. 5, 1999, report to Congress.

                                         As discussed more fully later, we found numerous errors, omissions, and
                                         inconsistencies in the records supporting this report; consequently, we
                                         were unable to fully validate the data and determine whether or not DOD’s
                                         departments and agencies were complying with the 50-percent ceiling. The
                                         types of errors and omissions we identified indicated that in some
                                         instances DOD underreported the amount of funded depot maintenance
                                         work and understated the amount performed by the private sector. In
                                         other instances, the errors overstated the amount of funded depot
                                         maintenance. The errors and omissions were such that we sometimes

                                          Because DOD does not consider them military departments or defense agencies, these two
                                         organizations are not subject to the 50-percent ceiling for private sector workloads. TRICARE
                                         Management Activity provides operational support for the military services in managing and
                                         administering portions of the defense health program. It funds maintenance on aeromedical evacuation
                                         aircraft. The U.S. Special Operations Command is a unified combatant command responsible for
                                         ensuring special forces are combat ready and mission capable. It receives its own funds for acquisition
                                         and support for special operations-peculiar equipment, while the military services are responsible for
                                         funding items that are not special operations-peculiar.

                                         Page 5                                                     GAO/NSIAD-99-154 Depot Maintenance

                           could not differentiate whether the amounts pertained to work performed
                           by the public or private sectors. As a result, the net effect was unclear.

While Precise Data Are     We cannot be sure of the precise amounts of depot workloads being
Lacking, Available         performed by government and private sector employees. However, DOD
                           reports an increasing trend among the services in relying on the private
Information Indicates      sector for this work. For DOD in total, the percentage reported for the
Growth in Private Sector   private sector was 42 percent for fiscal year 1998, up from 37 percent
Workloads                  reported for fiscal year 1997. Figure 1 shows changes in reported
                           percentages of DOD depot maintenance workloads performed by
                           contractor personnel from fiscal years 1994 through 1998 for the military
                           departments. The reporting baseline has changed over this period,
                           consequently, the data are not directly comparable. The reports reflect
                           changes in the data as reported under the guidelines in effect in each year.

                           Figure 1: Percentage of DOD Depot Maintenance Workloads Performed by
                           Contractors (by dollar value)

                                      1994            1995             1996             1997               1998
                                                                  F isc a l y e a r

                                                  Arm y               N a vy              A ir F o r c e

                           Source: DOD data.
                           Note: While the data provide indication of a general trend toward increased contractor performance, it
                           is subject to some imprecision due to periodic changes in reporting requirements.

                           Despite data limitations, the trend data indicate that the military
                           departments continue to move toward the 50-percent ceiling on private
                           sector workloads. DOD’s report for fiscal year 1998 indicated that, with the

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                        exception of TRICARE, which reported all its maintenance in the private
                        sector, no organization exceeded the ceiling on private sector workloads.
                        This trend toward greater reliance on the private sector is consistent with
                        DOD’s plans to move in this direction.

Future Projections      Although not required by 10 U.S.C. 2466, DOD is developing data to make
                        future projections of depot maintenance workloads in the public and
                        private sectors. However, at the time of our report, DOD was still
                        developing the data.

                        Data on the prior year’s workload percentages are important, but, by
                        themselves provide only a retrospective, point-in-time measure.
                        Projections of future years’ workloads and the percentage allocations
                        between the two sectors provide a valuable perspective for internal
                        management and congressional oversight. This data could highlight trends
                        in the size and flow of workload and help judge the likely impact of current
                        policies and acquisition program decisions on future allocations.

Errors,                 Our review this year, as in prior years, found numerous instances of
                        inaccurate and inconsistent reporting of depot workloads and in
Inconsistencies, and    designating whether it was performed by the public or private sector,
Uncertainties           making it unclear whether DOD departments and agencies were within the
                        stated 50-percent ceiling. Of those problem areas where we could quantify
Continue, but the Net   or reasonably estimate, we found errors and inconsistencies amounting to
Effect Is Unclear       about 10 percent of the total dollars of workload reported by DOD. 3 Many
                        of these problems were specific to types of workloads and systems but also
                        involved difficulties distinguishing between depot and nondepot workloads
                        at some locations. Other problems were of a more miscellaneous nature.
                        We could not determine the net effects of these problems on workload
                        totals and percentages because of limitations in the data and because some
                        were difficult to quantify. The major reporting problems are summarized
                        below, and discussed more fully in appendix II.

                          This figure, however, is based on our work primarily at headquarters locations and limited visits to
                        field locations where data were obtained from the services.

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Key Problems Identified   DOD’s report on fiscal year 1998 workloads contained varying degrees of
                          underreporting, over-reporting, and inconsistent reporting of depot
                          maintenance workloads. An example of inconsistent and possible
                          underreporting involves installations of major upgrade and
                          remanufacturing programs.4 The Army reported about $70 million for costs
                          of disassembling systems at both public and private facilities. However, the
                          Navy did not report any of its $10.4 million for disassembly workload.
                          Neither service reported the installation costs incurred in the upgrade
                          process in the private sector, considering these to be more production in
                          nature rather than depot maintenance. Estimated installation costs for the
                          Army were about $130 million and the Navy $30 million. OSD guidance
                          specifies that installation and depot-level costs on major performance
                          upgrades and other modifications should be reported.

                          Another example of inconsistent and underreporting of workloads involves
                          installation of other modifications by the Navy. The Naval Air Systems
                          Command reported $217 million for installation of modifications by both
                          the public and private sectors, but the Naval Sea Systems Command did not
                          report $176 million for installation work. A Sea Systems Command official
                          decided installation of modifications was not depot maintenance.
                          However, one program within the Naval Sea Systems Command did report
                          $62 million for public and private sector installations of modifications.
                          This problem can affect both public and private workloads because
                          installations are being done by both sectors.

                          In commenting on a draft of this report, Navy officials said that funds spent
                          for disassembly are paid for with Aircraft Procurement Navy dollars and
                          are not required to be reported. OSD officials, however, agreed with us that
                          it is not the source of funds but the nature of the work that would be the
                          determining factor in whether work should be considered depot work.
                          They also agreed that disassembly, reclamation, preparation, and recovery
                          work are depot maintenance functions, regardless of where this work is
                          performed or the source of funds paying for it.

                          Underreporting was caused by the inability to distinguish whether work on
                          depot maintenance workloads obtained through interservice agreements

                           A modification or upgrade is the alteration, conversion, or modernization of an end item of investment
                          equipment which changes or improves the original purpose or operational capacity in relation to the
                          effectiveness, efficiency, reliability or safety of that item. If the modification involves a remanufacture,
                          the process typically results in a new model number and serial number of the modified system.

                          Page 8                                                        GAO/NSIAD-99-154 Depot Maintenance

was actually completed in the public or private sector. For example, the
Army and the Naval Air Systems Command reported that all interservice
workloads—$11 million and $116 million, respectively—were performed in
the public sector, even though some workloads were actually performed by
private contractors. The U.S. Special Operations Command, which reports
separately from the services, did not determine where work was performed
and reported its entire amount obligated for Air Force reparables—
$97 million—as public sector obligations, even though the Air Force, in
total, contracts out more than one-third of its reparable workloads. This
problem would understate contract workloads.

The inability to distinguish depot workloads from other work performed by
the services at below-depot level maintenance organizations resulted in
inconsistent reporting. The Army performed depot maintenance tasks at
field level activities that were not completely reported because these
activities did not consider the work they did depot maintenance, even
though some of this work meets the depot maintenance definition
established in legislation. Several Army commands inconsistently
collected and reported depot data. In addition, a recent internal study by
the Army, as well as our ongoing review of Army maintenance, suggests
that there is a proliferation of depot workloads performed in nondepot
locations and the total amount, unknown at this time, is higher than
reported. Further, the Navy maintains its Trident submarines at refit
facilities but reported no depot maintenance. Navy officials have different
opinions about whether some of the work done on the Trident is depot
maintenance. The total maintenance expenditure in fiscal year 1998 was an
estimated $158 million. The problem of identifying depot workload in
nondepot activities could affect reported amounts for both public and
private sectors.

Errors resulting from clerical and transcription errors and other problems,
including differences in interpreting reporting guidance, also resulted in
underreporting. The Navy, for example, inadvertently reversed its
public-private data for the Atlantic and Pacific Fleets and reported a
$267,000 expenditure as $267 million; the net effect of both errors resulted
in an underreporting of the public sector obligations. The Air Force added
$24 million in estimated costs of government contract management to
public sector obligations and subtracted the costs from private sector
obligations. This latter area is not clearly dealt with in existing guidance.

Page 9                                      GAO/NSIAD-99-154 Depot Maintenance

Net Impact of Reporting   The net effect of DOD’s reporting problems on depot workloads and the
Problems Is Unclear       public-private percentages is not clear due to data limitations, limited time
                          available for our review, and our inability to quantify or project some data.
                          The total amount of errors and inconsistencies that was quantifiable
                          represented about 10 percent of the total dollars DOD reported. Some
                          errors involved underreporting, while others involved overreporting or
                          resulted in adding to one sector while subtracting the same amount from
                          the other sector. Further, although we could quantify or use officials’
                          estimates to quantify the majority of the problems, we found other
                          problems were not easily quantified, and there are lingering uncertainties
                          whether some types of workload should be reported. Some discrepancies
                          were not readily distinguishable as to whether they affected the public or
                          private sector. As a result, we could not accurately determine how much
                          the reporting errors affected the overall percentages assigned to the public
                          and private sectors. Thus, we could not definitively determine compliance
                          with the 50 percent ceiling for the private sector.

                          At some locations, we found personnel responsible for providing
                          information on depot workloads had not received the reporting guidelines
                          necessary to provide accurate and complete information on depot
                          workloads. Thus, although the services had issued guidance regarding
                          what and how maintenance should be reported, in these instances this
                          information never reached the personnel responsible for collecting it. Also,
                          in some cases, reporting officials at locations where both depot and
                          nondepot level maintenance work was being performed found they were
                          making subjective determinations that could easily have been made
                          differently by someone else.

Improvements Made in      Compared to prior years, DOD improved its reporting on the distribution of
                          depot maintenance funds between the public and private sectors for fiscal
Guidance and              year 1998. This most recent report shows that the services are reporting
Reporting for 1998, but   more dollars, on more types of maintenance, and from more activities. Two
                          services improved their respective processes for collecting data. Yet, based
Additional                on data deficiencies identified, additional improvements are needed.
Improvements Are          However, to what extent additional efforts can eliminate all reporting
Needed                    problems is questionable, given the sheer size and extent of data collection
                          efforts and the reporting uncertainties that persist.

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Improved Guidance and   Workload reporting guidance and implementation strategies for collecting
Data Collection         and reporting the fiscal year 1998 workload data were generally better,
                        more systematic, and more comprehensive than in prior years. OSD
                        provided increased top-level guidance and taskings to the appropriate
                        organizations. The Air Force and the Army took several steps to improve
                        their data collection and reporting processes, but we found little indication
                        that the Navy had.

                        The OSD Maintenance Policy, Programs, and Resources Office assembles
                        DOD’s report to Congress from the data aggregated by the military
                        departments and the defense agencies. Responding to a recommendation
                        in our July 1998 report, OSD issued guidance stating that the military
                        departments and defense agencies should establish and document internal
                        operating procedures for collecting data and reporting public and private
                        sector depot-level workloads. It also stipulated that the procedures should
                        clearly (1) identify the specific commands and activities responsible for
                        submitting data and (2) describe the records and systems from which
                        documentation would be pulled and the minimum documentation to be
                        retained. It defined depot maintenance consistently with 10 U.S.C. 2460,
                        added new reporting requirements for ICS, CLS, and similar contracts, and
                        included some narrative to help clarify new reporting requirements and

                        OSD tasked the military departments and the defense agencies to report
                        and required a response in the negative from those agencies having no
                        depot maintenance. Seven defense agencies submitted negative responses.
                        The Defense Intelligence Agency was the only agency to report some depot
                        maintenance, and that amount was minimal. Although not defense
                        agencies, the U.S. Special Operations Command and TRICARE
                        Management Activity also reported some depot maintenance workloads.
                        OSD does not consider these two organizations to be military departments
                        or defense agencies as defined in 10 U.S.C. 101 and, consequently, it does
                        not believe these organizations are subject to the 50-percent limitation. We
                        found no basis to disagree with that view. However, OSD rightly included
                        these organizations in the report to ensure more complete reporting of the
                        source of repair of DOD depot maintenance work. These organizations do
                        manage depot maintenance funds and own equipment items that are
                        maintained in DOD depots and by contractors.

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Air Force   Air Force officials initiated the following key actions that substantially
            improved its reporting process and results from prior years.

            • Issued additional instructions to supplement the OSD guidance,
              expanding on the directions for reporting ICS, CLS, and other
              maintenance reporting categories that had proven troublesome in the
              past or which required some interpretation.
            • Held a widely attended kick-off meeting to explain and revise the
              guidance and to discuss reporting issues with representatives of the air
              logistics centers, acquisition program offices, and Headquarters, Air
              Force Materiel Command (AFMC).
            • Provided electronic templates to help ensure comprehensive and
              standardized reporting.
            • Designated focal points that worked with reporting entities to answer
              questions and summarize data.
            • Used the Air Force Audit Agency to verify data and validate the
              collection process. Auditors, along with officials from AFMC
              headquarters and the Air Staff, reviewed major portions of the workload
              estimates initially submitted by logistics centers and acquisition offices
              and made substantial revisions to improve the accuracy and
              comprehensiveness of the data reported to the Congress.

Army        The Army also issued supplemental instructions to expand upon the OSD
            guidance, provide more details, and accommodate Army-unique programs.
            Officials based the instructions on the findings and recommendations
            resulting from last year’s evaluation by the Army Audit Agency and our
            work. The instructions were disseminated to 11 major commands, and
            each command headquarters distributed the guidance to lower
            organizational levels and generally tasked appropriate offices for reporting.
            Every command subsequently reported depot maintenance obligations for
            fiscal year 1998 while only four commands reported last year. Officials,
            however, did not always ensure that all reporting offices had received and
            understood the guidance, which led to some reporting errors and
            inconsistencies discussed later in this report. Responding to the problems
            we identified in last year’s report,5 the Army Audit Agency reviewed the
            results of the Army’s 1997 data collection and reporting, and made
            recommendations for improving Army procedures. An official said the

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

            Page 12                                                GAO/NSIAD-99-154 Depot Maintenance

                           auditors may be called in again to review the 1998 results, depending on the
                           kinds and extent of problems we identified in this year’s report.

Navy                       Navy officials did not (1) issue additional instructions, (2) ensure that the
                           OSD guidance was distributed to all appropriate offices, and, (3) in general,
                           exercise the degree of management oversight of the data collection
                           process, as did the other services. The Navy basically distributed the data
                           call to nine commands and relied on their responses with little internal or
                           external review. The Naval Audit Service was not tasked to verify data and
                           validate the process. The Navy’s approach resulted in differing
                           interpretations of OSD guidance and questionable data gathering practices
                           at two of the three commands we visited. For example, one command
                           reported obligations for installing modifications as stated in the OSD
                           guidance while another one did not, based on an official’s determination
                           that such expenses were not maintenance and were therefore not
                           reportable. Neither the Naval Air Systems Command nor Naval Sea
                           Systems Command sent the OSD guidance and taskings to all weapon
                           systems program officials who were in the best position to determine
                           applicability of reporting requirements to their programs. In commenting
                           on a draft of this report, Navy officials said they had (1) obtained copies of
                           newly drafted 50-50 data collection and implementation guidance from
                           both the Army and the Air Force to take advantage of their “lessons
                           learned” and (2) initiated plans to use the Naval Audit Service to help
                           improve the Navy’s 50-50 data gathering and reporting.

Further Improvements Can   In the current environment, where the distinction between depot and other
Be Made                    types of maintenance is becoming more blurred due to the various factors
                           noted, identifying and reporting all obligations for depot maintenance is an
                           increasingly complex process. Some situations will likely continue to
                           require some subjective judgments regarding whether and how much to
                           report. However, some of the errors we found were administrative and
                           clerical and could be eliminated through reviews of data before they are
                           forwarded to higher levels, improving DOD guidance, and providing more
                           management oversight. Also, we identified some opportunities for process
                           improvements that could help to improve the quality of DOD’s
                           public-private sector workload reporting.

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Distinctions Between Depot and    Since the early 1990s, the distinction between depot-level maintenance and
Other Types of Workload Are       other levels of maintenance and manufacturing work has become
Increasing Reporting Challenges   increasingly vague as the services move depot workloads to operating
and Will Likely Require           locations, redefine required levels of maintenance, and consolidate
Additional Guidance               maintenance organizations. This vagueness could require additional
                                  guidance on how to distinguish between depot and other workloads when
                                  depot and other maintenance levels have been consolidated.

                                  While depot-level maintenance workloads continue to be performed at
                                  traditional depot activities, they are also performed by civilian and
                                  active-duty military personnel in military units and by contractors at
                                  various field locations. Funds for depot-level maintenance activities come
                                  principally from operations and maintenance appropriations but also
                                  procurement and research, development, testing, and evaluation
                                  appropriations. The public depots are primarily financed with working
                                  capital funds, whereas other facilities providing maintenance are financed
                                  through direct appropriation.6

                                  Each of the military services is consolidating and streamlining some
                                  maintenance activities, which can present future reporting challenges.
                                  Thus, each of the military service headquarters may need to add guidance
                                  specific to its initiative, but some subjective judgments and differences in
                                  interpretation are likely when depot work is consolidated with other
                                  maintenance activities.

                                  An Army initiative—the Sustainment Maintenance program—will collapse
                                  the current four-level maintenance system into a two-level system. Still in
                                  the early policy formulation stage, the two-level system will combine field
                                  and sustainment levels of maintenance at the same location. The current
                                  depot and general support levels will be combined and relabeled as
                                  sustainment maintenance workload—tasks that involve repairing,
                                  overhauling, rebuilding, and testing items. Sustainment maintenance will
                                  be accomplished both at the established Army depots and at local repair
                                  and maintenance activities. The Army plans to issue a new national
                                  maintenance policy later this year to consolidate the maintenance levels,
                                  and it will then begin revising field level instructions and technical orders
                                  in preparation for implementing the sustainment maintenance program.

                                   A working capital fund is a revolving fund in which depots earn revenues through sales of maintenance
                                  services to customers, who reimburse the fund with appropriated monies. Nonworking capital funded
                                  maintenance facilities are financed through direct appropriations and their customers are not charged
                                  on a per item basis as they are for operations funded through the working capital fund.

                                  Page 14                                                   GAO/NSIAD-99-154 Depot Maintenance

                             The Navy’s regionalization of maintenance plans is consolidating
                             depot-level and below-depot levels of maintenance on a geographic basis.
                             For example, the Navy has implemented a pilot project consolidating the
                             operations and management of its Pearl Harbor Naval Shipyard and its
                             nearby intermediate maintenance facility. This pilot project is testing the
                             regional maintenance concept that integrating intermediate and depot
                             maintenance activities would result in greater efficiency and lower overall
                             costs than maintaining maintenance facilities within a single, geographic
                             area. The Navy decided the consolidated activity at Pearl Harbor would
                             use a single financial system and use mission funding rather than the Navy
                             Working Capital Fund. Fiscal year 1999 is the first year operating under the
                             new organization. The impact on the 50-50 reporting of merging both the
                             operational and financial aspects of the two levels of maintenance
                             reporting is uncertain, but an official told us the combined activity could
                             have difficulty determining what work should be included in the Navy’s
                             2466 report to Congress next year.

                             Similarly, the Air Force’s recent transition from three to two levels of
                             maintenance and changes in the location of work present some difficulties
                             in reporting depot-level maintenance. Under two levels of maintenance,
                             some workloads that had been accomplished at intermediate facilities
                             transitioned to depots, while some devolved to base maintenance activities.
                             Those workloads that went to depots should be included in the report to
                             Congress, consistent with the OSD guidance that all workloads performed
                             at depots should be counted as public sector workloads. The Air Force’s
                             experience in reporting C-5 engine maintenance suggests that additional
                             guidance may be needed in this area because the same or similar tasks may
                             not be consistently reported and could change from year to year depending
                             on the location where work is performed. The Air Force initially pushed
                             intermediate-level C-5 engine workloads to the San Antonio Air Logistics
                             Center, where they were reported as public depot workloads. The Air
                             Force later decided to move these same workloads to operating bases,
                             where they were not included in this year’s depot workload report.

Continue to Improve Other    The errors, inconsistencies, and uncertainties we found indicated that
Guidance and Ensure It Is    implementing guidance could be improved with further clarifications of
Adequately Communicated to   reporting requirements in problem areas discussed in this report and with
Key Reporting Levels         greater emphasis on ensuring that reporting guidance is disseminated to
                             and understood by those charged with reporting. The experiences in the
                             Air Force and the Army demonstrate that continuing to hone guidance and
                             tailor it to service specific issues and programs pays off. Once improved,
                             management must then direct and coordinate its release and provide the

                             Page 15                                    GAO/NSIAD-99-154 Depot Maintenance

                                  oversight necessary to ensure comprehensive and consistent results. On
                                  this point, the Army fell somewhat short in ensuring instructions were
                                  distributed and understood, especially in those commands that had not
                                  previously been tasked to report depot maintenance. Also, as discussed
                                  earlier, the Navy did not exercise much central direction and oversight of
                                  data collection to ensure all appropriate offices received guidance and had
                                  a common understanding of reporting requirements.

                                  Responding to a recommendation in our July 1998 report, OSD stated in its
                                  guidance that the military services and defense agencies were to establish
                                  and document internal operating procedures for collecting data and
                                  reporting public and private sector depot-level workloads. The procedures
                                  are to clearly identify the specific commands and activities responsible for
                                  submitting data and describe the records and systems from which
                                  documentation will be pulled and the minimum documentation to be
                                  retained. The OSD guidance clearly specified reporting conventions and
                                  organizational responsibilities, while Army and Air Force supplemental
                                  instructions provided more specific details tailored to service issues and
                                  programs. For example, the Air Force guidance for CLS and ICS programs
                                  included a helpful list of tasks to assist program officials in determining
                                  which program costs should be counted as depot and which should not be.
                                  Each year, DOD can build upon lessons learned to further improve
                                  guidance for the following year and to include new issues that emerge—for
                                  example, reporting maintenance warranty costs and the challenges posed
                                  by the services’ consolidations and changes in maintenance levels.

Align Internal Definitions With   Because of the new statutory definition of depot maintenance in 10 U.S.C.
Statutory Requirements            2460, the services need to ensure that their own regulations and internal
                                  operating processes are consistent with the statute. This appears to be
                                  more of a problem in the Army than the other services. The Army’s primary
                                  regulation on maintenance—Army Regulation 750-1—establishes policies
                                  and procedures for determining the appropriate level and subsequent
                                  classification of maintenance. The statutory definition encompasses a
                                  substantial portion of general support-level maintenance that is currently
                                  not recognized by the Army regulation as depot maintenance. As a result,
                                  field maintenance and program officials used definitions and maintenance
                                  classifications established pursuant to the regulation in determining
                                  whether and how much depot maintenance should be reported and did not
                                  report some workloads that appear to meet the definition in the statute.
                                  Army officials are revising this regulation to be more consistent with the
                                  statute. The Army, however, will also have to revise other operating
                                  instructions at the field and depot levels. Next year, the Army will need to

                                  Page 16                                    GAO/NSIAD-99-154 Depot Maintenance

                              ensure that, when completed, the revised regulation is understood and
                              used in the field to report depot maintenance workload.

Maintain Auditable Records    OSD guidance requires that the military services and the defense agencies
                              maintain the detailed supporting data used to develop the submission for
                              use by us. For CLS, ICS, and similar contractor support, the guidance
                              specifies that records are to be maintained on the amounts included in
                              workload totals and that estimating techniques and rationales are to be
                              explained and documented. Our review, however, showed that complete
                              records, accessible and understandable to a third party, were not always
                              maintained. Army units in Korea, for example, maintained rather poor
                              documentation and some records had been disposed of. The Navy did not
                              maintain comprehensive central records to show how obligations had been
                              accumulated. Air Force programs did not always have documentation to
                              show how CLS costs were computed and what assumptions and estimating
                              methodologies were used. Good records, documentation of processes
                              followed, and identification of data sources used are important not only for
                              audits and management oversight but also for use as a historical record
                              that can be followed by newly assigned staff to assist in data collection and
                              by new weapon system programs.

                              In commenting on a draft of this report, Navy officials said that the Defense
                              Contract Management Command (DCMC) maintains information about
                              depot maintenance contracts, including a complete history of obligations.
                              While this may be true, DCMC does not provide a separate accounting of
                              contract maintenance data. Additionally, our comment regarding the Navy
                              not maintaining comprehensive records was intended to refer to all types
                              of Navy depot-level maintenance, including that provided by Navy depots,
                              other service depots, as well as the private sector. In later discussions with
                              Navy officials, they agreed with our observations regarding the need to
                              maintain better records in the future.

Consider Expanded Use of      The Air Force has demonstrated the value of employing its audit agency as
Auditors to Verify Data and   a third party, “honest broker,” to verify data and validate the data collection
Validate Processes            and reporting processes. The Army made limited use of its auditors last
                              year to identify problems and to prepare instructions to supplement the
                              OSD guidance. The Navy did not employ its audit agency to assist in this
                              process. Additional use of service audit agencies could improve the quality
                              and consistency of reported workload data.

                              The Air Force called on the Air Force Audit Agency for both the 1998 and
                              1997 report cycles. Numerous reporting officials cited the Air Force Audit

                              Page 17                                      GAO/NSIAD-99-154 Depot Maintenance

                             Agency’s work as extremely valuable in improving report accuracy and
                             consistency. Auditors reviewed about $4.8 billion (85 percent) of the fiscal
                             year 1998 workloads reported by the air logistics centers and acquisition
                             program offices and identified an error rate of 3 percent, or $198 million
                             (absolute value). These errors were corrected before the Air Force
                             finalized its data and submitted the Air Force report to OSD. As a result,
                             we found fewer reporting problems in the Air Force than in the other

                             The Army used its audit agency to review data after the 1997 report had
                             already gone to Congress, but its findings and recommendations were
                             useful to improving the Army’s process and issuing supplemental
                             instructions. If the Army had used its auditors to verify data before
                             submitting its report to OSD, fewer problems would likely have gone
                             undetected in the report that went to Congress. And, given the magnitude
                             of errors identified in the Navy’s report, use of its audit service could have
                             been very beneficial. Use of statistical sampling techniques could also be
                             helpful in this regard.

Report Out-year Data and     As noted, while not required by law, this year’s data call from OSD
Project Future Allocations   continued the prior practice of having components report projected
                             workloads and percentage distributions for future years, in addition to
                             current year reporting. OSD tasked the services to project workload data
                             for fiscal years 1999 through 2005. The fiscal year 1999 and 2000 workloads
                             were to use data submitted in the 2000 President’s budget and the funded
                             workloads for the remaining years were to reflect the most recent Program
                             Operating Memorandum submission. DOD had not completed its efforts to
                             obtain this information at the time we completed our report. Having this
                             information, along with reporting on the results of the preceding year,
                             would be beneficial.

Conclusions                  DOD improved the results and the processes used to generate the report
                             for fiscal year 1998. The report indicates that the military departments and
                             defense agencies complied with the legislative requirement on depot
                             maintenance funding allocation. However, we could not fully validate the
                             data and determine whether the military departments and defense agencies
                             were complying with the 50-percent ceiling for private sector performance
                             under 10 U.S.C. 2466. Many of the reporting problems relate to
                             uncertainties regarding what is and is not reportable and inconsistent
                             interpretation of requirements between and among the services. Problems

                             Page 18                                      GAO/NSIAD-99-154 Depot Maintenance

                  also resulted from personnel not receiving or being fully aware of reporting
                  requirements. Further, some problems were exacerbated by the lack of
                  retention of documentation pertaining to workload allocations, or
                  insufficient management oversight to ensure accuracy and completeness of
                  the data.

                  Despite data limitations, available information indicates that DOD,
                  consistent with its policies and plans, is moving toward greater reliance on
                  private-sector repair capabilities. DOD’s report presents data for the most
                  recent reporting year. DOD is in the process of developing projections of
                  future year workload allocations. Such information is necessary to make a
                  complete analysis of funding trends.

Recommendations   To improve the data collection and reporting processes, we recommend
                  that the Secretary of Defense, in conjunction with the secretaries of the
                  military departments and commanders of the defense agencies and
                  activities, (1) provide additional clarifying guidance in areas of
                  uncertainties such as those involving warranties that include the
                  performance of maintenance, remanufacturing, and consolidation of depot
                  and nondepot work at individual locations; (2) increase management
                  emphasis and oversight to ensure reporting requirements are adequately
                  communicated to all organizational levels responsible for providing
                  workload reporting data; (3) consider greater involvement of service audit
                  agencies and statistical methods, as appropriate, to verify workload
                  reporting data before the data is submitted to OSD; (4) ensure retention of
                  necessary documentation to verify workload allocations; and (5) provide
                  future years’ projections along with the prior-year data, or as otherwise
                  required by Congress.7

Agency Comments   DOD officials provided oral comments on a draft of this report. They
                  concurred with the first four recommendations and agreed to take actions
                  such as issuing additional guidance in areas of uncertainty, including
                  remanufacturing and consolidation of depot and nondepot work, and
                  increasing the use of service audit agencies to review reported depot
                  maintenance workload data. While concurring with the intent of our fifth
                  recommendation, the officials said it is not practicable to submit future

                   H.R. 1401, section 334.

                  Page 19                                    GAO/NSIAD-99-154 Depot Maintenance

years’ projections of depot workloads at the same time as prior-year data.
These officials said that if DOD is to submit out-year projections, the
budget update scheduled at the end of March would provide a better
baseline than out-year projections estimated using data developed in
September of the previous year. Thus, because of the timing of the update,
they said that May 1 is the earliest the future-year data can be submitted.
We agree that the later information should be more current. However,
using projections determined by the end of March or later as the basis for
developing a report to Congress may not accommodate congressional
review during the defense authorization process. Noting that Congress
isconsidering requiring that out-year data be provided based on a different
schedule than the prior data, we revised our recommendation to reflect

As discussed below, officials also commented on various findings related to
DOD’s reporting on depot workloads.

DOD officials agreed that the Department’s fiscal year 1998 depot workload
report had significant errors and inconsistencies, but they noted that none
were of sufficient magnitude to cast reasonable doubt that the military
departments and the defense agencies were in compliance with the
50-percent limitation. As our report points out, given the numbers and
types of errors and inconsistencies identified, we could not determine
whether the required reporting activities were or were not in compliance
for fiscal year 1998.

Army and Navy officials stated that the Army and the Navy were correct in
not reporting certain costs associated with remanufactucturing programs
because these costs involve production, not depot maintenance. We noted
that the Army did include the costs associated with disassembly and
preparation, which are a part of the remanufacturing process, while the
Navy did not. DOD officials agreed that reporting guidance relative to
remanufacturing and major upgrade programs should be clarified. The
statutory definition of depot maintenance includes certain aspects of
weapon system and component upgrade and rebuild. We acknowledge that
this is a difficult area to report on. However, we believe our
recommendation is still merited and additional guidance and attention is
warranted to ensure reporting is done consistently and in accordance with
congressional guidelines.

    H.R. 1401, section 334.

Page 20                                    GAO/NSIAD-99-154 Depot Maintenance

Navy officials disagreed with our statements that the Navy should have
reported funds associated with depot-like work performed at the Trident
Refit Facilities. They said that these facilities are not considered
depot-level facilities; no depot maintenance work is performed there; and
to accommodate the Trident’s unique operational schedule, depots are used
only for extended refit periods and extended refueling overhauls. These
facilities, however, were developed with extensive industrial capability,
generally not authorized at intermediate repair facilities, to accommodate
depot repair of the submarines’ critical components to support the
Trident’s operational schedule. Further, in accordance with congressional
and OSD guidelines, it is not the location of the work but the content that
should determine whether it is depot-level work. Also, as previously noted,
DOD guidance provides that depot maintenance includes overhaul,
upgrading, or rebuilding of parts regardless of the source of funds for the
work. We continue to believe it is not reasonable to conclude that these
extraordinary industrial facilities perform no depot maintenance work in
light of the capabilities of the industrial equipment located at the facilities
and the content, complexity, and cost of the repair work performed there.
Our 1998 report recommended that the secretaries of the military
departments develop methodologies for aggregating and reporting
depot-level work accomplished at nonworking capital funded repair sites—
including the Trident repair facilities. We continue to believe that
additional efforts in this area are needed to ensure that depot work is
reported, regardless of location or funding source.

While our report states the Air Force may have underreported maintenance
warranty costs, Air Force officials commented that all warranty costs
related to depot-level maintenance were included in the report to Congress.
However, Air Force Audit Agency officials initially raised the issue that
warranty costs appeared to be underreported and, in their report
comments, Air Force officials said that operating procedures would be
expanded for warranty costs. Our report did not state that amounts were
incorrectly reported but that a warranty is another reporting category that
could be clarified in future guidance. Consequently, we left this example in
the final report. Because warranties are widely employed and encouraged
by DOD reform initiatives, it will be more important for OSD and the
military departments to expand and clarify reporting guidance in this area.
Therefore we have revised our recommendation to specifically reflect this

Agency officials also provided technical comments which we incorporated
where appropriate.

Page 21                                      GAO/NSIAD-99-154 Depot Maintenance

Scope and     To validate DOD’s reported amounts and percentage allocations to the
              public and private sectors, we reviewed DOD’s fiscal year 1998 report and
Methodology   the supporting details (summary records, accounting reports, budget
              submissions, and contract documents) at the departmental headquarters,
              major commands, and selected maintenance activities. We discussed with
              officials the processes used to request, collect, aggregate, and report depot
              data and the management controls to oversee and validate results. We
              compared the processes against title 10 provisions on reporting
              requirements and definitions and the internal guidance used to guide this
              year’s report. We selected certain programs and maintenance activities for
              more detailed review based on several factors, including relative size,
              OSD’s areas of interest, and our past experience as to problem reporting
              areas. We evaluated procedures used and the results to ensure accurate
              and complete data and to identify errors, omissions, and inconsistencies in
              the reported area. We discussed audit findings and reconciliations made by
              the Air Force Audit Agency in its review of Air Force data and reviewed
              Army Audit Agency findings from last year.

              To compare this year’s report to prior years, we used information that we
              had developed in past years, supplemented by newer data, to compare and
              contrast total amounts reported, workload compositions by maintenance
              categories, and individual reporting organizations. We did this to identify
              major changes in the amounts and composition as well as commonalties
              between this and previous reporting periods. However, a complete
              comparison is not possible because of changes in reporting guidance. We
              developed trend data to show the annual percentage allocations between
              the public and private sectors for the military departments and for DOD as
              a whole, from 1994 to 1998.

              Based on the supporting details backing up each organization’s report,
              discussions with officials, and our analysis of selected programs, we
              identified specific examples where the reported information was not
              accurate, was incomplete, and/or was inconsistently reported within and
              between organizations. We used OSD and service supplemental guidance
              as criteria to evaluate and determine problem reporting areas and areas
              where there are differences in interpreting and applying the guidance. We
              obtained officials’ views to determine the rationale they used deciding
              whether and how much to report and their perspectives on subjective and
              challenging areas of reporting.

              Page 22                                     GAO/NSIAD-99-154 Depot Maintenance

Building on what we had learned about both the positive actions taken by
DOD this year, as well as continuing problem areas, we identified process
improvements that could lead to improved future years’ reports. We also
identified where DOD had already taken action to improve this year’s
guidance, data collection processes, and oversight. We received comments
and perspectives from officials at OSD, department headquarters, major
commands, and maintenance activities regarding lessons learned and
lingering areas of concern.

We interviewed officials and examined documents at OSD, Army, Navy, and
Air Force headquarters, the Defense Intelligence Agency, and TRICARE
Management Activity, all in Washington, D.C.; the U.S. Special Operations
Command at MacDill Air Force Base, Florida; Army Materiel Command in
Alexandria, Virginia; Air Force Materiel Command, Dayton, Ohio; Naval Sea
Systems Command, Arlington, Virginia; Naval Air Systems Command,
Patuxent River, Maryland; Air Force Audit Agency, Dayton, Ohio; Army
Tank Automotive Command and the Program Executive Office for Ground
Combat and Support Systems, Warren, Michigan; Army Aviation Missile
Command and the Program Executive Office for Aviation, Huntsville,
Alabama; Oklahoma City Air Logistics Center, Tinker Air Force Base,
Oklahoma; Warner Robins Air Logistics Center, Robins, Georgia; and
several field locations of the Eighth U.S. Army, Korea.

We conducted our review from February to May 1999 in accordance with
generally accepted government audit standards.

We are sending copies of this report to the Honorable William S. Cohen,
Secretary of Defense; the Honorable F.W. Peters, Acting Secretary of the Air
Force; the Honorable Louis Caldera, Secretary of the Army; the Honorable
Richard Danzig, Secretary of the Navy; the Honorable Jacob J. Lew,
Director, Office of Management and Budget; and interested congressional
committees and members. We will also make copies available to others
upon request.

Page 23                                    GAO/NSIAD-99-154 Depot Maintenance

Please contact me at (202) 512-8412 if you or your staff have any questions
concerning this report. Points of contact concerning this report and other
key contributors are listed in appendix III.

David R. Warren, Director
Defense Management Issue

Page 24                                    GAO/NSIAD-99-154 Depot Maintenance

Page 25    GAO/NSIAD-99-154 Depot Maintenance

Letter                                                                                          1

Appendix I                                                                                     28
GAO Reports
Concerning Public and
Private Sector
Workload Distribution

Appendix II                                                                                    30
Problems Found in
DOD’s Report on Fiscal
Year 1998 Depot

Appendix III                                                                                   41
GAO Contacts and

GAO Related Products                                                                           43

Tables                   Table 1: Reported Fiscal Year 1998 DOD Depot Maintenance
                           Workload Distributions                                               5

Figures                  Figure 1: Percentage of DOD Depot Maintenance Workloads
                           Performed by Contractors (by dollar value)                           6

                         Page 26                                GAO/NSIAD-99-154 Depot Maintenance


AFMC            Air Force Materiel Command
CLS             contractor logistics support
DCMC            Defense Contract Management Command
DOD             Department of Defense
ICS             interim contractor support
NAVAIR          Naval Air Systems Command
O&M             operations and maintenance
OSD             Office of the Secretary of Defense
USSOCOM         U.S. Special Operations Command

Page 27                          GAO/NSIAD-99-154 Depot Maintenance
Appendix I

GAO Reports Concerning Public and Private
Sector Workload Distribution Reporting                                                                      Appenx

              In May 1996, we reported1 that the Department of Defense’s (DOD) report
              of public and private sector depot maintenance workload allocations did
              not provide a complete, consistent, and accurate picture of depot
              maintenance workloads. DOD’s report did not include funding for interim
              contractor support (ICS), contractor logistics support (CLS), labor for
              installation of modification and upgrade kits and software maintenance. In
              that report, we suggested that Congress might wish to consider requiring
              that these workload categories be included in future workload reports,
              regardless of funding source.

              Similarly, in January 1998, we reported2 that DOD's approach for collecting
              information on public and private sector depot maintenance workload
              allocations did not provide complete and consistent reporting for the same
              workload categories. We noted that DOD's guidance to the military
              departments was imprecise, leaving room for varying interpretations on
              data to be reported. To improve upon the accuracy of future workload
              distribution reports, we recommended that DOD develop a standardized
              methodology for annually collecting depot maintenance funding data for
              the public and private sectors, including specific definitions of the types of
              workloads and defense activities that should be reported. Responding to
              an earlier draft of our January 1998 report, Office of the Secretary of
              Defense (OSD) issued guidance in December 1997 that addressed many of
              our concerns regarding how the workload distribution data should be
              collected and aggregated to provide more complete and consistent

              In July 1998, we reported 3 that the military departments had not
              developed complete and consistent workload distribution information in
              their February 1998 reports on the fiscal year 1997 workload. This resulted
              in underreporting about $300 million for public sector workloads and
              $1.6 billion for private sector workloads. We identified several reasons for
              this underreporting. First, OSD guidance continued to leave room for
              varying interpretation of reporting requirements. Second, the military

              Defense Depot Maintenance: More Comprehensive and Consistent Workload Data Needed for
              Decisionmakers (GAO/NSIAD 96-166, May 21, 1996).
               Defense Depot Maintenance: Information on Public and Private Sector Workload Allocations
              (GAO/NSIAD-98-41, Jan. 20, 1998).
              Defense Depot Maintenance: Public and Private Sector Workload Distribution Reporting Can Be
              Further Improved (GAO/NSIAD-98-175, July 23, 1998).

              Page 28                                                 GAO/NSIAD-99-154 Depot Maintenance
Appendix I
GAO Reports Concerning Public and Private
Sector Workload Distribution Reporting

departments had not developed internal procedures and systems for
accurate and timely reporting. Third, the military departments had not
resolved questions on the inclusion of some depot-level workloads. We
recommended that the Secretary of Defense direct that the secretaries of
the military departments (1) establish and document internal operating
procedures for collecting data and reporting public and private sector
depot-level workload distribution and (2) develop methodologies for
aggregating and reporting the amount of funding for depot-level work at
nonworking capital funded repair sites. We also recommended that the
Secretary establish milestones for issuing clarifying instructions and for
resolving questions on responsibilities for reporting depot-level
maintenance for selected maintenance.

Page 29                                     GAO/NSIAD-99-154 Depot Maintenance
Appendix II

Problems Found in DOD’s Report on Fiscal
Year 1998 Depot Workloads                                                                           AppenIx

                     As in prior years, our review of selected data continued to find inaccurate
                     and inconsistent reporting. Some errors are attributable to simple
                     transcription and clerical mistakes, but many result from failure to follow
                     guidance, unclear instructions, inadequate management oversight, lack of
                     visibility of the data, and use of prospective and budgetary data rather than
                     actual recorded obligations. Major upgrades, installation of modifications,
                     interservice work (work performed by one service but funded by another),
                     CLS, and maintenance performed at nondepot locations are more likely
                     than others to experience reporting problems. There are also questions
                     and uncertainties about reporting certain workloads and other areas that
                     require judgment. In addition, the line separating depot-level maintenance
                     from lower levels of maintenance is becoming increasingly blurred as the
                     services move depot and depot-type workloads to operating locations,
                     redefine required levels of maintenance, and consolidate maintenance

Major Upgrades and   We determined that the Army and the Navy did not consistently report
                     workload data in the 2466 report and may have underreported the use of
Remanufactured       funds for installation and related workloads on several major upgrade and
Systems              remanufacture programs. Service officials said these programs were to
                     improve performance and were production in nature and not reportable as
                     depot maintenance. OSD guidance, however, includes overhaul, upgrading,
                     and rebuilding in its definition of depot maintenance and specifically
                     directs that the installation of performance upgrades and other
                     modifications be reported, regardless of the source of funds and location of
                     the work. The Army’s supplementary instructions also state that the
                     installation of major modifications or upgrades of weapon systems that are
                     designed to improve performance are reportable and that, if rebuild or
                     overhaul is performed in conjunction with the modification, the full cost of
                     the rebuild or overhaul is reportable as well as the cost to install the
                     modification kit. The Army instructions cite one upgrade program in
                     question as an example of reportable costs. Because of the differences in
                     opinion and inconsistent application of guidance, this area is one where
                     DOD needs to clarify reporting requirements.

                     The Army did not report obligations for depot-level installation workloads
                     for the Abrams Tank, the Bradley Infantry Fighting Vehicle, and the
                     Longbow Apache Helicopter upgrade programs funded by the procurement
                     appropriation. More than $1.3 billion in procurement funds were available
                     to these programs during fiscal year 1998. A DOD official estimated that
                     about 10 percent, or $130 million, was for installation. Army officials

                     Page 30                                     GAO/NSIAD-99-154 Depot Maintenance
                     Appendix II
                     Problems Found in DOD’s Report on Fiscal
                     Year 1998 Depot Workloads

                     believed that these kinds of performance upgrades and remanufacturing
                     actions were not reportable as depot maintenance. They consider these
                     actions more like new production because the upgraded systems receive
                     new model numbers and serial numbers. However, the Army did report the
                     depot-level obligations for the disassembly of components and
                     premodification work performed at Army depots and contractor facilities
                     on these weapon systems. For example, the Army reported obligations
                     totaling $38.5 million for the operations and maintenance (O&M) funded
                     disassembly of the Longbow Apache. Of this total, $30.2 million was for
                     contract obligations and $8.3 million was for work performed at an Army
                     depot. For the Abrams and Bradley disassembly and premodification
                     work, the Army reported procurement funded obligations totaling
                     $32.2 million ($24.5 million for workload at Army depots and $7.7 million
                     for contractor workloads).

                     The Navy’s AV-8B (Harrier) remanufacture program modifies selected day
                     attack Harriers to a radar/night attack capability. Aircraft are disassembled
                     at the Cherry Point Naval Aviation Depot in North Carolina, with specific
                     parts being shipped to the contractor facility to be used in the new
                     configuration. Navy officials did not report any funds for installing the new
                     configured parts at the contractor facility, nor did they report $10.4 million
                     in obligations for disassembly work at Cherry Point. The total program cost
                     in fiscal year 1998 was $327 million; using the estimate that installation
                     costs account for about 10 percent of program costs would indicate that
                     about $32.7 million was not reported. Program officials said that they did
                     not believe these kinds of costs were reportable under the depot
                     maintenance workload requirement because the remanufactured aircraft
                     will be a totally new system and that the Navy lacks the capability to do the
                     remanufacture. Program officials had not received OSD’s reporting
                     guidance this year and had not been tasked to report by Navy headquarters.
                     The OSD guidance specifies that all work performed at a DOD depot should
                     be reported.

Other Modification   On other modification work, two naval commands did not report
                     installations consistently and one underreported its work. The Naval Air
Work                 Systems Command (NAVAIR) reported $217.4 million for aircraft
                     modification installations, but the Naval Sea Systems Command did not
                     report about $176 million for installations. The Sea Systems official
                     responsible for data collection decided that installation of modifications
                     should not be reported because it was not “maintenance” and verbally
                     instructed her staff accordingly. However, that instruction apparently was

                     Page 31                                      GAO/NSIAD-99-154 Depot Maintenance
                         Appendix II
                         Problems Found in DOD’s Report on Fiscal
                         Year 1998 Depot Workloads

                         not passed to program officials in the nuclear area because they reported
                         $62 million for installation of nuclear equipment modifications. As
                         discussed previously, the OSD guidance states that installations on both
                         performance upgrades and other modifications should be reported as
                         depot maintenance.

Interservice Workloads   The Army and NAVAIR reported fiscal year 1998 interservice depot
                         workloads of $11 million and $116.4 million, respectively.1 Both assumed
                         that DOD employees would accomplish all this work, and they did not
                         attempt to determine whether the work was actually accomplished by a
                         contractor. Available data indicate that some of this interservice work was
                         performed in-house and some was contracted out. DOD reported that, in
                         fiscal year 1997, 21 percent of interservice workloads were accomplished
                         by contractors.

                         The Air Force, in contrast to the other services, queried its program
                         managers and officials responsible for managing interservice workloads to
                         determine the ultimate source of repair for the workloads it interservices to
                         the Army and the Navy. Its report to Congress included $170.7 million in
                         workload accomplished at Army and Navy depots by government
                         employees and $14 million accomplished by contractors (7.6 percent of the
                         total interservice). There are, however, conflicting data on the interservice
                         workload. The above amounts included a total of $174.9 million that was
                         financed through the revolving depot fund; the remaining amounts were
                         directly funded. The 1998 annual financial statement of the Air Force
                         revolving fund reported only $121.5 million for interservice workloads. Air
                         Force Materiel Command financial and depot maintenance staff could not
                         reconcile the two numbers. In commenting on a draft of this report, Air
                         Force officials said financial records do not provide sufficient detail to
                         report the ultimate source of repair for all interserviced workloads. Thus,
                         Air Force officials said they obtained source-of-repair data for
                         interserviced workloads from the individual centers. However, they
                         provided no data to reconcile the two data sources.

                          Depot workloads funded by one service but performed either at another service’s depot or by the other
                         service’s contractor are called interservice workloads. OSD guidance requires that themilitary
                         department or defense agency that manages the funding, or which owns the equipment being repaired,
                         should report the workload for the purposes of this report. OSD guidance also requires that depot work
                         will be reported according to who does the actual work, regardless of the location of the work. Air
                         Force supplemental guidance elaborates that the program manager or production specialist responsible
                         for the interservice workload will report whether the other service is repairing the asset organically or
                         by contract.

                         Page 32                                                     GAO/NSIAD-99-154 Depot Maintenance
              Appendix II
              Problems Found in DOD’s Report on Fiscal
              Year 1998 Depot Workloads

              U.S. Special Operations Command (USSOCOM) is not required to report
              under 10 U.S.C. 2466. It does not have its own depots and, similar to
              interservice arrangements, obtains depot maintenance from the services on
              a reimbursable basis. For the fiscal year 1998 report, USSOCOM officials
              allocated depot-level workloads on reparable parts to the public and
              private sources for work sent to the Army and the Navy but were not able
              to do so for the Air Force. An official said that he lacked visibility into the
              Air Force’s stock fund to determine who performed the work.
              Consequently, USSOCOM reported all $97 million in its Air Force reparable
              workload as public sector workload. USSOCOM and Air Force officials
              could not determine for us the ultimate sources of repair for this diverse
              workload, but it appears that this assumption may have significantly
              understated the private sector workload and overstated the public work by
              the same amount. The Air Force’s fiscal year 1998 financial statement
              shows that about 35 percent of depot-level reparable funds in total went to
              private contractors. For another point of comparison, we obtained data
              from the Warner Robins Air Logistics Center directorate that manages
              special operating force programs. This data suggest an even more
              pronounced private sector involvement. The center directorate
              determined that $24.4 million of its fiscal year 1998 reparable workload was
              accomplished by contractors and only $2 million by the government. This
              workload consisted of maintenance on both USSOCOM and Air Force
              owned equipment.

CLS and ICS   In reviewing contract and financial records and through discussions with
              officials, we identified several instances where program officials
              overstated contract obligations because they did not separate depot-related
              costs from the costs of other nondepot services provided by contractors.
              We also identified a few programs that incorrectly reported obligations
              through misinterpreting guidance or reporting outdated data.

              Although DOD had collected information on CLS and ICS 2 for weapon
              systems in prior years, its report on fiscal year 1998 depot maintenance was
              the first year it had reported to Congress in the current format. Efforts to

               CLS is designed to be a lifetime support concept in which the contractor may provide some or all
              logistics support for an operational weapon system or major component. In addition to depot
              maintenance, support may include intermediate and base level maintenance, supply operations,
              engineering services, and program management. ICS is an interim arrangement, part of the acquisition
              strategy for new systems and subsystems, in which a contractor provides depot maintenance and,
              sometimes, other support services.

              Page 33                                                   GAO/NSIAD-99-154 Depot Maintenance
Appendix II
Problems Found in DOD’s Report on Fiscal
Year 1998 Depot Workloads

obtain and report data on CLS and ICS depot workloads can be somewhat
more difficult than for other types of maintenance because these often
require subjective judgments on the part of reporting officials to isolate
depot-related cost items from nondepot-related items. For ICS programs,
OSD guidance requires the services only to report depot maintenance on
weapon systems that have passed their initial operating capability dates.3
The ease and exactness in isolating appropriate depot costs partly depend
upon how a contract is structured and how easy it is to clearly identify
depot tasks within the contract line items. If it is not practical to determine
the amount to be reported based on specific contract line items or other
direct means, the guidance permits the use of algorithms or estimation
formulas to determine the portion to be reported. When other than actual
obligations are reported, the military department or defense agency is
required to maintain records on the amount of CLS and ICS reported and to
describe and explain any algorithm or estimation formula used in making
the projections.

Although DOD does not consider TRICARE to be a defense agency subject
to the 50-50 limitation, DOD wanted to include this activity’s depot
maintenance data in the 2466 data call for completeness. The TRICARE
Management Activity overreported CLS depot maintenance work by about
$7 million by including some tasks that are not considered to be depot
maintenance. OSD guidance tasked the TRICARE Management Activity to
report depot maintenance and repair for the C-9A medical evacuation
aircraft funded by the Defense Health Program. The TRICARE reporting
official used records available to him and reported $30.7 million in depot
maintenance obligations for fiscal year 1998. This amount represented the
total annual program obligations for CLS contracts. We reviewed contract
records and budgetary data and determined that $23.7 million should have
been reported for depot maintenance during fiscal year 1998. In addition to
valid depot workload for programmed depot maintenance, engine
overhauls, and other depot-level tasks, the total amount included base
supply activities, engineering support, contractor management costs, and
other nondepot-related items. The Air Force flies and maintains the
C-9 fleet for the Defense Health Program. We understand that DOD plans
to transfer reporting responsibility to the Air Force starting with the fiscal
year 2001 workload.

 Initial operating capability refers to the date when the service determines that a new system has been
fielded in sufficient numbers at its first operating base.

Page 34                                                    GAO/NSIAD-99-154 Depot Maintenance
        Appendix II
        Problems Found in DOD’s Report on Fiscal
        Year 1998 Depot Workloads

        USSOCOM reported the entire amount—$106.8 million—obligated on its
        numerous CLS and ICS contracts. It did not identify only the depot
        maintenance portions. Reporting officials did not readily have information
        to identify the reportable depot portions but, to the extent those contracts
        also funded nondepot tasks, depot maintenance obligations would be

        The Army National Guard overreported depot-level maintenance
        obligations on CLS contracts for fixed winged aircraft by about
        $40.3 million. An official reported total obligations on contracts for fiscal
        year 1998 rather than only the depot-related obligations because he had not
        received the Army’s 1998 instructions and reported total obligations as was
        done for the 1997 report. We determined that the total obligations reported
        included $40.3 million for base operations, flying hours, and other
        nondepot related costs. By excluding those items, we identified the
        $40.3 million overreporting. An Army program official said that it is
        difficult to distinguish between depot-level and nondepot activities for
        these fixed winged aircraft. The contracts for logistics support did not
        separately identify the depot maintenance portion of the workload. The
        program office had received training and guidance on making these
        judgments, but the Guard had not received the guidance nor the training.

        We found several instances of misreported and questionable amounts in the
        Air Force data. For example, two programs had reported outdated
        budgetary estimates rather than actual obligations, which were higher by
        about $5 million in total. Officials in one of those programs also
        misinterpreted the instructions for reporting software maintenance, which
        resulted in further underreporting CLS obligations by $500,000. A third
        program overstated obligations by $1 million by including some nondepot
        maintenance items. A fourth CLS program, which serves many DOD
        customers at hundreds of worldwide sites, primarily relied on the
        contractor’s estimate of depot costs. This program reported only 5 percent
        of its total program as depot related, which was very low compared to
        other CLS programs.

Ltert   Page 35                                     GAO/NSIAD-99-154 Depot Maintenance
                       Appendix II
                       Problems Found in DOD’s Report on Fiscal
                       Year 1998 Depot Workloads

Difficulties in        The distinction between depot-level maintenance and other categories of
                       maintenance is becoming increasingly blurred as the services move depot
Distinguishing Depot   workloads to operating locations, redefine required levels of maintenance,
Work From Other        and consolidate maintenance organizations. Traditionally, DOD has not
                       considered these field activities and activities funded by direct
Maintenance            appropriation, rather than through the working capital fund, as depot
Performed at           maintenance providers. OSD guidance now requires the services to report
Nondepot Locations     maintenance work funded by all funding sources, regardless of the location
                       where work is performed. Based on problems we identified at the limited
                       locations contacted, we believe that the services may have underreported
                       significant amounts of work at facilities that do both depot level and other
                       levels of maintenance work.

Army                   For the fiscal year 1998 workload report, the Army reported $112 million in
                       depot-level work completed by local repair and maintenance organizations
                       operating at various field locations. However, the approach and
                       methodology that the field activities used for collecting and accumulating
                       workload data were inconsistent. Officials at some field-level maintenance
                       and repair activities owned, managed, and funded by the Army’s major
                       operational commands, said they did not know that they had to report
                       maintenance activities as depot maintenance since they were not
                       performed at a depot. Although the Army’s reporting guidelines follow the
                       definitions in 10 U.S.C. 2460 and OSD guidance for identifying depot
                       maintenance workloads, personnel who were assigned to the operating
                       commands and who were responsible for accumulating data for inclusion
                       in the report did not fully understand the requirements. Consequently,
                       several major operating commands applied different data collection
                       methodologies that led to inaccurate and inconsistent reporting. For
                       example, the Training and Doctrine Command reported labor and materials
                       obligations for only the depot-level tasks associated with items for which
                       the command had obtained a special repair authority4 from Army
                       headquarters, while the European Command reported all depot level and
                       general support tasks. Reporting officials at the Eighth Army in Korea
                       were new to the reporting requirements and had some difficulties
                       interpreting and applying the guidance.

                        A special repair authority is a one-time or continued authority granted by Army headquarters that
                       allows a field location to perform specified depot-level maintenance.

                       Page 36                                                    GAO/NSIAD-99-154 Depot Maintenance
                           Appendix II
                           Problems Found in DOD’s Report on Fiscal
                           Year 1998 Depot Workloads

Total Amount of Depot      As directed by the House Committee on National Security, the Army
Maintenance Conducted at   recently completed a study of the proliferation of depot-maintenance type
                           activities.5 The Army’s April 1999 report concluded that it currently lacks
Army Field Locations       information to accurately determine the total amount of depot
Cannot Be Determined       maintenance and similar work being conducted at field activities. The
                           Army’s maintenance manuals and policy statements have not been updated
                           to reflect the depot maintenance definitions enacted by Congress and
                           codified under 10 U.S.C. 2460. Maintenance manuals and policy statements
                           currently reflect a four-level system consisting of unit level, direct support,
                           general support, and depot level.6 In discussing the Army’s study, Army
                           headquarters officials told us they plan to revise their maintenance
                           manuals and policy statements to redefine levels of maintenance. The
                           current depot and general support levels will be combined and relabeled as
                           sustainment maintenance workload--–tasks that involve overhauling and
                           rebuilding items—and should be reported as depot level in future workload
                           reports. Army officials believe these changes will enable commands to
                           develop more complete and consistent workload data for future reporting

                           The Army’s depot proliferation report states that the total amount of
                           depot-level maintenance work conducted at field locations is unknown. It
                           stated that field level activities completed 40 staff years of depot-level work
                           at a reported cost of $17.6 million under special repair authorities granted
                           by Army command headquarters. The report also provided information
                           indicating that unknown resources were expended overhauling and
                           rebuilding various Army equipment—work that the Army’s maintenance
                           classification and reporting procedures did not recognize and categorize as
                           depot-level workload, but which could be considered as depot
                           maintenance under the 10 U.S.C. 2460 definition. The report also stated
                           that the workload allocation reporting process did not accurately reflect
                           the total dollar value of the depot workload performed in field locations.
                           The workload was overreported in some cases and underreported in
                           others. The report concluded that reporting problems were largely
                           attributed to (1) differing interpretations of the OSD guidance and 10 U.S.C.
                           2460 and OSD definitions of depot-level maintenance, especially with

                             Directed by H.R. 105-532 on the Defense Authorization Act for Fiscal Year 1999, the completed “Study
                           of the Proliferation of Depot Maintenance-Type Activities” was submitted to Congress on April 14, 1999.
                            Unit and direct support maintenance is generally conducted by deployable military units. General
                           support and depot maintenance generally is conducted by personnel working in fixed industrial-like

                           Page 37                                                   GAO/NSIAD-99-154 Depot Maintenance
                       Appendix II
                       Problems Found in DOD’s Report on Fiscal
                       Year 1998 Depot Workloads

                       respect to rebuilding, remanufacturing, and specialized repair type work,
                       and (2) reporting officials lacking effective systems to facilitate timely and
                       accurate reporting. We are currently completing a separate review on this

Navy                   The Navy did not report any of the $158 million it expended on
                       maintenance support at the Trident Refit Facilities in Bangor, Washington,
                       and Kings Bay, Georgia. While some officials labeled them as
                       intermediate-level maintenance and repair facilities, the activities were
                       specifically designed to provide incremental depot overhaul and repair of
                       the Trident submarine fleet and depot-level repair of Trident equipment.
                       The facilities also provide routine services and perform emergency and
                       emergent voyage repairs to other submarine units. Navy documents cite
                       extensive facility capabilities, dry-dock, and equipment that indicate a
                       depot capability. The refit facilities performed depot overhauls on some
                       smaller surface vessels to better utilize their facilities. However, in their
                       official comments to our July 1998 report, the Navy stated that no
                       depot-level maintenance is performed at the refit facilities. Other Navy
                       officials told us that the refit facilities are the only locations where any
                       Trident maintenance is done. This raises a question how submarines that
                       have been in service for at least 15 years can have no depot maintenance
                       performed on them.

Additional             Our review of financial records, summary spreadsheets, and other
                       materials supporting DOD’s workload report, and discussions with officials
Miscellaneous Errors   identified a wide variety of other errors and reporting uncertainties.
and Omissions

Navy                   In the workload numbers reported to Congress (table 1), the Navy reversed
                       its public-private workload figures for the Atlantic and Pacific fleets and
                       misreported $267,000 as $267 million. The net effect of these two errors
                       decreased the Navy’s total workload and its private sector workload,
                       increased the public sector workload, and changed the public-private
                       sector allocation percentages from the reported 58/42 to 65/35.

                       Page 38                                      GAO/NSIAD-99-154 Depot Maintenance
            Appendix II
            Problems Found in DOD’s Report on Fiscal
            Year 1998 Depot Workloads

            Based on work we reported7 in February 1999, we believe that the public
            workload numbers reported by the Atlantic Fleet included some amount
            that was contracted to the private sector. In general, for the workload that
            is sent to the public shipyards, government employees do most of the major
            overhaul work while the ship is in drydock. Private sector employees,
            either on the shipyard or at private facilities, however, accomplish some
            work. Fleet officials reported the entire workload as accomplished in the
            public sector. We reported that about $30 million of the $538 million of
            work sent to the Norfolk Naval Shipyard in fiscal year 1998 was contracted
            to private firms. It is likely that some funds also flow through the other
            public shipyards to contractors but we did not make an effort to identify
            comparable situations.

            The Navy made two additional errors that resulted in overstating contract
            obligations by $41.5 million. Obligations for nonequipment ship alterations
            were double-counted, and estimated costs for installations had been
            reported based on a budget figure, which turned out to be greater than
            actual obligations for the year.

Air Force   The Air Force adjusted its workload figures to transfer $24 million from
            private sector obligations to the public sector. Officials subtracted
            1.5 percent of its total contracted workload that is funded through the
            depot maintenance revolving fund and added that amount to the public
            sector amount. The 1.5-percent figure is based on an element in the pricing
            structure for contracted items that estimate the salaries for government
            personnel charged with contract management. The Air Force maintains
            that this should be reported as a public sector government workload to be
            consistent with 10 U.S.C. 2466 that specifies the reporting of government
            employee costs as public sector obligations. This area is not clearly dealt
            with in existing guidance.

            The Air Force may have underreported maintenance warranty costs by an
            undetermined amount. Officials did report warranty costs of $3.4 million
            for four programs, but Materiel Command officials and the auditors believe
            that more programs could have reportable warranty costs. For example,
            one product center reported $1.2 million, the fiscal year 1998 portion of a
            10-year extended warranty for the AGM-130. Other programs at the

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

            Page 39                                                   GAO/NSIAD-99-154 Depot Maintenance
                          Appendix II
                          Problems Found in DOD’s Report on Fiscal
                          Year 1998 Depot Workloads

                          product center, including Joint Direct Attack Munitions, Advanced Medium
                          Range Air to Air Missile, and sensor fused weapon, have similar warranties
                          but no depot costs were reported for these programs. Warranties may be
                          another reporting category that could be clarified in future guidance. In
                          commenting on a draft of this report, Air Force officials said that costs
                          occurring prior to initial operating capability would not meet the 10 U.S.C.
                          2460 definition of depot-level maintenance and would not be included in
                          the Air Force submission. However, both they and other officials agreed
                          that additional guidance will be provided in the future regarding the
                          applicability of warranty costs to 2466 reporting.

Army                      At the Army’s Aviation and Missile Command, program officials did not
                          coordinate data collection actions with officials at the integrated
                          maintenance center. This resulted in double counting some items, which
                          overstated obligations by $1.8 million. Also, two program offices reported
                          their budgeted programs rather than actual obligations, overstating
                          reported workload by $600,000.

U.S. Special Operations   An error in the computation formula used by the Special Operations
Command                   Command to report its depot workload resulted in a $69-million
                          understatement in both the total amount and the private sector amount.
                          Correcting this changes the public-private sector percentages from the
                          reported 70/30 to 58/42.

                          Page 40                                    GAO/NSIAD-99-154 Depot Maintenance
Appendix III

GAO Contacts and Staff Acknowledgments                                                       AppeInx

GAO Contacts       Barry Holman (202) 512-5581
                   Julia Denman (202) 512-4290

Acknowledgements   In addition to those named above, Bruce Fairbairn, Raymond Cooksey,
                   Andrew Marek, Glenn Knoepfle, Frederick Naas, Terry Wyatt, Jean Orland,
                   and Kate Monahan made key contributions to this report.

                   Page 41                                  GAO/NSIAD-99-154 Depot Maintenance
Page 42   GAO/NSIAD-99-154 Depot Maintenance
GAO Related Products

               Army Logistics: Uncertainties Surrounding Proposed Support Plan for
               Apache Helicopter (GAO/NSIAD-99-140, May 25, 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, 1999).

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

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

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

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

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

               Depot Maintenance: Uncertainties and Challenges DOD Faces in
               Restructuring Its Depot Maintenance Program (GAO/T-NSIAD-97-111,
               Mar. 18, 1997, and GAO/T-NSIAD-112, Apr. 10, 1997).

               Navy Ordnance: Analysis of Business Area Price Increases and Financial
               Losses (GAO/AIMD/NSIAD-97-74, Mar. 14, 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).

               Defense Depot Maintenance: DOD's Policy Report Leaves Future Role of
               Depot System Uncertain (GAO/NSIAD-96-165, May 21, 1996).

       Leter   Page 43                                    GAO/NSIAD-99-154 Depot Maintenance
                   GAO Related Products

                   Defense Depot Maintenance: More Comprehensive and Consistent
                   Workload Data Needed for Decisionmakers (GAO/NSIAD-96-166, May 21,

                   Defense Depot Maintenance: Privatization and the Debate Over the
                   Public-Private Mix (GAO/T-NSIAD-96-146, Apr. 16, 1996, and
                   GAO/T-NSIAD-96-148, Apr. 17, 1996).

                   Closing Maintenance Depots: Savings, Personnel, and Workload
                   Redistribution Issues (GAO/NSIAD-96-29, Mar. 4, 1996).

                   Depot Maintenance: Issues in Allocating Workload Between the Public
                   and Private Sectors (GAO/T-NSIAD-94-161, Apr. 12, 1994).

                   Depot Maintenance (GAO/NSIAD-93-292R, Sept. 30, 1993).

                   Depot Maintenance: Issues in Management and Restructuring to Support
                   a Downsized Military (GAO/T-NSIAD-93-13, May 6, 1993).

                   Air Logistics Center Indicators (GAO/NSIAD-93-146R, Feb. 25, 1993).

(709392)   Leter   Page 44                                   GAO/NSIAD-99-154 Depot Maintenance
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