United States General Accounting Office

GAO Report to Congressional Requesters

April 1998 PUBLIC-PRIVATE

COMPETITIONS

DOD’s Additional

Support for Combining

Depot Workloads

Contains Weaknesses

GAO/NSIAD-98-143

GAO United States

General Accounting Office

Washington, D.C. 20548

National Security and

International Affairs Division

B-279625 

April 17, 1998

The Honorable James M. Inhofe

Chairman, Subcommittee on Readiness

Committee on Armed Services

United States Senate

The Honorable Herbert H. Bateman

Chairman, Subcommittee on Military Readiness

Committee on National Security

House of Representatives

The National Defense Authorization Act for Fiscal Year 1998 requires that

we review the Department of Defense’s (DOD) December 19, 1997,

determinations and supporting rationale for combining certain depot-level

maintenance and repair workloads. DOD determined that workloads now

being performed at the closing San Antonio, Texas, and Sacramento,

California, Air Force maintenance depots cannot be performed as logically

and economically without combination. Our required report, issued on

January 20, 1998, concluded that DOD’s determinations to combine

workloads were not adequately supported.1

 On February 24, 1998, DOD

provided additional support for the earlier determination to Congress and

us.2

 As you requested, we reviewed that additional material. This report

addresses the reasons the Air Force believes it is more logical and

economical to combine the workloads and our overall views on the

rationale for DOD’s determinations and the information provided on

February 24, 1998, to support this rationale.

Background As a result of a 1995 Base Closure and Realignment (BRAC) Commission

decision, Kelly Air Force Base, Texas, is to be realigned, and the San

Antonio Air Logistics Center, including its Air Force maintenance depot, is

to be closed by July 2001. Similarly, McClellan Air Force Base, California,

and the Sacramento Air Logistics Center, including its Air Force

maintenance depot, is to be closed by July 2001. To mitigate the impact of

the closures on the local communities and center employees, the

administration announced its decision to maintain certain employment

1

Public-Private Competitions: DOD’s Determination to Combine Depot Workloads Is Not Adequately

Supported (GAO/NSIAD-98-76, Jan. 20, 1998).

2

The Air Force developed the White Paper on Single vs. Multiple Workload Competitions (Sacramento)

and the Rationale for Combining Multiple Depot-Level Maintenance and Repair Workloads (San

Antonio) to provide additional support for the Department’s determinations to combine multiple

workloads into a single solicitation at each location.

Page 1 GAO/NSIAD-98-143 Public-Private Competitions
B-279625 

levels at these locations. Privatization-in-place3 was one initiative for

achieving these employment goals.

Since that time, Congress and the administration have debated the process

and procedures for deciding where and by whom the depot maintenance

workloads at the closing depots should be performed.4

 Central to this

debate are concerns about the excess facility capacity at the Air Force’s

three remaining maintenance depots and the legislative requirement in 

10 U.S.C. 2469 that, for workloads exceeding $3 million in value, a

public-private competition must be held before the workloads can be

moved from a public depot to a private sector company.5

 Because of

congressional concerns raised in 1996, the Air Force revised its

privatization-in-place plans to provide for competitions between the public

and private sectors as a means to decide where the depot maintenance

workloads would be performed. The first competition was for the C-5

aircraft depot maintenance workload, which had been performed at the

San Antonio depot. The Air Force awarded the workload to the Warner

Robins depot in Georgia on September 4, 1997. During 1997, Congress

continued to oversee DOD’s strategy for allocating workloads currently

performed at the closing depots.

The 1998 Defense Authorization Act required that we and DOD analyze

various issues related to the competitions at the closing depots and report

to Congress regarding several areas, which are discussed in appendix I.

One of these areas involves the combination into single solicitations of

aircraft and multi-commodity workloads at the Sacramento depot and

multiengine workloads at the San Antonio depot. Appendix II provides

additional information about the maintenance workloads currently

performed at these facilities. As required by the act, a solicitation may be

issued for a single contract for the performance of multiple depot-level

maintenance or repair workloads. However, the Secretary of Defense must

first (1) determine in writing that the individual workloads cannot be

performed as logically and economically without combination by sources

3

Privatization-in-place is a term used to describe contracting with the private sector for the

performance of activities previously accomplished by government employees at a government facility.

The contractor would use the former government facility to perform the work. Privatization-in-place

may involve transferring ownership of government assets, such as facilities and equipment, to the

private sector.

4

The workloads at the Sacramento depot include KC-135, A-10, and F-15 aircraft; ground

communications and electronics equipment and hydraulics; avionics and instruments; and electrical

accessories. The workloads at the San Antonio depot include the F100, TF39, and T56 engines; gas

turbine engines; and fuel accessories.

5

We have issued several reports addressing these issues. For more details, see Related GAO Products

at the end of this report.

Page 2 GAO/NSIAD-98-143 Public-Private Competitions
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that are potentially qualified to submit an offer and be awarded a contract

to perform those individual workloads and (2) submit a report to Congress

setting forth the reasons for the determination. Further, the Air Force

cannot issue a solicitation for combined workloads until at least 60 days

after the Secretary submits the required report.

Our January 20, 1998, report made two key points about DOD’s

determinations. First, we stated that there was no analysis of the logic and

economies associated with having the workload performed individually by

potentially qualified offerors. Consequently, there was no support for

determining that the individual workloads cannot as logically and

economically be performed without combination. Second, we noted that

the reports and available supporting data did not adequately support DOD’s

determinations. Appendix III contains a summary of this report.

We discussed our findings in a February 24, 1998, hearing conducted by

the Subcommittee on Military Readiness, House National Security

Committee, and a March 4, 1998, hearing conducted by the Subcommittee

on Readiness, Senate Armed Services Committee.6

 At those hearings,

Office of Secretary of Defense and Air Force officials provided additional

rationale supporting DOD’s determinations to combine the workloads.

Subcommittee members expressed their concerns regarding whether the

new data provided adequate support for the determinations. Both

subcommittees requested that we analyze the additional data and report to

them on our findings.7

Results in Brief The Air Force’s support for DOD’s determinations that it is more logical and

economical to combine the workloads being competed at the closing

depots is based on a wide variety of information accumulated during the

acquisition strategy development process started in September 1995. While

we recognize that the determinations ultimately represent a management

judgment based on various qualitative and quantitative factors and that

DOD’s determinations may well be appropriate, the rationale presented in

the February 24, 1998, Sacramento white paper and San Antonio report for

combining the workloads in single solicitations at each location is not well

supported.

6

Public-Private Competitions: Access to Records Is Inhibiting Work on Congressional Mandates

(GAO/T-NSIAD-98-101, Feb. 24, 1998, and GAO/T-NSIAD-98-111, Mar. 4, 1998).

7

The rationale and support we assessed included the December 19, 1997, determinations and reports;

the February 24, 1998, Sacramento white paper and San Antonio report; and the supporting

documentation provided by the Air Force.

Page 3 GAO/NSIAD-98-143 Public-Private Competitions
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Our assessment indicates that there are significant weaknesses in logic,

assumptions, and data. DOD did not consider other alternatives that appear

to be logical and potentially cost-effective, and its assumption that

efficiencies from shared personnel and facilities are best achieved with a

single solicitation for combined workloads at each location is

questionable. Also, the Air Force’s claim that the effects of sequential

personnel reductions and transition delays can be problematic is

questionable in view of DOD’s demonstrated success in the past handling

multiple transitions and sequential reductions. In addition, the workload

stability rationale for Sacramento is questionable because the inherent

inefficiencies of the commodity workload are not likely to be improved by

combination with the more predictable and consistent aircraft workload.

Finally, the Air Force’s cost analysis, which concluded that workload

combination would save $22 million to $130 million at Sacramento and

$92 million to $259 million at San Antonio, is questionable because it did

not consider all cost factors, such as the cost benefits of increased

competition resulting from solicitations for individual workloads.

Air Force Rationale

for Workload

Combination

Determinations

On February 24, 1998, the Air Force provided additional information in

support of DOD’s December 19, 1997, determinations. This information

included two documents: a white paper containing the rationale for

combining the Sacramento depot’s aircraft and commodity workloads into

a single solicitation and a report containing the rationale for combining the

San Antonio depot’s engine workloads into a single solicitation.

Air Force officials stated that the decision to combine most of the aircraft

and commodity workloads at the Sacramento depot and the engine

workloads at the San Antonio depot was made before the mandate in the

1998 National Defense Authorization Act. The officials also said that the

process used to make the decision was valid and that a reassessment of

alternative acquisition strategies was not required in response to the act.

The Sacramento white paper described the rationale supporting the

workload combination determination as an iterative process that evolved

over a 2-1/2-year period beginning in September 1995. This process

included conferences and discussions with potential offerors, strategy

panels with Air Force acquisition experts, repair base analyses,8

unsolicited input from industry representatives, and reviews of recent DOD

outsourcing efforts. Sacramento officials explained that the initial

8

In late 1996, the Air Force accomplished repair base analyses for six depot-level workloads currently

performed by the Sacramento depot. The objective of each of the analyses was to identify industry

capabilities and capacity to repair and overhaul specific workloads.

Page 4 GAO/NSIAD-98-143 Public-Private Competitions
B-279625 

approach involved a privatization-in-place strategy, including separate

solicitations for seven individual workloads and separate transition

schedules for some of the individual workloads. In July 1996, the Air Force

decided to conduct a public-private competition combining the

Sacramento KC-135 and A-10 aircraft and various commodity workloads,

including hydraulics, instruments and avionics, and electrical accessories.

According to Air Force officials, the Air Force has pursued workload

combination as its acquisition strategy since that time.

The San Antonio report recognized that the Air Force had not conducted

an economic analysis regarding the potential savings of issuing single

versus multiple solicitations. Instead, the Air Force relied on reviews of

engine workload data, repair processes, and market surveys to identify the

acquisition strategy for determining how San Antonio’s engine workloads

will be performed in the future.

Both documents discuss the logic and economies supporting DOD’s

determinations to combine workloads into a single solicitation at each of

the closing depots. The key points in the Air Force’s rationale and support

for DOD’s determinations are summarized below.

Logic Factors Cited to

Support Workload

Combinations

The Air Force stated that its decisions to combine the Sacramento and San

Antonio workloads into single solicitations at each location were based on

the following logic factors:

• Workload commonality and overhead sharing. The Air Force believes that

shared personnel skills and backshops9

 provide an opportunity for

achieving improved efficiencies and lower prices in peacetime while

providing flexibility to better plan for wartime surge requirements. Air

Force officials noted that shared fixed overhead costs for such functions,

such as planning, scheduling, and providing materiel support over a larger

workload base, provide opportunities for improved economies and

reduced costs at both the Sacramento and San Antonio depots. Further,

using the same backshops for multiple workloads should reduce the

overall cost of the combined work at each location.

• Avoidance of multiple transitions and personnel turbulence. The Air Force

believes that managing multiple transitions increases the readiness risks

associated with closing complex, integrated industrial facilities. Further,

delaying the award of the contract by splitting the competition into

9

Depot industrial facilities have backshops to provide support for common processes, which may

include cleaning, inspection, metal plating, painting, and welding.

Page 5 GAO/NSIAD-98-143 Public-Private Competitions
B-279625 

multiple awards could subject the workforce to multiple

reduction-in-force actions, which would disrupt the skill mix and result in

productivity losses and production delays that adversely affect the

readiness of the Air Force’s operational units.

• Workload stability. This factor was also cited to support the rationale at

the Sacramento depot. The Air Force stated that, because the aircraft

workload is stable, it can be competed using a guaranteed minimum

quantity. However, the Air Force noted that many of the commodity

workloads have been erratic and therefore cannot be competed with a

minimum guaranteed workload. Consequently, the Air Force stated that

combining the aircraft and commodity workloads into one solicitation

would allow the winning offeror to smooth peaks in one workload

segment and offset valleys in other workload segments, providing a more

stable production capability. Further, the Air Force stated that a more

stable workload would increase efficiency and savings by providing

potential offerors a more reliable basis for employment levels and cost

planning.

• Market surveys. To support workload consolidation at the San Antonio

depot, the Air Force said that the majority of respondents to its

October 1995 market survey indicated a preference for a single contract

for the C-5 aircraft and a single contract for the combined engine

workloads. Further, the Air Force concluded from survey results that

more competitors would participate under the single solicitation for the

multiple engine workloads.

Economic Factors Cited to

Support Workload

Combinations

The Air Force cited the following factors supporting the economies of

workload combination at the closing depots:

• Time delays. The Sacramento white paper stated that separating the

Sacramento workload into five segments would delay contract award and

transition completion dates by 16 months, which would impact closure,

increase costs, and reduce projected BRAC savings. Similarly, the San

Antonio report stated that separating the San Antonio engine workloads

into three solicitations would extend the planned contract award from 

225 to 740 days, impacting closure and increasing costs.

• Cost increases. The Air Force stated that conducting multiple

competitions at Sacramento could result in cost increases to the offerors

and the government, which the Air Force estimates to be between

$22 million and $130 million. At San Antonio, the Air Force estimated the

increased cost to be between $92 million and $259 million.

Page 6 GAO/NSIAD-98-143 Public-Private Competitions
B-279625 

• Increased risks. The Air Force believes that changing the strategy from

single to multiple awards would increase risks and translate into higher

costs.

DOD’s Determinations

to Combine

Workloads Are Not

Well Supported

The additional rationale that the Air Force provided to further justify DOD’s

December 19, 1997, determinations is not well supported. We identified

significant weaknesses in both the logic and economic rationale presented

to support combining workloads at the Sacramento and San Antonio

depots into single solicitations at each location.

Significant Weaknesses in

Supporting Logic

We identified significant weaknesses in the rationale presented by the Air

Force to support DOD’s determinations to combine workloads at the

closing Sacramento and San Antonio depots into single solicitations at

each location. First, the Air Force did not adequately consider some other

viable alternatives as a part of its assessment. Second, some assumptions

are creditable only if the combined workloads are performed in place.

Third, each of the supporting points has specific weaknesses that create

additional questions regarding the adequacy of DOD’s support for workload

combination determinations. Our concerns regarding the economic

rationale are discussed in the following section.

Limited Consideration of

Alternatives

Although the Air Force gave limited consideration to options other than

combining the workloads at the two locations, they did not consider, or

gave only limited consideration to, some other feasible alternatives.

According to the 1998 Defense Authorization Act, alternatives that appear

logical and potentially cost-effective should have been evaluated. Options

not considered include (1) using solicitations that permit the competitors

to offer on any combination of workloads, from one to all and (2) having

another contracting activity conduct simultaneous competitions for

segments of the Sacramento or San Antonio workloads to avoid delays

from sequential competitions for individual segments of the competition.

Questionable Assumptions Our review indicates that several of the assumptions supporting the Air

Force’s rationale are questionable unless the workload remains at the

existing locations. For example, the Air Force states that combining

workloads will preclude multiple workload transitions, thereby avoiding

multiple reduction-in-force actions, limiting personnel turbulence, and

minimizing readiness impacts. Further, the Air Force states that, for the

Sacramento workload, combining aircraft and commodities into a single

solicitation would provide the winning offeror the ability to shift

Page 7 GAO/NSIAD-98-143 Public-Private Competitions
B-279625 

employees between workload segments. The advantages cited by the Air

Force are not likely to occur if the workloads are performed at a single

location other than Sacramento and San Antonio or at multiple locations.

Other Weaknesses We identified other weaknesses or deficiencies with each of the factors

cited by the Air Force, including the following:

• Workload commonality and sharing of overhead. The Air Force’s position

that realizing efficiencies from shared personnel and facilities at

Sacramento and San Antonio is best achieved with a single solicitation for

combined workloads is questionable. The efficiencies that are achievable

from shared facilities and personnel may be greater if the workloads being

combined are the same or more similar than the workloads being

combined under the Sacramento and San Antonio solicitations. For

example, the Air Force may achieve greater efficiency by combining

(1) the management of the Sacramento KC-135 workloads with other

KC-135 workloads to be competed and/or (2) the San Antonio Air Force

T-56 engine workloads with other engine workloads also to be competed.

Both of these options provide opportunities for significant cost savings

that were not considered by the Air Force.

• Avoidance of multiple transitions and personnel turbulence. We realize

that risks can be associated with the transition of any depot maintenance

workload. However, we have reported that there is no inherent reason

why these workloads cannot be transitioned without impacting equipment

readiness if the transition is properly planned and effectively

implemented.10 Further, DOD has successfully closed 17 depots over the

past 10 years and has successfully managed multiple transitions and the

resulting sequential personnel reductions.

• Workload stability for commodities and aircraft repair at Sacramento. The

Air Force data does not support the conclusion that the inherent

inefficiencies of the commodity workload are improved by combining it

with the more predictable and consistent aircraft workload. For example,

even though the Air Force states that stability will come from being able to

transfer employees between the aircraft and commodity workloads, this

transfer has rarely happened. Although the Air Force has had the ability to

shift workers among the aircraft and commodity workloads, Sacramento

depot personnel data shows that on average, each year over the last 

7 years, only 22 of the approximately 1,500 wage grade depot employees

have been shifted between aircraft and commodities.

10Depot Maintenance: Lessons Learned From Transferring Alameda Naval Aviation Depot Engine

Workloads (GAO/NSIAD-98-10BR, Mar. 25, 1998).

Page 8 GAO/NSIAD-98-143 Public-Private Competitions
B-279625 

• Results of market surveys. We question whether the results of the 1995

market survey are applicable to the Air Force’s current position that

combining the San Antonio workloads is more logical and economical

than issuing individual solicitations. The survey was designed to collect

potential offeror preferences under the then-current acquisition strategy of

privatizing the San Antonio aircraft and engine workloads in place.

However, in 1996 the Air Force revised this acquisition strategy and

adopted a public-private competition strategy. Further, in 1997 the Air

Force conducted a market analysis of engine manufacturing companies to

determine the availability and interest of public and private sector sources

to perform the required repair of engines currently maintained in Air Force

depots. In this survey, engine manufacturers indicated a preference for

repairing their own engines and were less interested in repairing other

engines. Additionally, our discussions with four potential offerors for the

engine workload indicated that they are interested in participating

regardless of whether the workloads are combined into a single

solicitation.

Significant Weaknesses in

Economic Analyses

We also identified two significant weaknesses in the Air Force’s economic

analyses supporting the combination of workloads into single solicitations

at each site. First, and most significantly, the analyses were not

comprehensive or consistent estimates of the comparative costs

associated with the alternatives examined. Second, the cost estimates are

questionable for several key categories.

Incomprehensive or

Inconsistent Comparative Cost

Analyses

The Air Force analyses stated that workload combination would save

$22 million to $130 million at Sacramento and $92 million to $259 million

at San Antonio. These figures represent estimates of costs associated with

administering the additional contracts and delaying contract award and

transition. However, the estimates contain two significant weaknesses.

First, all costs associated with performing the work are not included. For

example, the analyses did not consider the cost of performing

maintenance operations, including the costs of labor, parts, and overhead

required to perform the repair under the two alternatives considered, or

the additional layer of cost associated with subcontracting under the

combined workload package scenario. Also, the possibility of the cost

benefits of increased competition resulting from solicitations for

individual workloads was not recognized. Further, because the estimated

value of the workload at these locations is $2.4 billion at Sacramento and

$8 billion at San Antonio, the effect of not considering these costs could

Page 9 GAO/NSIAD-98-143 Public-Private Competitions
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significantly impact the outcome of the analyses.11 To illustrate the

significance, a small difference of, for example, 5 percent between cost

estimates for single versus multiple solicitations would represent

$120 million and $400 million, for the Sacramento and San Antonio

workloads respectively. These amounts would materially affect the

savings ranges projected by the Air Force.

Second, the cost estimates for the two locations did not use consistent

cost elements. For example, the San Antonio estimate included a

$40-million cost associated with delaying depot closure, which would

reduce the amount of estimated savings, whereas the Sacramento estimate

did not consider such costs. We do believe costs associated with delaying

closure are relevant to both locations, although we have some questions

about the accuracy of the $40-million cost estimate.

Questionable Cost Estimates Notwithstanding our concerns about the comprehensiveness and

consistency of the cost analysis, our review of the cost data provided

indicates that the estimates are overstated or questionable in several

areas, including the following:

• Contract administration costs at Sacramento. The Sacramento estimate

included a 1.9 percent estimate for contract administration costs resulting

from having more than one contract for the Sacramento workload. This

estimate was based on a contractor industrial performance metrics study.12

This estimate may be overstated because participants in the original study

found the cost impacts projected by the contractor were significantly

overstated.13 For example, five participants prepared estimates of the top

10 cost drivers identified in the contractor study and found that the study

estimates were overstated from 14 to 70 percent.

• Closure savings costs. As mentioned above, the San Antonio cost estimate

included a $40-million cost associated with delaying depot closure.14

However, this estimate is overstated. The $40-million estimate is based on

the closure of all logistics operations, some of which will not close until

11The Air Force used an 8-year contract period for Sacramento workloads and a 15-year period for San

Antonio workloads in its cost estimates. For comparison purposes, we used the same periods.

12DOD Regulatory Cost Premium, Coopers and Lybrand, December 1994.

13Acquisition Reform: DOD Faces Challenges in Reducing Oversight Costs (GAO/NSIAD-97-48, Jan. 29,

1997).

14The Air Force based its $40-million estimate on our report, Air Force Depot Maintenance:

Privatization-in-Place Plans Are Costly While Excess Capacity Exists (GAO/NSIAD-97-13, Dec. 31,

1996). This report estimated that a 1-year delay in the closure of McClellan Air Force Base and parts of

Kelly Air Force Base would result in a $90-million reduction of the BRAC Commission’s estimated

savings.

Page 10 GAO/NSIAD-98-143 Public-Private Competitions
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2001.15 According to the BRAC estimates, savings from closing the depot

maintenance operations provided only 21 percent of the estimated annual

savings from closure. At this rate, the cost of delay should be no higher

than $8.4 million rather than the $40 million estimated in the San Antonio

report.

• Transition costs. Sacramento included a cost estimate for extending the

transition period.16 Under the multi-contract approach, Sacramento

assumed workload segments would be transitioned incrementally over a

20- to 24-month period. Although the Air Force may incur additional

transition costs under a multiple contract strategy, we found transition

costs were overstated. The Air Force’s transition cost methodology

assumed that each individual winning offeror would require the full 20 to

24 months to complete the transition. However, Sacramento officials

recognized that the contractors’ transitions for the individual workload

segments will not require the entire 20- to 24-month period. The officials

stated that they were unable to separately identify a more precise cost

estimate.

Conclusions The Air Force’s support for DOD’s determinations that it is more logical and

economical to combine the workloads being competed at the closing

depots is based on a wide variety of information accumulated during the

acquisition strategy development process started in September 1995. We

recognize that this substantial body of data includes certain information

relevant to the determinations required by the National Defense

Authorization Act of 1998. We also recognize that the determinations

ultimately represent a management judgment based on various qualitative

and quantitative factors.

However, our assessment of these factors, as presented by the Air Force in

its February 24, 1998, Sacramento white paper and San Antonio report

shows significant weaknesses in logic, assumptions, and data.

Consequently, DOD’s determinations may well be appropriate, but its

rationale is not well supported.

15Under the Air Force’s current closure plans, certain functions and activities such as program and

item management and various tenant organizations will remain at the closing Sacramento and San

Antonio facilities until 2001.

16The Air Force used an estimate of average transition costs per day for the Aerospace Guidance and

Metrology Center during its privatization-in-place transition year. We have testified and issued two

reports on the Center’s closure and privatization: Air Force Privatization-in-Place: Analysis of Aircraft

and Missile Guidance System Depot Repair Costs (GAO/NSIAD-98-35, Dec. 22, 1997) and Aerospace

Guidance and Metrology Center: Cost Growth and other Factors Affect Closure and Privatization

(GAO/NSIAD-95-60, Dec. 9, 1994).

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Agency Comments On April 10, 1998, we provided a draft of this report for comment. DOD

informed us that, given the short amount of time available, it chose not to

comment on the report at this time.

Scope and

Methodology

To determine the reasons the Air Force believes it is more logical and

economical to combine the workloads at the Sacramento and San Antonio

depots, we reviewed the December 19, 1997, reports DOD provided to

Congress, as required by 10 U.S.C. 2469a; the Sacramento white paper and

San Antonio report provided to Congress on February 24, 1998, which

expanded on DOD’s rationale for combining workloads into single

solicitations; and other information relevant to the preparation of these

reports.

To analyze the rationale for DOD’s determination, we reviewed

(1) information contained in the reports; (2) documentation and other data

supporting the reports; (3) discussions with Air Force officials responsible

for preparing the reports and managing depot maintenance workloads;

(4) discussions with contractor officials who are planning to participate in

the competitions for workloads currently performed at the Sacramento

and San Antonio depots; (5) discussions with Air Force Audit Agency

officials who provided advice on the preparation of the Sacramento white

paper and San Antonio report; (6) a review of related Air Force studies,

reports, and data; (7) our prior work regarding related depot maintenance

issues; and (8) a review of applicable laws and regulations.

We conducted our review between February and April 1998 in accordance

with generally accepted government auditing standards.

We are sending copies of this report to the Secretaries of Defense and the

Air Force; the Director, Office of Management and Budget; and interested

congressional committees. Copies will also be made available to others on

request.

Page 12 GAO/NSIAD-98-143 Public-Private Competitions
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If you or your staff have any questions about this report, please contact me

at (202) 512-8412. Major contributors to this report are listed in 

appendix IV.

David R. Warren, Director

Defense Management Issues

Page 13 GAO/NSIAD-98-143 Public-Private Competitions
Contents

Letter 1

Appendix I 

Requirements for

Reports on

Depot-Level

Maintenance

16

Appendix II 

Sacramento and San

Antonio Depot

Maintenance

Workloads

18

Sacramento 18

San Antonio 19

Air Force Management Structure for the Sacramento and San

Antonio Competitions

20

Appendix III 

Summary of January

20, 1998, GAO Report

on DOD’s

Determinations to

Combine Depot

Maintenance

Workloads

21

Appendix IV 

Major Contributors to

This Report

23

Related GAO Products 26

Tables Table II.1: Sacramento Depot Aircraft Workload 18

Table II.2: Sacramento Depot Commodity Workload 19

Table II.3: San Antonio Depot Engine Workload 20

Page 14 GAO/NSIAD-98-143 Public-Private Competitions
Contents

Abbreviations

BRAC Base Closure and Realignment

DOD Department of Defense

Page 15 GAO/NSIAD-98-143 Public-Private Competitions
Appendix I 

Requirements for Reports on Depot-Level

Maintenance

The National Defense Authorization Act for Fiscal Year 1998 contains

several depot-related reporting requirements.

1. Report on DOD’s Compliance with 50-Percent Limitation (section 358) 

The act amends 10 U.S.C. 2466(a) by increasing the amount of depot-level

maintenance and repair workload funds that the Department of Defense

(DOD) can use for contractors from 40 to 50 percent and revises 10 U.S.C.

2466(e) by requiring the Secretary of Defense to submit a report to

Congress identifying the percentage of funds expended for contractors’

performance by February 1 of each year.

Within 90 days of DOD’s submission of its annual report to Congress, we

must review the DOD report and report to Congress whether DOD has

complied with the 50-percent limitation.

2. Reports Concerning Public-Private Competitions for the Depot

Maintenance Workloads at the Closing San Antonio and Sacramento

Depots (section 359)

The act adds to 10 U.S.C. a new section, 2469a, which provides for special

procedures for public-private competitions for the workloads of these two

closing depots. It also requires that we report in the following areas:

First, the Secretary of Defense is required to submit a determination to

Congress if DOD finds it necessary to combine any of the workloads into a

single solicitation. We must report our views on the DOD determination

within 30 days.

Second, we are required to review all DOD solicitations for the workloads

at San Antonio and Sacramento and to report to Congress within 45 days

of the solicitations’ issuance whether the solicitations provide

“substantially equal” opportunity to compete without regard to

performance location and otherwise comply with applicable laws and

regulations.

Third, we must review all DOD awards for the workloads at the two closing

Air Logistics Centers and report to Congress within 45 days of the contract

awards whether the procedures used complied with applicable laws and

regulations and provided a “substantially equal” opportunity to compete

without regard to performance location, determine whether “appropriate

consideration was given to factors other than cost” in the selection, and

Page 16 GAO/NSIAD-98-143 Public-Private Competitions
Appendix I 

Requirements for Reports on Depot-Level

Maintenance

ascertain whether the selection resulted in the lowest total cost to DOD for

performance of the workload.

Fourth, within 60 days of its enactment, the 1998 Defense Authorization

Act requires us to review the C-5 aircraft workload competition and

subsequent award to the Warner Robins Air Logistics Center and report to

Congress on whether the procedures used provided an equal opportunity

for offerors to compete without regard to performance location, whether

the procedures complied with applicable laws and the Federal Acquisition

Regulation, and whether the award resulted in the lowest total cost to DOD.

3. Report on Navy’s Practice of Using Temporary Duty Assignments for

Ship Maintenance and Repair (section 366)

The act requires us to report by May 1, 1998, on the Navy’s use of

temporary duty workers to perform ship maintenance and repairs at

homeports not having shipyards.

Page 17 GAO/NSIAD-98-143 Public-Private Competitions
Appendix II 

Sacramento and San Antonio Depot

Maintenance Workloads

Sacramento At the time it was identified for closure during the 1995 Base Closure and

Realignment (BRAC) process, the Air Force’s Sacramento depot had

responsibility for the repair of four aircraft and four commodity groups.

The depot also had a significant body of manufacturing or repair work it

performed in small quantities for various non-Air Force customers.

Additionally, it had a microelectronics facility that performed reverse

engineering on parts to provide technical data for manufacturing support

parts or for developing repair procedures.

Two of the four aircraft repaired at the Sacramento depot will not be

included in the competition package—the F-15 and EF-111. F-15 repairs

are being consolidated at the Warner Robins depot, which is the F-15

center of excellence and already performs most of the F-15 work. The

EF-111 repair requirement is expected to end as the aircraft is phased out

of operations. KC-135 and A-10 aircraft requirements are expected to be

included in the Sacramento competition package. The KC-135 aircraft is

currently repaired at the Oklahoma City depot and at a contractor facility

in Birmingham, Alabama. Table II.1 shows the production hours for 1995,

1996, and 1997 for the KC-135 and A-10 aircraft. The KC-135 workload may

be increased in the competition package, but the A-10 workload is

expected to decrease and to be erratic as the aircraft is phased out of the

inventory.

Table II.1: Sacramento Depot Aircraft

Workload (fiscal years 1995-97) Fiscal year

Aircraft 1995 1996 1997

KC-135 823,755 1,045,027 696,760

A-10 77,090 102,819 87,939

Total 900,845 1,147,846 784,699

Note: The direct production actual hours are based on customer orders.

In accordance with a 1995 BRAC Commission decision, the Sacramento

depot’s largest commodity grouping—ground communications and

electronics—which has a projected workload of about 825,000 hours, is

being transitioned to the Tobyhanna Army Depot between 1998 and 2001.

The Sacramento depot’s software maintenance workload has declined

significantly, and the remaining software work is expected to be

transferred outside the competition process to the Ogden depot. The

remaining commodity groups currently repaired at Sacramento include

hydraulics, instruments and avionics, and electrical accessories.

Page 18 GAO/NSIAD-98-143 Public-Private Competitions
Appendix II 

Sacramento and San Antonio Depot

Maintenance Workloads

Table II.2 provides an overview of the actual direct labor hours used

during fiscal years 1995-97 for the commodity groupings that are currently

repaired at the Sacramento depot and are expected to be a part of the

competitive package.

Table II.2: Sacramento Depot

Commodity Workload (fiscal years

1995-97)

Fiscal year

Commodity Group 1995 1996 1997

Hydraulics 449,803 479,702 436,659

Electrical accessories 377,765 350,979 291,449

Instruments and avionics 325,626 289,300 312,226

Total 1,153,194 1,119,981 1,040,334

Note: The direct production actual hours are based on customer orders.

The Air Force assessed Sacramento’s core capabilities and analyzed the

private sector’s repair base.1

 Through this process, which was approved by

the Defense Depot Maintenance Council, none of the Sacramento

workload was determined to be core.

San Antonio At the time of its closure, the San Antonio depot largely did modifications

and repairs of aircraft, turbine engines, and support equipment, and did a

smaller amount of work on nuclear ordnance and engine software. The

source of repairs for the C-5 aircraft was determined through a separate

public-private competition. That workload was won by the Warner Robins

depot, which assumed responsibility for the C-5 in November 1997;

work-in-process will continue at San Antonio until the summer of 1998.

The Warner Robins depot inducted its first C-5 aircraft in January 1998.

The nuclear ordnance commodity management workload is being

transferred outside the competition to the Ogden and Oklahoma City

depots and Kirkland Air Force Base, with the bulk of the work going to

Ogden.

Table II.3 shows a breakout of the San Antonio engine workload based on

direct production actual hours for fiscal years 1995 through 1997.

1

Core capabilities consist of the minimum facilities, equipment, and skilled personnel necessary to

ensure a high level of technical expertise and combat readiness by maintaining weapon systems

determined to be necessary to support the nation’s strategic or contingency plans. The objective of the

repair base analysis was to identify industry capabilities and capacity to repair and overhaul specific

workloads.

Page 19 GAO/NSIAD-98-143 Public-Private Competitions
Appendix II 

Sacramento and San Antonio Depot

Maintenance Workloads

Table II.3: San Antonio Depot Engine

Workload (fiscal years 1995-97) Fiscal year

Engine 1995 1996 1997

F100 1,693,031 1,688,945 1,414,954

T56 627,199 917,017 981,068

TF39 462,704 676,837 654,632

Total 2,782,934 3,282,799 3,050,654

For various reasons, the competition for engine workloads will not include

all of the workload at the San Antonio depot. For example, the Navy is

making independent source-of-repair decisions for its T56 engine

workloads. Further, core engine workload will be moved outside the

competition process to the Oklahoma City depot. The Air Force assessed

the core engine capabilities at the San Antonio and Oklahoma City depots

and analyzed private industry’s repair base. As a result of this process, the

Air Force determined that it should retain the capability to repair about

24 percent of the annual F100 engine module workload and 50 percent of

the workload required to maintain the capability to repair and check out

whole engines—or about nine whole engines. Accordingly, the Air Force is

moving the F100 core workload to the Oklahoma City depot outside the

engine competition. Finally, it is uncertain whether the Air Force could

outsource all the engine workload in the competitive package given the

statutory limits on the percentage of depot maintenance work that can be

performed by the private sector.

Air Force

Management

Structure for the

Sacramento and San

Antonio Competitions

The Air Force is using a management structure for administering and

managing the Sacramento and San Antonio competitions similar to the one

it used for the C-5 competition. The structure includes a program office

and evaluation team at each center as well as an advisory council and

source selection official at Air Force headquarters. The program office has

general responsibility for preparing and managing the request for

proposals. The evaluation team will report its assessments to a council

made up of representatives from the Office of the Secretary of Defense,

Air Force headquarters, and Air Force Materiel Command staff. The

council will review the team’s assessment and advise the source selection

official.

Page 20 GAO/NSIAD-98-143 Public-Private Competitions
Appendix III 

Summary of January 20, 1998, GAO Report

on DOD’s Determinations to Combine Depot

Maintenance Workloads

It may be that the individual workloads at the closing San Antonio, Texas,

and Sacramento, California, Air Force depots cannot as logically and

economically be performed without combination by sources that are

potentially qualified to submit an offer and be awarded a contract for

individual workloads. However, DOD reports and data do not provide

adequate information to support DOD’s determinations.

First, DOD has not analyzed the logic and economies associated with

having the workload performed individually by potentially qualified

offerors. Consequently, it has no support for determining that the

individual workloads cannot as logically and economically be performed

without combination by sources that would do them individually. Air

Force officials stated that they were uncertain as to how they would

analyze the performance of workloads on an individual basis. However,

Air Force studies indicate that the information to make such an analysis is

available. For example, in 1996 the Air Force performed analyses for six

depot-level workloads performed by the Sacramento depot to identify

industry capabilities and capacity. Individual analyses were accomplished

for hydraulics, software, electrical accessories, flight instruments, A-10

aircraft, and KC-135 aircraft depot-level workloads. As a part of these

analyses, the Air Force identified sufficient numbers of qualified

contractors interested in various segments of the Sacramento workload to

support a conclusion that it could rely on the private sector to support the

workloads.

Second, reports and available data did not adequately support DOD’s

determinations “that the individual workloads cannot as logically and

economically be performed without combination by sources that are

potentially qualified to submit an offer and to be awarded a contract to

perform those individual workloads.” For example, DOD’s determination

report relating to the Sacramento Air Logistics Center, McClellan Air

Force Base, California, states that all competitors indicated throughout

their Sacramento workload studies that consolidating workloads offered

the most logical and economical performance possibilities. This statement

was based on studies performed by the offerors as part of the competition

process.1

 However, one offeror’s study states that the present competition

format is not in the best interest of the government and recommends that

the workload be separated into two competitive packages. We were

unable to determine whether the other two contractor studies support the

statement in the DOD report that all competitors favored consolidating the

1

Prior to the planned competition, the Air Force engaged three offerors to identify work processes at

Sacramento and determine how those processes could be performed more efficiently.

Page 21 GAO/NSIAD-98-143 Public-Private Competitions
Appendix III 

Summary of January 20, 1998, GAO Report

on DOD’s Determinations to Combine Depot

Maintenance Workloads

workloads because the Air Force did not provide us adequate or timely

access to the studies cited in the report.

Page 22 GAO/NSIAD-98-143 Public-Private Competitions
Appendix IV 

Major Contributors to This Report

National Security and

International Affairs

Division, Washington,

D.C.

Julia Denman, Assistant Director

Dallas Field Office Penney Harwell, Site Senior

Larry Junek, Project Manager

Kim Seay, Senior Evaluator

John Strong, Deputy Project Manager

Pam Valentine, Evaluator

Office of the General

Counsel

John Brosnan, Assistant General Counsel

Page 23 GAO/NSIAD-98-143 Public-Private Competitions
Appendix IV 

Major Contributors to This Report

Page 24 GAO/NSIAD-98-143 Public-Private Competitions
Appendix IV 

Major Contributors to This Report

Page 25 GAO/NSIAD-98-143 Public-Private Competitions
Related GAO Products

Defense Depot Maintenance: DOD Shifting More Workload for New

Weapon Systems to the Private Sector (GAO/NSIAD-98-8, Mar. 31, 1998).

Dex pot Maintenance: Lessons Learned From Transferring Alameda Naval

Aviation Depot Engine Workloads (GAO/NSIAD-98-10BR, Mar. 25, 1998).

Public-Private Competitions: Access to Records Is Inhibiting Work on

Congressional Mandates (GAO/T-NSIAD-98-111, Mar. 4, 1998).

Public-Private Competitions: Access to Records Is Inhibiting Work on

Congressional Mandates (GAO/T-NSIAD-98-101, Feb. 24, 1998).

Public-Private Competitions: DOD’s Determination to Combine Depot

Workloads Is Not Adequately Supported (GAO/NSIAD-98-76, Jan. 20, 1998).

Public-Private Competition: Processes Used for C-5 Aircraft Award Appear

Reasonable (GAO/NSIAD-98-72, Jan. 20, 1998).

DOD Depot Maintenance: Information on Public and Private Sector

Workload Allocations (GAO/NSIAD-98-41, Jan. 20, 1998).

Air Force Privatization-in-Place: Analysis of Aircraft and Missile System

Depot Repair Costs (GAO/NSIAD-98-35, Dec. 22, 1997).

Outsourcing DOD Logistics: Savings Achievable but Defense Science

Board’s Projections Are Overstated (GAO/NSIAD-98-48, Dec. 8, 1997).

Air Force Depot Maintenance: Information on the Cost-Effectiveness of

B-1B and B-52 Support Options (GAO/NSIAD-97-210BR, Sept. 12, 1997).

Navy Depot Maintenance: Privatizing the Louisville Operations in Place Is

Not Cost-Effective (GAO/NSIAD-97-52, July 31, 1997).

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-97-112, May 1, 1997).

Navy Ordnance: Analysis of Business Area Price Increases and Financial

Losses (GAO/AIMD/NSIAD-97-74, Mar. 14, 1997).

Page 26 GAO/NSIAD-98-143 Public-Private Competitions
Related GAO Products

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).

Air Force Depot Maintenance: Privatization-in-Place Plans Are Costly

While Excess Capacity Exists (GAO/NSIAD-97-13, Dec. 31, 1996).

Army Depot Maintenance: Privatization Without Further Downsizing

Increases Costly Excess Capacity (GAO/NSIAD-96-201, Sept. 18, 1996).

Navy Depot Maintenance: Cost and Savings Issues Related to

Privatizing-in-Place the Louisville, Kentucky, Depot (GAO/NSIAD-96-202, 

Sept. 18, 1996).

Defense Depot Maintenance: Commission on Roles and Mission’s

Privatization Assumptions Are Questionable (GAO/NSIAD-96-161, July 15,

1996).

Defense Depot Maintenance: DOD’s Policy Report Leaves Future Role of

Depot System Uncertain (GAO/NSIAD-96-165, May 21, 1996).

Defense Depot Maintenance: More Comprehensive and Consistent

Workload Data Needed for Decisionmakers (GAO/NSIAD-96-166, May 21, 1996).

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).

Military Bases: Closure and Realignment Savings Are Significant, but Not

Easily Quantified (GAO/NSIAD-96-67, Apr. 8, 1996).

Depot Maintenance: Opportunities to Privatize Repair of Military Engines

(GAO/NSIAD-96-33, Mar. 5, 1996).

Closing Maintenance Depots: Savings, Personnel, and Workload

Redistribution Issues (GAO/NSIAD-96-29, Mar. 4, 1996).

Navy Maintenance: Assessment of the Public-Private Competition Program

for Aviation Maintenance (GAO/NSIAD-96-30, Jan. 22, 1996).

Page 27 GAO/NSIAD-98-143 Public-Private Competitions
Related GAO Products

Depot Maintenance: The Navy’s Decision to Stop F/A-18 Repairs at Ogden

Air Logistics Center (GAO/NSIAD-96-31, Dec. 15, 1995).

Military Bases: Case Studies on Selected Bases Closed in 1988 and 1991

(GAO/NSIAD-95-139, Aug. 15, 1995).

Military Base Closure: Analysis of DOD’s Process and Recommendations

for 1995 (GAO/T-NSIAD-95-132, Apr. 17, 1995).

Military Bases: Analysis of DOD’s 1995 Process and Recommendations for

Closure and Realignment (GAO/NSIAD-95-133, Apr. 14, 1995).

Aerospace Guidance and Metrology Center: Cost Growth and Other

Factors Affect Closure and Privatization (GAO/NSIAD-95-60, Dec. 9, 1994).

Navy Maintenance: Assessment of the Public and Private Shipyard

Competition Program (GAO/NSIAD-94-184, May 25, 1994).

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).

Defense Force Management: Challenges Facing DOD as It Continues to

Downsize Its Civilian Workforce (GAO/NSIAD-93-123, Feb. 12, 1993).

(709335) Page 28 GAO/NSIAD-98-143 Public-Private Competitions
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