United States General Accounting Office

GAO Report to Congressional Requesters

November 1998 ARMY INDUSTRIAL

FACILITIES

Workforce

Requirements and

Related Issues

Affecting Depots and

Arsenals

GAO/NSIAD-99-31

GAO United States

General Accounting Office

Washington, D.C. 20548

National Security and

International Affairs Division

B-279770 

November 30, 1998

The Honorable Herbert H. Bateman

Chairman, Subcommittee on Military Readiness

Committee on National Security

House of Representatives

The Honorable Lane Evans

House of Representatives

In response to your requests, we reviewed workforce issues at the Army’s maintenance depots

and arsenals. This report focuses on the need for and progress in implementing improvements

and efficiencies to the Army’s depot maintenance and manufacturing arsenal programs.

We are sending copies of this report to the Ranking Minority Member, Subcommittee on

Military Readiness, House Committee on National Security; the Chairmen and Ranking Minority

Members, Senate Committee on Armed Services, the Subcommittee on Defense, Senate

Committee on Appropriations; and the Chairman and Ranking Minority Members,

Subcommittee on National Security, House Committee on Appropriations; the Secretaries of

Defense and the Army; and the Director, Office of Management and Budget. We will make

copies available to others upon request.

If you or your staff have any questions concerning this report, please contact me on

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

David R. Warren, Director

Defense Management Issues
Executive Summary

Purpose Due to reductions in personnel and workloads, the Army’s depots and

arsenals, which reported fiscal year 1998 employment at about 13,600 and

revenues of about $1,620 million, have faced increased uncertainty

regarding workloads, funding, and personnel levels.

The Chairman of the Subcommittee on Readiness, House Committee on

National Security asked GAO to examine selected workforce issues

pertaining to the Army’s maintenance depots, focusing particularly on the

depot in Corpus Christi, Texas. Subsequently, Congressman Lane Evans

requested that GAO examine workforce issues at the Army’s manufacturing

arsenals. This report addresses (1) the Army’s basis for personnel

reductions planned at its depots during fiscal years 1998-99; (2) the Army’s

progress in developing an automated system for making maintenance

depot staffing decisions based on workload estimates; (3) factors that may

impact the Army’s ability to improve the cost-effectiveness of its

maintenance depot’s programs and operations; and (4) workload trends,

staffing, and productivity issues at the Army’s manufacturing arsenals.

Background Both Army maintenance depots and manufacturing arsenals are part of the

combined public and private sector industrial base that supports the

requirements of Army forces. Over the years, the number of public depots

and arsenals has been reduced as the Army’s requirements were reduced

and/or the Army increasingly placed greater reliance on the private sector

to meet its industrial needs. In 1964, there were nine maintenance depots,

and by September 1995, the last of the closures directed by the Base

Realignment and Closure (BRAC) Commission had been completed, and

five maintenance depots remained.1

 At the end of World War II, the Army

operated six manufacturing arsenals; two are in operation today.2

The operation of the depots and arsenals is affected and governed by a

variety of laws, including the Arsenal Act, which set forth the policies

governing the manufacture of supplies in the arsenals, a statute which

provides for a Department of Defense (DOD)-maintained core logistics

capability to include the operation of government-owned and -operated

1

The Army had proposed reducing the number of government-owned and operated maintenance

depots to three, but the 1995 BRAC Commission recommendations and implementation actions left

five depots. The remaining depots are Anniston (combat vehicles and small arms), Corpus Christi

(helicopters and engines), Letterkenny (tactical missile maintenance), Red River (Bradley Fighting

Vehicle), and Tobyhanna (communications, electronics, and avionics).

2

The remaining arsenals are Rock Island (artillery material, gun carriages, and small arms) and

Watervliet (Seacoast gun carriages, railway mounts, artillery and tank gun tubes, mortars, and gun

breeches).

Page 2 GAO/NSIAD-99-31 Army Industrial Facilities
Executive Summary

maintenance depots,3 and the so-called 50/50 provision which requires that

the services use at least half of the funds made available for depot-level

maintenance for performance by federal personnel. Also, section 364 of

the National Defense Authorization Act for Fiscal Year 1998 precludes

reductions in force of depot personnel, other than those directed by a BRAC

Commission, until the Secretary of the Army certifies to the Congress that

the Army has a fully operational software system to estimate depot

personnel requirements.

Results in Brief Our examination shows the Army did not have a sound basis for

identifying the number of positions to be eliminated from the Corpus

Christi depot. This was particularly the case in determining the number of

direct labor personnel needed to support depot workload requirements.

Army efforts to develop an automated workload and performance system

for use in its depots have proceeded to the point that required certification

to the Congress of the system’s operational capability is expected soon.

However, system improvements that are currently underway would

enhance the system’s capabilities for determining indirect and overhead

personnel requirements in Army depots. Other issues and factors affecting

the Army’s basis for workload forecasting or the cost-effectiveness of its

depot maintenance programs and activities are (1) an increased reliance

on the use of regional repair activities and private sector contractors for

work that otherwise might be done in maintenance depots, (2) declining

productivity, (3) difficulties in effectively using depot personnel, and

(4) nonavailability of repair parts.

Use of the arsenals has declined significantly over the years as the private

sector has assumed an increasingly larger share of their work. According

to Army officials, as of mid-1998, the Army’s two weapons manufacturing

arsenals used less than 24 percent of their industrial capacity, compared to

more than 80 percent 10 years ago. The Army’s depots and arsenals face

multiple challenges and uncertainties, and the Army has inadequate 

long-range plans to guide its actions regarding its industrial infrastructure.

3

10 U.S.C. 2464 states that the DOD must maintain logistic capability sufficient to ensure the technical

competence and resources necessary for an effective and timely response to a national defense

emergency. This core logistics capability is required to be owned and operated by the government.

Page 3 GAO/NSIAD-99-31 Army Industrial Facilities
Executive Summary

Principal Findings

Questionable Basis for

Planned Reductions at

Corpus Christi

In determining needed staff reductions at the Corpus Christi depot, the

Army considered direct labor and indirect labor requirements and

estimates of employee productivity. However, GAO found a number of

weaknesses in the Army’s methodology for considering these factors. For

example, direct labor requirements were based on unproven productivity

assumptions, overhead personnel requirements were based on a faulty and

imprecise analysis concerning the ratio of indirect (overhead) to direct

workers, and questionable overtime requirements estimates were used.

Efforts to implement the planned reductions proved to be poorly managed

at the Corpus Christi depot and had unintended consequences: fewer

indirect and more direct labor employees were reduced than intended.

This adversely affected the depot’s productivity. With the reduction of

direct labor employees, the use of overtime increased and contractor

workers were hired to offset the labor loss. The Corpus Christi depot has

had major problems meeting its production schedules and may lose one

source of its repair work from another military service.

Progress Made in

Automating Personnel

Requirements Process, but

Needed System

Enhancements Yet to Be

Completed

In May 1996, the Army began to develop an automated process for

analyzing and documenting personnel requirements that are linked to

specific workload requirements. The system, which is now operational at

all five Army maintenance depots, has been evaluated by the Army Audit

Agency and required certification to the Congress of the system’s

operational capability is expected soon. According to Army Audit Agency

the programming logic is reasonably sound, and performance satisfies the

Army’s acceptance criteria. While the basic system is in place, additional

system enhancements were not yet completed that would help overcome

the kinds of problems the Army recently encountered in clarifying

workforce requirements at the Corpus Christi depot. For example, the

Army now plans to add an automated model for predicting indirect and

overhead personnel requirements before it certifies the system as

operational at Army depots.

Page 4 GAO/NSIAD-99-31 Army Industrial Facilities
Executive Summary

Improving Workload

Forecasting Essential to

Improving Personnel

Requirements

Determination

In the past, Army depot maintenance workload requirements have

fluctuated to such an extent that they contributed to significant reported

financial losses to the depots. This situation, if it continued, would limit

the usefulness of workload data that are a critical input to the automated

system for analyzing and determining personnel requirements.

One of the factors that had adversely affected the Army’s ability to project

depot maintenance work is the significant amount of depot maintenance

work being done at regional repair activities at Army active installations

and Army National Guard activities. This was being done even though the

Army depot system was already underutilized and had excess plant

capacity. The continuing reliance and expanded use of these regional

repair facilities for depot-level workloads could have a substantial impact

on the future viability and efficiency of operations at the Army’s public

sector depot operations.

Another factor affecting future workload requirements for the Army depot

system was the amount of work shifted to the private sector. While

recognizing the need to allocate work levels within the existing legislative

framework, DOD’s Logistics Strategic Plan expresses a preference for

performing depot maintenance work in the private sector. The Army is

planning to shift significant new workloads to the private sector,

particularly maintenance workloads for new systems. This could be

accomplished under a program referred to as prime vendor support. Under

this program the private sector contractor is responsible for the

maintenance and repair of the system at all repair levels.4

The depots’ productivity was also declining. Reported productive labor

hours at various depot facilities are about 6 percent below DOD’s standard

rate: two depots reported productivity rates 10 percent below the

standard. Various factors contributed to lower-than-expected worker

productivity. For example, GAO’s work shows that Army depot managers

generally lacked effective systems and procedures to facilitate movement

of workers between different organizational units and skill areas.

Additionally, worker productivity at Army depots has been at times

adversely affected by a lack of needed repair parts. GAO previously

reported that one depot took an average of 525 days to complete repair

work on weapon system components: 18 of those days were needed to

conduct maintenance tasks; the rest of the time was spent ordering,

4

The Army supports four levels of repair—unit, direct support, general support, and depot. At the unit

and direct support levels, repairs of weapon systems and component parts are done and repaired items

are returned to the user. At the general support and depot levels, repairs of weapon systems and

components are done and repaired items are returned to the supply system.

Page 5 GAO/NSIAD-99-31 Army Industrial Facilities
Executive Summary

transporting, and storing repair parts or waiting due to other unanticipated

delays.5

Arsenals Face Challenges

and Uncertainties About

Their Future Viability

The Army planned to implement its automated workload and performance

system in its manufacturing arsenals in December 1998. However, these

facilities have broader problems that will not be solved by the automated

system. Given the reductions in workload that have occurred over time,

the Army arsenals’ future is uncertain. The Army is considering conversion

of its two arsenals to government-owned, contractor-operated facilities.

Army personnel planning documents show the elimination of all arsenal

personnel from the government’s employment rolls by 2002. However, key

questions remain unanswered, such as the cost-effectiveness and

efficiency of this option.

Army Has Not Reached

Consensus on a Long-term

Strategy for Its Industrial

Activities

Uncertainties exist about the future of the Army’s depots and arsenals and

the extent to which the functions they perform should be retained as

government-owned and -operated facilities or performed by private sector

contractors. Overall, recent experiences at the Army’s manufacturing

arsenals and maintenance depots indicate that the Army faces multiple,

difficult challenges and uncertainties in determining staffing requirements

and improving the efficiency and effectiveness of its industrial activities.

The issues become more problematic for the depots due to the expanded

capabilities of regional repair facilities’ work that appears to overlap the

work being done in the depots. The Army has no comprehensive plan for

managing its overall depot maintenance and manufacturing arsenals,

including excess capacity, workload planning, personnel requirements,

and productivity.

Recommendations GAO makes recommendations to the Secretaries of Defense and the Army

concerning the need for (1) improvements to the automated workforce

performance system before certifying it operational, (2) improving

workload management and downsizing, (3) determining the extent to

which the Army’s logistics and manufacturing capabilities are of such

importance that they need to be retained as government-owned and

-operated facilities, and (4) developing a strategic plan to guide the future

operations of the Army’s industrial activities.

5

Inventory Management: The Army Could Reduce Logistics Costs for Aviation Parts by Adopting Best

Practices (GAO/NSIAD-97-82, Apr. 15, 1997).

Page 6 GAO/NSIAD-99-31 Army Industrial Facilities
Executive Summary

Agency Comments

and GAO’s Evaluation

In written comments on a draft of this report, DOD concurred with GAO’s

recommendations and stated that appropriate corrective actions would be

taken. The following are actions the Army has taken, or is planning to

take:

• incorporating procedures for determining indirect personnel requirements

before certifying the automated workforce performance system as

operational;

• reemphasizing the importance of conservative, realistic, and stabilized

workload estimates and establishing a board of directors to evaluate and

monitor depot maintenance requirements to ensure compliance with

applicable regulatory requirements;

• studying the regional repair capabilities and evaluating total maintenance

requirements to determine the most efficient workload allocations; and

• developing a 5-year plan to provide a strategic framework to direct future

operations of Army maintenance depots and manufacturing arsenals.

Page 7 GAO/NSIAD-99-31 Army Industrial Facilities
Contents

Executive Summary 2

Chapter 1 

Introduction

12

Army Depots and Arsenals 12

Industrial Funds Used to Support Depots and Arsenals 15

Depot Command and Management Structures 17

Assessment of Changes in Staffing Requirements 19

Objectives, Scope, and Methodology 22

Chapter 2 

Questionable Analysis

Supporting Planned

Depot Reductions

Accentuated Need to

Improve Workforce

Planning

25

Weaknesses in the Army’s Workforce Reduction Process 25

Attempted Implementation of the Staff Reduction Plan at Corpus

Christi Depot Proved Chaotic and Had Unintended Consequences

33

Automated System for Identifying Requirements Could Soon Be

Certified Operational, but Some Development Work Remains

36

Conclusions 38

Recommendations 39

Agency Comments and Our Evaluation 39

Chapter 3 

Unresolved Issues

Overshadow Progress

in New Depot

Workload Forecasting

System

40

Changing Workload Estimates Inhibit Army Efforts to Predict

Personnel Requirements

40

Implications of Depot Workload Assignments 46

Other Factors Inhibiting Depot Efficiency 49

Conclusions 53

Recommendations 54

Agency Comments and Our Evaluation 54

Chapter 4 

Uncertainties

Surround Future of

Arsenals

56

Automated Requirements Process Is Planned for Arsenals 56

Workload Is Declining and Capacity Is Underutilized 56

Movement Toward Greater Reliance on the Private Sector 58

Decreasing Workloads Impact Arsenals 59

Conclusions 61

Recommendations 61

Agency Comments and Our Evaluation 61

Page 8 GAO/NSIAD-99-31 Army Industrial Facilities
Contents

Chapter 5 

Strategic Plan Is

Essential for

Addressing the Future

of Army Depots and

Arsenals

62

Summary of Issues 62

Legislation Impacting Army Depots and Arsenals 63

Our Prior Reports Have Reflected Need for Strategic Planning 63

Conclusions 65

Recommendations 65

Agency Comments and Our Evaluation 66

Appendixes Appendix I: Comments From the Department of Defense 68

Appendix II: Major Contributors to This Report 72

Related GAO Products 73

Tables Table 1.1: Post-World War II “Old Line” Manufacturing Arsenals 14

Table 1.2: Army Underutilized Plant Capacity Funding 16

Table 1.3: Army Depots and Management Commands and

Principal Work

18

Table 2.1: Fiscal Year 1998 Depot Composite Hourly Rates

Requested by Depots and Approved by Headquarters

26

Table 2.2: Summary of Planned Personnel Reductions at Army

Depots

27

Table 2.3: IOC’s Assumptions, DOD’s Standard, and Reported

Experience of Depot Workers’ Productivity for Fiscal Year 1997

28

Table 2.4: IOC Ratios for Determining Overhead Personnel

Requirements

30

Table 3.1: Operations and Maintenance Funds Appropriated by

the Congress and Reallocated By DOD and Army Headquarters

Reprogramming

41

Table 4.1: Reported Arsenal Workload and Employment Levels

for Fiscal Years 1988 Through 1998

57

Figures Figure 1.1: Army Depots and Arsenals and Corresponding

Management Commands

19

Figure 1.2: The Army’s 12-Step Methodology for Evaluating

Workforce Requirements

21

Figure 3.1: Fiscal Year 1997 Workload Estimates for Corpus

Christi Army Depot

44

Figure 3.2: Fiscal Year 1998 Workload Estimates for Corpus

Christi Army Depot

45

Page 9 GAO/NSIAD-99-31 Army Industrial Facilities
Contents

Abbreviations

AMC Army Materiel Command

AWPS Army Workload Performance System

BRAC Base Realignment and Closure

DOD Department of Defense

GAO General Accounting Office

GOCO Government-Owned/Contractor-Operated

IOC Industrial Operations Command

ISM Integrated Sustainment Maintenance

Page 10 GAO/NSIAD-99-31 Army Industrial Facilities
Page 11 GAO/NSIAD-99-31 Army Industrial Facilities
Chapter 1 

Introduction

Army maintenance depots and arsenals were established to support Army

fighting units by providing repair and manufacturing capability, in concert

with the private sector, to meet peacetime and contingency operational

requirements. In recent years, the Army has taken steps to operate these

facilities in a more business-like manner, including generating revenues

from their output to support their operations. The number of these

facilities has been reduced and the size of their workloads and staffs have

declined significantly. This reflects the downsizing that began in the late

1980s following the end of the Cold War and the trend toward greater

reliance on the private sector to meet many of the Army’s needs.

Army Depots and

Arsenals

The Army relies on both the public and the private sectors to meet its

maintenance, overhaul, repair, and ordnance manufacturing needs. Army

depots and arsenals have a long history of service, and they are subject to

various legislative provisions that affect the work they do as well as how it

is allocated between the public and private sectors.

Depots Army maintenance depots were established between 1941 and 1961 to

support overhauls, repairs, and upgrades to nearly all of the Army’s ground

and air combat systems. Before the depots were established, some

maintenance and repair work was performed at the Army’s supply depots

and arsenals and some was performed by the private sector. However,

before 1941 much of the equipment in use was either repaired in the field

or discarded. Depot workload can be classified into two major categories:

end items and reparable secondary items. End items are the Army’s

ground combat systems, communications systems, and helicopters.

Secondary items include various assemblies and subassemblies of major

end items, including helicopter rotor blades, circuit cards, pumps, and

transmissions. Several depots, particularly Tobyhanna, also do some

manufacturing, but generally for small quantities of individual items

needed in support of depot overhaul and repair programs.

In 1976, 10 depots performed depot maintenance in the continental United

States. By 1988 that number had been reduced to eight as a result of

downsizing following the Vietnam War. Between 1989 and 1995, Base

Realignment and Closure (BRAC) Commission decisions resulted in the

closure of three more depots and the ongoing realignment of two others.

At the end of fiscal year 1998, the 5 Army depots1

 employed about 11,200

1

The five depots are Anniston, Alabama; Corpus Christi, Texas; Letterkenny, Pennsylvania; Red River,

Texas; and Tobyhanna, Pennsylvania.

Page 12 GAO/NSIAD-99-31 Army Industrial Facilities
Chapter 1 

Introduction

civilians, a 48-percent reduction from the 21,500 in fiscal year 1989. In

fiscal year 1998, the depots received revenues of about $1.4 billion. Since

the mid-1980s, depots have generally not been able to hire new

government civilian employees because of personnel ceilings and,

therefore, have used contractor personnel to supplement their workforce

as necessary to meet workload requirements.

Like the other services, operations of the Army depots are guided by

legislative requirements. Section 2464 of title 10 provides for a Department

of Defense (DOD)-maintained core logistics capability that is to be

government-owned and -operated and that is sufficient to ensure the

technical competence and resources necessary for an effective and timely

response to a mobilization or other national emergency. Section 2466

prohibits the use of more than 50 percent of the funds made available in a

fiscal year for depot-level maintenance and repair to contract for the

performance of the work by nonfederal personnel. Section 2460 defines

depot-level maintenance and repair. Section 2469 provides that

DOD-performed depot-level maintenance and repair workloads valued at

$3 million or more cannot be changed to contractor performance without

the use of competitive procedures for competitions among public and

private sector entities. A related provision in section 2470 provides that

depot-level activities are eligible to compete for depot-level maintenance

and repair workloads.

Arsenals The Army’s two remaining manufacturing arsenals were established in the

1800s to provide a primary manufacturing source for the military’s guns

and other war-fighting equipment. Subsequently, in 1920, the Congress

enacted the Arsenal Act, codified in its current form at 10 U.S.C. 4532. It

requires that the Army have its supplies made in U.S. factories or arsenals

provided they can produce the supplies on an economic basis. It also

provides that the Secretary of the Army may abolish an arsenal considered

unnecessary. It appears that the act was intended to keep

government-owned arsenals from becoming idle and to preserve their

existing capabilities to the extent the capabilities are considered necessary

for the national defense. The Army implements the act by determining,

prior to issuing a solicitation to industry, whether it is more economical to

make a particular item using the manufacturing capacity of a U.S. factory

or arsenal or to buy the item from a private sector source. Only if the Army

decides to acquire the item from the private sector is a solicitation issued.

Page 13 GAO/NSIAD-99-31 Army Industrial Facilities
Chapter 1 

Introduction

As the domestic arms industry has developed, the Army has acquired from

industry a greater portion of the supplies that in earlier years had been

furnished by arsenals. Following World War II, the Army operated six

major manufacturing arsenals. Since 1977, only two remain in operation.2

Table 1.1 provides information on the six post-World War II arsenals,

including operating periods and major product lines.

Table 1.1: Post-World War II “Old Line”

Manufacturing Arsenals

Arsenal

Date

established Date closed Major product lines

Rock Island Arsenal, Rock

Island, Illinois

1862 Operational

today

Artillery material, gun

carriages, limbers,

caissons, tanks, tractors,

machine guns, and small

arms

Watervliet Arsenal, Watervliet,

New York

1813 Operational

today

Seacoast gun carriages,

railway mounts, high

explosives and

armor-piercing projectiles,

artillery and tank gun tubes,

mortars, and gun breeches

Picatinny Arsenal, Dover,

New Jersey

1880 1976 Powders and high

explosives, and metal

components

Frankford Arsenal,

Philadelphia, Pennsylvania

1816 1977 Small arms, fire-control and

range-finding instruments,

and gauges

Springfield Armory,

Springfield, Massachusetts

1794 1967-68 Rifles, bayonets, automatic

rifles, machine guns, and

revolvers

Watertown Arsenal,

Watertown, Massachusetts

1816 1967 Seacoast gun carriages

and guns

Source: Industrial Operations Command Historical Office.

Today the two arsenals manufacture or remanufacture a variety of

weapons and weapon component parts, including towed howitzers, gun

mounts, and gun tubes. At the end of fiscal year 1998, the Rock Island and

Watervliet facilities employed a total of about 2,430 civilians, a 46-percent

reduction from a total of about 4,500 employees at the end of fiscal 

year 1989. In fiscal year 1998, the two arsenals received about $199 million

in revenues.

2

In addition, the Army operates three facilities that are predominantly devoted to ammunition

production. These facilities are located in Pine Bluff, Arkansas; Crane, Indiana; and McAlester,

Oklahoma. These facilities were not included in the scope of our review.

Page 14 GAO/NSIAD-99-31 Army Industrial Facilities
Chapter 1 

Introduction

Industrial Funds Used

to Support Depots and

Arsenals

Funding for day-to-day operations of Army depots and arsenals is provided

primarily through the Army Working Capital Fund.3

 The services

reimburse the working capital fund with revenues earned by the depots

and arsenals for completed work based on hourly labor rates that are

intended to recover operating costs, including material, labor, and

overhead expenses. While Army depots and arsenals are primarily focused

on providing the fighting forces with required equipment to support

readiness objectives, the industrial fund was intended to optimize

productivity and operational efficiencies. Army industrial activities are

supposed to operate in a business-like manner, but they are expected to

break even and to generate neither profits nor losses.4

 Nonetheless, these

military facilities may sometimes find it difficult to follow business like

practices. For example, Army requirements may make it necessary to

maintain capability to perform certain industrial operations even though it

would not seem economical—from a business perspective—to do so.

Systems with older technology must be maintained even though acquiring

repair parts becomes more difficult and expensive. If military customers

need products that are inefficient to produce, the depots and arsenals

must produce them anyway.

To compensate the depots and arsenals for the cost of maintaining

underutilized capacity that might be needed in the future, these activities

receive supplemental funding in the operations and maintenance

appropriation under an account entitled “underutilized plant capacity.” As

shown in table 1.2, funding of this account has been reduced in recent

years. Army officials stated that the reduction was made to fund other

higher priority programs; however, they stated that in future years, this

trend would likely be reversed.

3

Under this industrial funding arrangement, applicable to a variety of business activities such as depot

maintenance and manufacturing arsenals, the Army sells goods and services to the military services

based on predetermined rates designed to recoup operating costs. Working capital fund customers pay

for the goods and services, primarily, with operations and maintenance funds appropriated by the

Congress.

4

We have previously reported on difficulties DOD faces in attempting to fully capture its operating

costs. For example, in our May 1997 testimony Defense Depot Maintenance: Challenges Facing DOD in

Managing Working Capital Funds (GAO/T-NSIAD-97-152, May 7, 1997), we noted that DOD has

consistently experienced losses in the operations of various working capital funds, including the depot

maintenance activity group, and has had to request additional funding to support their operations.

Page 15 GAO/NSIAD-99-31 Army Industrial Facilities
Chapter 1 

Introduction

Table 1.2: Army Underutilized Plant

Capacity Funding Dollars in millions

FY Arsenals Depots Total

1996 $56.1 $73.8 $129.9

1997 22.0 24.1 46.1

1998 20.6 24.2 44.8

Source: Army Budget Office.

The Army Materiel Command (AMC) and its subordinate commands hold

semiannual workload conferences to review, analyze, document, and

assign work to the five depots. In contrast, the arsenals actively market

their capabilities to DOD program management offices to identify potential

customers. Despite differences in how they obtain their work, depots and

arsenals are alike in how they set rates for their work. The process they

use begins about 18 months prior to the start of the fiscal year in which

maintenance and manufacturing will be performed. Depot and arsenal

managers propose hourly rates to recover operating costs based on the

anticipated level of future workload requirements, but rates are ultimately

determined at the Department of Army and DOD levels.

Rate setting is an iterative process that begins with the industrial activities

and the Industrial Operations Command (IOC), a subordinate command

under AMC. After they reach agreement, the proposed rates, which are

included in consolidated depot and arsenal budgets, are forwarded for

review up the chain of command. These commands frequently revise the

rates initially requested by IOC based on past performance and other

evolving workload and staffing information. When rates are reduced, the

industrial activities must find ways to cut costs or increase workload to

end the year with the desired financial outcome, which is usually to have a

cumulative zero net operating result.5

 However, even if the proposed rates

are approved without modification, the performing industrial activity can

end the year in better or worse financial shape than originally anticipated,

depending on whether or not actual costs and workload are as anticipated.

This can necessitate a rate increase in a subsequent year to offset the

losses of a prior year, or a rate reduction to offset profits.

Depots and arsenals employ direct labor workers who charge time to finite

job taskings, earning revenue for the business. In addition, they employ a

number of indirect workers, such as shop supervisors and parts

5

That is, if the total of all prior years’ profits and losses was a profit, the plan will be to reduce rates,

thus returning the accumulated profit to the customers. Returning an accumulated profit is achieved

by setting rates sufficiently low to plan for a loss for the current year.

Page 16 GAO/NSIAD-99-31 Army Industrial Facilities
Chapter 1 

Introduction

expediters, whose time cannot be related to a finite job order but

nevertheless support the depot maintenance and arsenal manufacturing

process. Likewise, the industrial facilities also employ a variety of general

and administrative overhead personnel such as production managers,

technical specialists, financial managers, personnel officers, logisticians,

contracting officers, computer programmers, and computer operators.6

While the time spent by these two categories of overhead personnel is

difficult to relate to a finite job order, their costs are nevertheless reflected

in the overall rates charged by the industrial activities.

Depot Command and

Management

Structures

AMC is responsible for management control and oversight of the Army’s

industrial facilities. The Army’s IOC—a subordinate command under

AMC—had management responsibility for both arsenals and depots. That

began to change in November 1997, when under a pilot program,

management responsibility for workloading and overseeing work at the

Tobyhanna Army Depot was transferred to the

Communications-Electronics Command, the depot’s major customer.7

 The

Army completed the transfer of operational command and control for the

Tobyhanna depot in October 1998 and plans to complete transfer of

management responsibilities for the other depots in October 1999. Each

depot will be aligned with its major customer, which is also the

coordinating inventory control point for the depot’s products. Table 1.3

summarizes the upcoming management relationship for each Army depot

and lists its principal workloads.

6

Hereafter, unless a distinction is required, indirect and overhead personnel will be collectively

referred to as overhead personnel.

7

The Communications-Electronics Command, a major subordinate command under AMC, serves as an

inventory control point for the Army’s electronics and communications systems and component parts.

Since November 1997, the Communications-Electronics Command has been responsible for

determining requirements and providing management oversight for repair programs assigned to the

Tobyhanna depot.

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Introduction

Table 1.3: Army Depots and

Management Commands and Principal

Work

Depot Major customer Principal work

Anniston Army Depot,

Alabama

Tank-Automotive and

Armaments Command

Combat vehicles, small arms

Corpus Christi Army Depot,

Texas

Aviation and Missile

Command

Helicopters, engines

Letterkenny Army Depot,

Pennsylvania

Aviation and Missile

Command

Tactical missile

maintenance, towed and

self-propelled artillerya

Red River Army Depot, Texas Tank-Automotive and

Armaments Command

Bradley Fighting Vehicle

Tobyhanna Army Depot,

Pennsylvania

CommunicationsElectronics CommandCommunications and

electronics, avionics

aLetterkenny’s artillery maintenance mission will be transferred to Anniston in 1999 as a result of a

1995 BRAC decision. Also, as a result of that decision, a portion of its tactical missile workload

will be realigned to the Tobyhanna depot.

Upon completion of the transfers of management responsibilities for

depots, the IOC workforce will be reduced by about 280 positions out of a

current staff level of about 1,400 personnel at the end of fiscal year 1998.

The gaining commands will not get additional manpower positions. AMC is

assuming that the gaining commands will be able to take on these added

responsibilities with no increase in staff. These reductions are in addition

to the 1,720 personnel reductions that IOC previously planned to make

within the individual depots during fiscal years 1998 and 1999—many of

which were put on hold because of section 364 of the National Defense

Authorization Act for Fiscal Year 1998. Section 364 prohibits the Army

from initiating a reduction in force at five Army depots participating in the

demonstration and testing of the Army Workload and Performance System

(AWPS) until after the Secretary of the Army certifies to the Congress that

AWPS is fully operational. It exempts reductions undertaken to implement

1995 BRAC decisions.

Current plans call for the arsenals to remain under the management and

control of IOC. Also, the arsenals are not currently precluded by 

section 364 from reducing their workforce. Accordingly, to adjust the

workforce to more accurately reflect the current workload, the two

arsenals are in the process of reducing their workforce by a total of over

300 positions out of 2,700.

Figure 1.1 shows the locations of the Army’s industrial facilities and each

major command to be responsible for management control and oversight.

Page 18 GAO/NSIAD-99-31 Army Industrial Facilities
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Figure 1.1: Army Depots and Arsenals and Corresponding Management Commands

Army Materiel Command

Alexandria, Va. 

Army Headquarters

Pentagon, Va. 

Industrial Operations Command

Rock Island, Ill. 

CommunicationsElectronics Command

Fort Monmouth, N.J.

Aviation and Missile Command

Huntsville, Ala. 

Tank-Automotive and Armaments Command

Warren, Mich. 

Anniston Army Depot

Anniston, Ala. 

Headquarters organization

Materiel management command

Depot

Arsenal

Corpus Christi Army Depot

Corpus Christi, Tex.

Letterkenny Army Depot

Chambersburg, Pa.

Red River Army Depot

Texarkana, Tex.

Tobyhanna Army Depot

Tobyhanna, Pa.

Watervliet Arsenal

Watervliet, N.Y.

Rock Island Arsenal

Rock Island, Ill. 

Assessment of

Changes in Staffing

Requirements

In recent years, several audit reports have highlighted the Army’s inability

to support its personnel requirements on the basis of analytically based

workload forecasts. For example, the Army Audit Agency reported in 1992

and 1994 that the Army did not know its workload and thus could not

justify personnel needs or budgets.8

 In several more recent audits, the

Army Audit Agency recommended declaration of a material weakness in

relating personnel requirements to workload and budget. In DOD’s fiscal

year 1997 Annual Statement of Assurance on Management Controls, DOD

8

Managing Workload, Organizations and Staffing, Army Audit Agency (HQ 94-751, June 23, 1994) and

Management of Army Workload of Tables of Distribution and Allowances Organizations, Army Audit

Agency (HQ 92-T2, Jan. 21, 1992).

Page 19 GAO/NSIAD-99-31 Army Industrial Facilities
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noted a material weakness in its manpower requirements determination

system. It noted that the current system for manpower requirements

determination lacked the ability to link workload, manpower

requirements, and dollars. Thus, the Army was not capable of rationally

predicting future civilian manpower requirements based on workload. As a

result, managers at all levels did not have the information they needed to

improve work performance, improve organizational efficiency, and

determine and support staffing needs, manpower budgets, and personnel

reductions.

In response to concerns about its workforce planning, the Army has

sought to implement a two-pronged approach to evaluating its workforce

requirements. This includes implementing a 12-step methodology analysis

and developing an automated system for depots, arsenals, and ammunition

plants that is referred to as AWPS. In February 1998, we reported that the

Army had developed this corrective action plan to resolve its material

weakness but that it might have difficulty achieving the expected

completion date.9

The 12-step methodology, adopted by the Army in April 1996, is a largely

manual process that provides a snapshot of personnel requirements

designed to link personnel requirements to workload at various

headquarters commands and organizations. The methodology includes

analyses of missions and functions, opportunities to improve processes,

workload drivers, workforce options (including civilian versus using

military personnel and contracting versus using in-house personnel), and

organizational structure. It also looks for ways to consolidate and create

more effective use of indirect and overhead personnel assigned to Army

industrial activities. Figure 1.2 shows the components of the 12-step

method.

9

Force Structure: Army’s Effort to Improve Efficiency of Institutional Forces Have Produced Few

Results (GAO/NSIAD-98-65, Feb. 26, 1998).

Page 20 GAO/NSIAD-99-31 Army Industrial Facilities
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Figure 1.2: The Army’s 12-Step Methodology for Evaluating Workforce Requirements

Step 1 - Create resource baseline

Step 2 - Validate mission

Step 3 - Evaluate functions

Step 4 - Analyze sources of labor

Step 5 - Define, validate, and project workload

Step 6 - Develop staffing model

Step 7 - Discuss issues and assumptions

Step 8 - Compute demand for labor

Step 9 - Describe staffing offsets

Step 10 - Structure new organization

Step 11 - Resolve issues

Step 12 - Document the results

The development of AWPS resulted from an Army effort initiated in July

1995 to have a contractor survey leading edge commercial and public

sector entities to identify their “best practices” for determining personnel

requirements based on a detailed analysis of work to be performed. The

contractor concluded that a computer-based system developed by the

Naval Sea Logistics Center, Pacific, for use in naval shipyards provided the

greatest potential for documenting personnel requirements at Army

industrial activities. Consequently, in March 1996, the Army provided

funding to a support contractor and the Navy to develop and implement a

modified version of the Navy’s computer-based process at Army

maintenance depots to support the maintenance function.

The AWPS system is designed to facilitate evaluation of what-if questions,

including workload and personnel requirements analyses. The evolving

system currently consists of three modules—performance measurement

control, workload forecasting, and workforce forecasting—to integrate

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Introduction

workload and workforce information to determine personnel requirements

for various levels of work. The system provides two primary management

information products—information concerning the production status on

specific project orders and information concerning workload forecasts

and related workforce requirements.

Objectives, Scope,

and Methodology

The Chairman of the Subcommittee on Readiness, House Committee on

National Security, asked us to examine selected workforce issues

pertaining to the Army’s depots, focusing particularly on the Corpus

Christi depot, where significant difficulties were encountered in

implementing a planned personnel reduction during 1997. Subsequently,

Congressman Lane Evans requested that we examine workforce issues at

the Army’s manufacturing arsenals. Accordingly, this report focuses on

(1) whether the Army had a sound basis for personnel reductions planned

at its depots during a 2-year period ending in fiscal year 1999; (2) progress

the Army has made in developing an automated system for making depot

staffing decisions based on workload estimates; (3) other factors that may

adversely impact the Army’s ability to improve the cost-effectiveness of its

depot maintenance programs and operations; and (4) workload trends,

staffing, and productivity issues at the Army’s manufacturing arsenals.

This is one of a series of reports (see related GAO products at the end of

this report) addressing DOD’s industrial policies, outsourcing plans, activity

closures, and the allocation of industrial work between the public and

private sectors.

To determine whether the Army had a sound basis for personnel

reductions, we reviewed the rationale, support, status, and resulting

impact of the Army’s proposal to reduce staffing at its depots. We

interviewed resource management personnel at Army headquarters, Army

Materiel Command, the Army Industrial Operations Command, the Army

Aviation and Missile Command, and the Corpus Christi Army Depot where

we obtained information on the Army’s reasons for proposed staffing

reductions, and reviewed documentation supporting the Army’s proposed

staff reduction plan. We discussed staff reduction and related issues with

Army Audit Agency officials. To ascertain the Army’s progress in

developing workload-based staffing estimates, we met with officials from

the Naval Sea Logistics Center, Pacific, which is modifying previously

existing Navy programs to fit the Army depot and arsenal scenarios. We

also interviewed key Norfolk Naval Shipyard and Navy headquarters

personnel who have used the Navy’s automated workforce planning

system. We visited Corpus Christi, Letterkenny, and Tobyhanna depots to

Page 22 GAO/NSIAD-99-31 Army Industrial Facilities
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Introduction

obtain information on the implementation of AWPS and to observe depot

employees’ use of AWPS-generated data. We also reviewed the results of the

Army Audit Agency’s audit work regarding the implementation of

personnel downsizing and regarding the development and testing of the

AWPS system.

To identify factors that may adversely impact the Army’s ability to improve

the cost-effectiveness of its depot maintenance operations, we analyzed

financial and productivity data for each of the depots and discussed

emerging issues with Headquarters IOC, depot, and commodity command

officials. We also visited the Corpus Christi, Letterkenny, and Tobyhanna

depots to obtain information on various aspects of their operation and

management. We visited the Naval Air Systems Command, Patuxent River,

Maryland to follow up on Corpus Christi Army Depot problems associated

with performing Navy workload. During subsequent depot and arsenal

visits, we asked questions about the scheduling of work, parts availability,

overtime, movement of personnel, and related topics. We also visited

selected Army repair facilities that perform depot-level tasks but are not

recognized as traditional depot-level maintenance providers. We also

conducted literature and internet searches of appropriate topics.

To review workload, staffing, and productivity issues at Army arsenals, we

interviewed personnel at the Army Industrial Operations Command, which

provides management control and oversight for the manufacturing

arsenals. We reviewed back-up documentation supporting proposed

staffing reductions and the reasonableness and support assumptions on

which staff reduction proposals were based. We visited the two arsenals

and met with a variety of key management personnel to discuss and obtain

their views on various workload and staffing issues.

We performed work at the following activities:

• Department of Army Headquarters, Washington, D.C.

• Army Materiel Command, Alexandria, Va.

• Army Industrial Operations Command, Rock Island, Ill.

• Army Aviation and Missile Command, Huntsville, Ala.

• Corpus Christi Army Depot, Corpus Christi, Tex.

• Letterkenny Army Depot, Chambersburg, Pa.

• Tobyhanna Army Depot, Tobyhanna, Pa.

• Rock Island Arsenal, Rock Island, Ill.

• Watervliet Arsenal, Watervliet, N.Y.

Page 23 GAO/NSIAD-99-31 Army Industrial Facilities
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• Aviation Classification Repair Activities Depot (Army National Guard),

Groton, Conn.

• Fort Campbell, Fort Campbell, Ky.

• Fort Hood, Killeen, Tex.

• Management Engineering Activity, Chambersburg, Pa.

• Naval Air Systems Command, Patuxent River, Md.

• Naval Sea Systems Command, Arlington, Va.

• Commander in Chief, U.S. Atlantic Fleet, Norfolk, Va.

• Norfolk Naval Shipyard, Portsmouth, Va.

• Army Audit Agency, Alexandria, Va.

We conducted our work between September 1997 and August 1998 in

accordance with generally accepted government auditing standards and

generally relied upon Army provided data. While reviewing AWPS generated

data, we noted significant errors, particularly early in the audit, and did

not utilize that information other than to note its occurrence.

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A variety of weaknesses were contained in IOC’s analysis supporting its

plan to eliminate about 1,720 depot jobs over a 2-year period ending in

fiscal year 1999. Those weaknesses accentuated previously existing

concerns about the adequacy of the Army’s workforce planning. The lack

of an effective manpower requirements determination process has been an

Army declared internal control weakness, for which several corrective

actions are in process, including the development and implementation of

an automated workload and workforce planning system. An initial attempt

to implement the planned reductions at the Corpus Christi Army Depot

proved chaotic and resulted in unintended consequences from the

termination of direct labor employees who were needed to support depot

maintenance production requirements. While the Army was proceeding

with efforts to strengthen its workforce planning capabilities during this

time, those capabilities were not sufficiently developed to be used to

support the IOC’s analysis. The Army has made progress in establishing

AWPS—its means for analyzing and documenting personnel requirements

for the maintenance function—and is approaching the point of certifying

its operational status to the Congress. However, while the current version

of the system addresses direct labor requirements, it does not address

requirements for overhead personnel—an important issue in the

ill-planned 1997 reduction of personnel at the depot in Corpus Christi,

Texas.

Weaknesses in the

Army’s Workforce

Reduction Process

The Army’s plan for reducing the workforce at its depots had a number of

weaknesses and did not appear to be consistent with its own policy

guidance. Army Regulation 570-4 (Manpower Management: Manpower and

Equipment Control) states that staffing levels are to be based on

workloads to be performed. However, our work indicates that the Army’s

plan for reducing staff levels at its depots was developed primarily in

response to affordability concerns and was intended to lower the hourly

rates depots charge their customers. The plan was not supported by a

detailed comparison of planned workload and related personnel

requirements. Army officials stated that incorporation of the 12-step

process into AWPS will help the Army address affordability while directly

linking manpower to funded workload, assuming that the Army ensures

accuracy and reliability of AWPS data input, both by the planners and via

the shop floor.

In July 1996, as part of its review of proposed rates, AMC headquarters

determined that the hourly rates proposed by the Army depots for

maintenance work in fiscal year 1998 were generally unaffordable. It

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concluded that depot customers could not afford to purchase the work

they needed. The Army’s depot composite rate for fiscal year 1998 was

over 11 percent higher than the composite rate for fiscal year 1996. 

Table 2.1 provides a comparison of the initial rates requested by each

Army depot for fiscal year 1998, the final rates approved for that year by

Headquarters AMC and the Army staff, and the percentage difference.

Table 2.1: Fiscal Year 1998 Depot

Composite Hourly Rates Requested by

Depots and Approved by Headquarters Depot

Composite

requested rate

Composite final

rate

Percentage

change

Anniston $105.78 $92.40 –12.6

Corpus Christi 148.19 125.44 –15.4

Letterkenny 111.93 84.50 –24.5

Red River 100.53 108.74 +8.2

Tobyhanna 83.46 69.41 –16.8

Composite ratea $107.03 $93.71 –12.4

Note: The rates shown are average composites. Actual rates paid by depot customers vary

based on the specific type of services rendered. Information on rates was provided by AMC.

aComposite rates are weighted figures and not numeric averages.

AMC Headquarters officials stated that in recent years the depot rates had

increased to the point that, in some cases, they were not affordable.1 IOC

officials stated that since they had to reduce the rates quickly, they had

little choice but to require staff reductions.

Reported personnel costs in fiscal year 1997 comprise about 46 percent,

material and supplies about 29 percent, and other miscellaneous costs

about 25 percent of depots’ operating costs.

As shown in table 2.1, the rate reduction varied by depot. Unlike the other

depots where IOC set a lower rate, IOC set the rate at the Red River depot

higher than depot officials requested. However, the rate set was still not

high enough to cover estimated costs at that depot. An IOC official stated

that if the Red River depot had charged its customers based on the

estimated costs of operations at that facility, including recovery of

1

In a prior report, Army Depot Maintenance: Privatization Without Further Downsizing Increases

Costly Excess Capacity (GAO/NSIAD-96-201, Sept. 18, 1996), we noted that inefficiencies resulting

from large amounts of excess capacity is a significant factor. More specifically, we said that declining

workload and the failure to eliminate excess capacity have resulted in an increased share of relatively

fixed overhead that must be allocated to each depot maintenance workload. Additionally, we cited

other factors such as declining workload and production inefficiencies in a 1997 testimony, Defense

Depot Maintenance: Challenges Facing DOD in Managing Working Capital Funds

(GAO/T-NSIAD/AIMD-97-152, May 7, 1997).

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previous operating losses, the composite rate would have been over 

$174 per hour in fiscal year 1998. Having made the decision to reduce the

rates through staffing cuts, what remained to be done was to develop a

depot staff reduction plan. The initial plan developed by IOC headquarters

personnel eliminated about 1,720 depot jobs. The proposal would have

affected personnel at three of the five maintenance depots—Corpus

Christi, Letterkenny, and Red River.2

Staff Reduction Plan Based

on Questionable Ratios

and Productivity

Assumptions

To determine the staff reduction plan, IOC headquarters used a

methodology that considered direct labor requirements, overhead

requirements, and employee overtime estimates. We analyzed these

factors and determined that (1) the direct labor requirements were based

on unproven productivity assumptions, (2) the overhead personnel

requirements were based on an imprecise ratio analysis, and

(3) unrealistic quantities of overtime were factored into the analysis. 

Table 2.2 shows the number of positions originally scheduled for

elimination at each depot for fiscal years 1998 and 1999.

Table 2.2: Summary of Planned

Personnel Reductions at Army Depots

Depot

Staffing as of

Mar. 30, 1997

Reductions

planned for

FY 1998

Reductions

planned for

FY 1999

Total

reductions

planned for

FY 1998-99

Anniston 2,578 0 0 0

Corpus Christi 3,074 328 685 1,013

Letterkenny 2,010 151 54 205

Red River 2,249 164 338 502

Tobyhanna 2,455 0 0 0

Total 12,366 643 1,077 1,720

Note: The planned reductions for fiscal year 1999 include additional cuts of 223 authorized

positions at the Corpus Christi depot, 115 authorized positions at the Red River depot, and 

54 authorized positions at the Letterkenny depot, which were proposed, but not included in

budget planning documents. Table does not include BRAC-related personnel reductions, which

total 595 positions at the Red River depot and 575 positions at the Letterkenny depot.

Source: GAO analysis of data provided by IOC.

Direct Labor Requirements

Based on Unproven

Productivity Assumptions

To determine and justify the number of required direct labor employees,

IOC divided the total anticipated workload (measured in direct labor hours)

2

Staff reductions were not recommended for the Anniston and Tobyhanna depots. These depots were

projected to receive additional repair work from depots closed or realigned as a result of the 1995

BRAC process. IOC officials decided that their projected workloads would support the current

workforce.

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by a productive workyear factor. This factor represents the amount of

work a direct labor employee is estimated to be able to accomplish in 

1 fiscal year. IOC used a variety of assumptions to support its position that

the number of depot personnel could be reduced. IOC’s analysis used

productive factors that are substantially higher than either the DOD

productive workyear standard or the historical average achieved in the

recent past by Army depots. For example, IOC’s analysis assumed that each

Corpus Christi depot direct labor employee would accomplish 1,694 hours

of billable time, not including paid overtime hours, in a workyear.

However, while DOD’s productive workyear standard for direct labor depot

maintenance employees is 1,615 hours per person, the Corpus Christi

depot direct labor employees averaged a reported 1,460 hours of billable

time in fiscal year 1997 and 1,528 hours in fiscal year 1996. By using the

higher productivity level, the IOC analysis showed the Corpus Christi depot

would need 14 percent fewer employees, based on the change in this

factor.3

 Table 2.3 provides a comparison of IOC’s worker productivity

assumptions for each depot and the actual reported productivity levels for

fiscal year 1997.

Table 2.3: IOC’s Assumptions, DOD’s

Standard, and Reported Experience of

Depot Workers’ Productivity for Fiscal

Year 1997

Direct labor hours

Depot IOC assumption DOD standard

Depot reported

productivity

Anniston 1,656 1,615 1,421

Corpus Christi 1,694 1,615 1,460

Letterkenny 1,711 1,615 1,590

Red River 1,634 1,615 1,533

Tobyhanna 1,699 1,615 1,569

While the DOD productive workyear standard assumes that each direct

labor worker will achieve 1,615 hours of billable time each year, the

depots have been unable to achieve this goal. Several factors affect this

productivity level. First, due to workforce seniority, Corpus Christi depot

workers have recently reported using an average of 196 hours of paid

annual leave per year.4

 This is higher than the reported 175 hours of annual

leave used on average at all Army activities as well as the reported

167-hour average annual leave used at other government agencies. In

addition, Corpus Christi depot employees used a reported average of

3

Other depots would be affected similarly, but to a lesser degree, based on a comparison of the

assumption and the individual depot’s actual experience.

4

Federal employees with between 3 and 15 years of government service earn 160 hours of annual leave

per year, and those with over 15 years of service earn 208 hours.

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about 112 hours of sick leave per year—more sick leave than they earn in

a given year5

 and about 50 percent higher than other Army, DOD, and

government activities. The reported Army-wide average sick leave use was

73 hours; the DOD average, 78 hours; and the governmentwide average, 

74 hours. Several depot management officials commented that while they

monitor sick leave usage, it has increased partly as a result of the older

workforce and partly as a result of the Federal Employees Family Friendly

Leave Act, Public Law 103-338, October 22, 1994, which allows the use of

sick leave to care for family members and for bereavement purposes.

Second, because most depot employees at the Corpus Christi and Red

River depots are working a compressed work schedule of four 10-hour

workdays, they receive 100 hours of paid holiday leave per year. In

contrast, a government employee who works a 5-day 8-hour workweek,

receives 80 hours of paid holiday leave per year. Third, the depots’ direct

labor workers charge varying amounts of overhead (nonbillable) time for

training, shop cleanup, job administration, temporary supervision, certain

union activities, and other indirect activities. In fiscal year 1997, direct

labor workers’ charges to overhead job orders ranged from a reported

average of 125 hours at the Letterkenny depot to 205 hours at the Corpus

Christi depot.

Overhead Labor Requirements

Based on Questionable Ratio

Analysis

To determine and justify the number of required overhead employees, IOC

used a ratio analysis that essentially allowed a specified percentage of

overhead employees for each direct labor worker. IOC officials told us that

they believed the depots had too many overhead personnel and they had

developed a methodology to base overhead personnel requirements on

predetermined ratios of direct to overhead employees. IOC developed its

methodology and the ratios based on actual direct and overhead employee

ratios for a private-sector firm tasked with operating a government-owned,

contractor-operated Army ammunition plant.

Different ratios were assigned based on the number of functions each

depot organization performs—such as maintenance, ammunition storage,

or base operation support.6

 The IOC ratio analysis assumed that for every

100 direct labor employees, a single-function depot organization could

5

Federal civilian employees earn 104 hours of sick leave per year. Unused sick leave may be carried

forward for use in subsequent years.

6

Three of the Army maintenance depots are located on military bases that also support ammunition

storage facilities, increasing the overall requirement for overhead personnel. Additionally, four of the

depots are considered the host activity on the bases where they reside. As the host activity, they are

responsible for managing the housekeeping and business activities associated with having a large

piece of real estate that is similar to a small town—such as grounds-keeping, building, and road

maintenance, and fire and safety operations. These activities require additional support personnel. The

difficulty lies in estimating the number of personnel required to support these additional requirements.

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have no more than 40 overhead personnel, a dual-function depot

organization no more than 50 overhead personnel, and a three-function

depot organization no more than 60 overhead personnel. Table 2.4

provides a summary of ratios IOC used to determine the number of

overhead employees.

Table 2.4: IOC Ratios for Determining

Overhead Personnel Requirements

Depot Functions

Maximum permissible

overhead personnel per 100

direct personnel

Anniston Maintenance, ammunition storage,

host 60

Corpus Christi Maintenance 40

Letterkenny Maintenance, ammunition storage,

host 60

Red River Maintenance, ammunition storage,

host 60

Tobyhanna Maintenance, host 50

A number of concerns have been raised about the use of these ratios. For

example, in 1997 the then Deputy Under Secretary of Defense (Logistics)

stated that the use of such ratios may provide only marginal utility in

identifying potentially excess employees and inefficient depot operations.

He noted that ratio analysis may not consider the value of productivity

enhancements that result from the acquisition of increasingly

sophisticated technology to accomplish depot missions, which in turn

causes direct labor requirements to decrease, while the overhead labor

requirements increase.7

 Depot officials similarly noted that technology

enhancements over the past few years have significantly reduced direct

labor requirements, while sometimes increasing overhead in the depots,

particularly when training and maintenance costs increase. They noted

that IOC’s methodology did not consider the impact of various efficiency

enhancements that eliminated substantial numbers of direct labor

positions and added a smaller number of overhead positions. These

enhancements include the replacement of conventional labor-intensive

lathes with state-of-the-art numerically controlled devices, hundreds of

conventional draftsmen with a few technicians having computer-aided

design skills, and numerous circuit card repair technicians with

multimillion-dollar devices that make and repair circuit cards.

7

Defense Depot Maintenance Council Business Plan Fiscal Years 1996-2001. The Council is an

organization of senior officials in each of the services, the Defense Logistics Agency, and the Office of

the Secretary of Defense who are responsible for maintenance policy and operations.

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Our discussions with depot officials and a support contractor raised

similar concerns, including not considering and analyzing (1) differences

in the complexity of work being performed in different depots,

(2) requirements for government organizations to maintain certain

overhead activities that are not required in the private sector, (3) differing

policies in the way depots classify direct and overhead labor,

(4) allowances for private sector contractors that perform supplemental

labor, (5) the extent to which direct personnel work overtime, and (6) the

extent to which contractors perform overhead functions.

Army officials stated that the ratios were not developed using a sound

analytical basis, but said that determining overhead requirements is not, by

its very nature, a precise science. While we recognize the challenge that

this presents, we have stated in the past that until a costing system,

computer-based methodology, and 12-step methodology are fully

developed and integrated, the Army cannot be sure that it has the most

efficient and cost-effective workforce.8 Although the 12-step process also

calls for the use of ratios in some cases, these ratios are based on

methodologies that produce finer degrees of precision. The process also

calls for the use of more appropriate mixes of fixed and variable overhead

personnel. Nonetheless, we share IOC officials’ concerns that the Army

depots have too much overhead. We have reported that this is in part a

consequence of having underutilized depot facilities.9 Thus, personnel

reductions alone, without addressing excess infrastructure issues, cannot

resolve the Army’s problem of increasing maintenance costs reflected in

its depot rate structure.

In commenting on a draft of this report, DOD acknowledged that the

methodology the Army used to project workload requirements lacked the

precision that would have been available if AWPS had been fully

implemented and workload projections were more realistic. While DOD

stated that the personnel reduction process received intense scrutiny,

implementation of its plan achieved its main objective, which was a

reduction in indirect personnel costs that it believed would lead to

unaffordable rates.

8

Force Structure: Army Efforts to Improve Efficiency of Institutional Forces Have Produced Few

Results (GAO/NSIAD-98-65, Feb. 26, 1998).

9

Air Force Depot Maintenance: Privatization-in-Place Plans Are Costly While Excess Capacity Exists

(GAO/NSIAD-97-13, Dec. 31, 1996) and Army Depot Maintenance: Privatization Without Further

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

Page 31 GAO/NSIAD-99-31 Army Industrial Facilities
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Questionable Analysis Supporting Planned

Depot Reductions Accentuated Need to

Improve Workforce Planning

Reduction Plan Envisioned

Substantial Overtime Following

Personnel Terminations

IOC’s staff reduction plan was developed using the assumption that when

the suggested personnel restructuring was completed the remaining direct

labor employees would be expected to work varying amounts of overtime

to accomplish their planned maintenance workloads. In fiscal years 1998

and 1999, Corpus Christi Army Depot direct employees would be expected

to work overtime that averaged about 16 and 12 percent, respectively, of

their regular time hours. IOC personnel stated that it is less expensive to

pay overtime rates than to have more employees charging an equivalent

number of straight time hours, particularly given the uncertainties

regarding the amount of forecasted workload that might not materialize.

Historically, Army depot employees have performed varying amounts of

overtime. For example, in fiscal year 1996, the Army maintenance depots

reportedly averaged 13-percent overtime, with individual depot overtime

rates ranging from a low of about 4 percent at the Tobyhanna depot, to a

high of about 19 percent at the Corpus Christi depot. Although Corpus

Christi originally planned for about 6-percent overtime for direct

personnel during fiscal year 1998, the plan was revised to its current

15.8-percent overtime plan and unplanned requirements caused average

reported overtime by direct employees to approach 30 percent in some

months, with individual rates ranging from 0 to over 50 percent. Using

overtime could provide a cushion against workload shortages, as opposed

to a short-term alternative of hiring people to cover unanticipated

increases in workloads; however, to plan for average overtime rates of up

to 15.8 percent appears to be beyond the norm for such types of activities,

particularly when unplanned requirements could drive the overtime usage

substantially above the levels that were planned. For example, we

compared the 1997 Bureau of Labor Statistics durable goods

manufacturing work week, including overtime, which averaged about 

42.8 hours, with comparable data for Corpus Christi and noted that a

15.8-percent overtime figure corresponds to a 46.3 hour work week, while

30 and 50 percent overtime figures correspond to workweeks of 52 and 

60 hours, respectively.

Page 32 GAO/NSIAD-99-31 Army Industrial Facilities
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Depot Reductions Accentuated Need to

Improve Workforce Planning

Attempted

Implementation of the

Staff Reduction Plan

at Corpus Christi

Depot Proved Chaotic

and Had Unintended

Consequences

AMC efforts to implement its planned reductions at its Corpus Christi depot

proved to be extremely chaotic and resulted in unintended consequences.

The enactment of section 364 of the 1998 Defense Authorization Act

restricted further personnel reductions, except those that are BRAC-related.

Army officials stated that when it became apparent that the incentives10

being offered to indirect personnel in exchange for voluntary employment

terminations would not achieve the desired reduction of 336 employees,

similar offers were extended to include direct personnel. These officials

stated that incentive offers were made to direct labor employees, only

when the position held by the terminated direct laborer could be filled by

an indirect labor person, who otherwise would face involuntary

separation.11 Notwithstanding that requirement, any depot

employee—indirect or direct—was allowed to separate until the desired

goal of eliminating 336 employees was reached. Consequently, some direct

employees separated, which further exacerbated an existing productivity

problem. The congressional action followed and postponed completion of

the staff reduction plan until AWPS was certified as operational.

Efforts to Implement Staff

Reductions

According to headquarters AMC officials, command industrial activities had

too many overhead personnel and the depots could eliminate some of

these positions without adversely affecting productivity. To avoid an

involuntary reduction in force targeting overhead positions, they

developed a plan to encourage voluntary separations. AMC authorized the

use of financial incentives, including cash payments and early retirement

benefits, and authorized the extension of this offer to direct personnel. At

the Corpus Christi depot, 336 personnel voluntarily terminated their

employment in 1997 under the Army’s staff restructuring plan—55

personnel left through normal attrition and 281 personnel were offered

financial incentives to encourage their terminations.12 In June and

July 1997, this latter group was tentatively approved for various financial

incentives in return for voluntary termination of employment.

By the end of June 1997, paperwork authorizing voluntary retirements

with cash incentives was approved for some employees while still pending

10Incentives included approvals for early retirements and cash payments.

11In some cases, this was to be achieved by converting an indirect-employee to a direct one; in other

situations, the position held by a separating direct employee might be filled by a second direct

employee, whose job, in turn, might be filled by a third indirect employee. The general effect of this

was to replace direct employees with less experienced or unexperienced employees.

12Also in 1997, 336 Red River depot employees received financial incentives to leave. Most of these

terminations were related to the BRAC Commission realignment of workloads to the Anniston Army

Depot.

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Depot Reductions Accentuated Need to

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for others. Some left the Corpus Christi area thinking they had been

granted authorization to leave and receive cash incentive payments.

However, at this same time, headquarters AMC was addressing numerous

questions regarding the appropriateness of the staff reduction effort, given

the size of the depot’s scheduled workload. As a result of these questions,

Headquarters, AMC, asked the Army Audit Agency to review and comment

on the documentation supporting the recommended staff cuts.

Army Audit Agency personnel compared the IOC’s assessment of personnel

requirements against computer-generated forecasts from the AWPS, which

was still under development. The auditors, using AWPS-generated products

as their primary support, concluded on June 27, 1997, that personnel cuts

were not necessary. Furthermore, the auditors concluded that, based on

AWPS calculations, rather than lose personnel, Corpus Christi depot would

need to hire 44 additional personnel.

On July 1, 1997, in response to the Army Audit Agency findings, the Army

directed its personnel offices to stop processing paperwork for voluntary

separations and financial incentives. On July 2, 1997, Corpus Christi

personnel officers were directed to recall the more than 190 employees

whose applications had not been fully approved. This event caused a great

deal of concern, both among the affected personnel and the workforce in

general. According to cognizant Corpus Christi depot personnel officials,

some of the employees had taken separation leave, others had sold their

residences, and still others had moved out of state and bought new homes.

Subsequently, the Army organized a task force including representatives

from AMC, IOC, the Army Audit Agency, and depot management to review

and validate information contained in the AWPS computational database.

The team found that one major Corpus Christi customer had incorrectly

coded unfunded workload requirements totaling $70 million as if they

were funded, having the effect of overstating personnel requirements. This

process left unclear the precise number of employees that were needed to

support the approved depot workload.

Nevertheless, after 3 to 4 weeks of what depot officials described as zero

productivity, the Army declared that documentation supporting IOC’s

recommended reductions was accurate and employees were given

permission to depart.

Reductions Produced

Unintended Consequences

In offering financial separation incentives at the Corpus Christi depot

during fiscal year 1997, AMC did not limit the separation opportunities to

Page 34 GAO/NSIAD-99-31 Army Industrial Facilities
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Depot Reductions Accentuated Need to

Improve Workforce Planning

overhead personnel. They did not think the desired number of workers

would volunteer, if the incentives were restricted to overhead personnel

only. Further, headquarters personnel did not want to require involuntary

separations. Of the 281 personnel separating with incentives from the

Corpus Christi depot, 147 were classified as direct labor and 134 as

overhead personnel. Including those separating without incentives, 

187 direct labor employees were separated from Corpus Christi.13

Given the potential imbalances in the workforce caused by the planned

personnel separations, Corpus Christi management and union personnel

jointly developed a plan to transfer indirect employees to fill vacated

direct labor jobs. These procedures were adopted before any incentive

offers were made and were designed to avoid the involuntary separation of

indirect personnel by retraining them to assume direct labor jobs vacated

by senior personnel accepting incentive offers. The plan required that 

49 overhead employees complete various training programs before they

could assume the targeted direct labor position. However, progress toward

achieving these objectives has been slower than expected. The depot

initially expected to backfill vacant direct labor jobs by January 1998, but

in May 1998 when we visited the depot, only one-third of the 49 overhead

personnel scheduled to be retrained had moved to their newly assigned

jobs and begun their conversion training and by mid-July, depot officials

advised that 80 percent had moved to new positions.

In commenting on a draft of this report, Army officials stated that these

conversions were scheduled to be completed in November 1998. However,

depot officials also told us that it takes between 3 and 4 years to retrain a

typical indirect employee as a direct employee. According to depot

personnel, the loss of 187 experienced direct labor employees exacerbated

the existing productivity problem at the Corpus Christi depot. To fill in the

need for direct labor, employees worked a reported average of 19 percent

overtime, and the depot had to use 113 contractor field team personnel14 in

addition to the 70 contractor personnel already working in the depot.

Nonetheless, the depot has had major problems meeting its production

schedule and, as discussed further in the next chapter, may lose repair

work from the Navy, except for crash damage work.

13We have previously reported on the importance of planning for the effective use of separation

incentives to eliminate unnecessary positions while retaining critical skills. See Federal Downsizing:

Better Workforce and Strategic Planning Could Have Made Buyouts More Effective (GAO/GGD-96-62,

Aug. 26, 1996).

14Contractor field team personnel are contractor employees who augment the government workforce

on an as-needed basis. These personnel typically work along-side government employees.

Page 35 GAO/NSIAD-99-31 Army Industrial Facilities
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Depot Reductions Accentuated Need to

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Subsequently, the Congress enacted the section 364 legislation, which was

effective November 18, 1997, postponing involuntary reductions until the

Army had certified it had an operational automated system for determining

workload and personnel staffing. As a result, the balance of IOC’s proposed

staff reductions planned for fiscal year 1999 was deferred.

Automated System for

Identifying

Requirements Could

Soon Be Certified

Operational, but Some

Development Work

Remains

Army efforts to develop AWPS have proceeded to the point that required

certification to the Congress of its operational capability is expected soon.

Even so, efforts will be required to ensure that accurate and consistent

workload forecasting information is input to the system as it is used over

time. The Army recently completed development and prototype testing of

a system enhancement to provide automated support for determining

indirect and overhead personnel requirements. Based on our draft report

recommendations, the Army plans to postpone AWPS certification until this

system improvement is operational at all five maintenance depots.

Certification of System to

the Congress

In May 1996, the Army completed installation and prototype testing of the

AWPS at the Corpus Christi Army Depot. In June 1997, it announced plans

to extend the AWPS process to other Army industrial facilities, including

manufacturing arsenals and ammunition storage sites. At the same time,

the Army expected that implementation of AWPS at the five maintenance

depots would be completed in August 1997.15 Congressional certification

as required by section 364 of the 1998 Defense Authorization has not yet

occurred.

In March and April 1998, a team of representatives from various AMC

activities, in consultation with the Army Audit Agency, developed AWPS

acceptance criteria, that were later accepted by the Assistant Secretary of

the Army for Manpower and Reserve Affairs. Army auditors compared

acceptance criteria to actual demonstrated experience and reported that

the system is operational at all five depots, system programming logic is

reasonably sound, and AWPS performance experience satisfies the Army’s

acceptance criteria.16 In August 1998, Army officials stated that the

Secretary of the Army could make the mandated certification of successful

implementation of computer-based workload and personnel forecasting

procedures at Army maintenance depots within the next few months.

Army officials stated that several planned system enhancements have not

15In fiscal years 1996 and 1997, the Army estimates it spent $2.4 million on AWPS development and

implementation. In fiscal year 1998, it budgeted an additional $5 million for AWPS-related tasks.

16Army Workload and Performance System in Maintenance Depots, AA98-258, July 31, 1998.

Page 36 GAO/NSIAD-99-31 Army Industrial Facilities
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Depot Reductions Accentuated Need to

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yet been implemented, but they do not believe these items would preclude

the Secretary from certifying successful completion of AWPS

implementation. However, in its written comments to our draft report, DOD

stated the Army now plans to postpone AWPS certification until an

automated support module for determining indirect and overhead

personnel requirements is fully operational at each of the five maintenance

depots.

Ensuring Accurate Data Assuming successful system implementation, future reliability of the

system will depend upon the availability and entry of accurate and

consistent data imported to AWPS and used to generate system products.

The AWPS system provides three primary management information

products—information concerning production performance on specific

project orders and information concerning workload forecasts and related

workforce requirements. The AWPS system receives and processes data

from several computerized Army support systems, including the Standard

Depot System, Automated Time Attendance and Production System,

Headquarters Application System, and Maintenance Data Management

System. The Standard Depot System and Automated Time and Attendance

System input project status and expense information from the depot

perspective. The Headquarters Application System provides status and

planned workload data from the IOC perspective, and the Maintenance

Data Management System provides workload data from the Army

commodity command (major customer) perspective.

Army leadership, in 1997, asked the Army Audit Agency to review and

validate the proposed depot personnel reductions. Although the system

was still being developed, this early experience demonstrated the

vulnerability of personnel requirement statements if the computational

database contains errors and inconsistencies. The Army Audit Agency

identified problems that resulted because AWPS-generated staffing

estimates were based on inaccurate workload forecasts imported to the

AWPS computational database. During the implementation period, the Army

periodically compared AWPS data with similar information contained in the

other computerized support systems and found numerous inconsistences.

Other data inaccuracies stemmed from employees’ not correctly charging

time to job codes on which they were working and the reporting of job

codes that were not recognized by the AWPS system. In July 1998, the Army

Audit Agency reported that comparisons of data contained in AWPS and

several support systems have improved to the point that system managers

believe the system logic and AWPS-processed data are reasonably sound.

Page 37 GAO/NSIAD-99-31 Army Industrial Facilities
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Questionable Analysis Supporting Planned

Depot Reductions Accentuated Need to

Improve Workforce Planning

Further System

Enhancements Underway

As of August 10, 1998, the Army had not updated and entered several

critical items into the automated workforce forecasting subsystems. These

items included (1) updating personnel requirements for overhead

personnel based on the approved 12-step process and (2) developing a

database of employee skills and a breakdown of depot workload tasks by

required job skills. However, as noted in its comments to a draft of this

report, DOD stated that the Army planned to postpone certifying this

system as operational until it incorporates automated procedures for

determining indirect personnel requirements. This should enhance the

effectiveness of the AWPS system.

AWPS was initially envisioned only as a tool for documenting requirements

for direct labor. However, in May 1998 the Army determined that it would

integrate an automated version of the 12-step process into the AWPS

system. The model estimates for each maintenance shop and support

function the required fixed and variable overhead personnel that are

needed to support the direct workload. Because the model is customized

to meet individual depot needs, a 50-person sheet metal shop may have

overhead requirements different from a similarly sized electronics shop. In

October 1998, Army officials stated that the Army had installed an

automated 12-step process for predicting overhead personnel

requirements at each of the five maintenance depots and that the depots

were developing input data required by the system’s computational

database.

The Army also plans to enhance the current AWPS system by adding an

automated database reflecting specific skills of each depot’s employee.

Work on this system enhancement is expected to be completed in

January 1999. The Army anticipates that the automated database will

enable the depots to estimate personnel requirements for each specific job

specialty and facilitate identification and movement of skilled workers

between shops to offset short-term labor imbalances.

Conclusions The Army did not have a sound methodology for projecting workforce

requirements; this led to a highly undesirable set of events that resulted in

the voluntary separation of direct labor employees, which negatively

impacted employees and depot productivity. Also, given the need to use

contract labor and the plan to have depot employees consistently work

substantial amounts of overtime, it is questionable whether all of the

reductions of direct labor personnel were appropriate. This situation also

illustrates the challenge of targeting reductions at the depots in areas

Page 38 GAO/NSIAD-99-31 Army Industrial Facilities
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Depot Reductions Accentuated Need to

Improve Workforce Planning

where there are excess personnel and providing the required training to

workers when skill imbalances occur, as a result of transfers.

We believe the Army’s inability to deal with the perceived need for

reducing overhead requirements prompted the chaotic staff reduction

effort at the Corpus Christi depot. Further, incorporation of the capability

to address overhead requirements is an essential element of an effective

AWPS system. The Army’s current plan to postpone certifying the AWPS

system as operational until it incorporates procedures for determining

indirect personnel requirements should enhance the overall effectiveness

of the system.

Recommendations We recommend that the Secretary of Defense require the Secretary of the

Army, in making future personnel reductions in Army depots, to more

clearly target specific functional areas, activities, or skill areas where

reductions are needed, based on workload required to be performed. We

also recommend that the Secretary of the Army complete incorporating an

analysis of overhead requirements into AWPS prior to certifying the system,

pursuant to section 364.

Agency Comments

and Our Evaluation

DOD concurred with the recommendations. It stated that the development

and testing of an automated process for predicting indirect and overhead

personnel requirements would be completed before the system is certified

as operational at maintenance depots. We modified our conclusions and

recommendations to reflect the actions being taken by the Army in

response to our draft report. Specifically, we now recommend that the

Army complete ongoing actions that it initiated in response to our draft

report recommendations. We also incorporated technical comments that

were provided by DOD where appropriate.

Page 39 GAO/NSIAD-99-31 Army Industrial Facilities
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Unresolved Issues Overshadow Progress in

New Depot Workload Forecasting System

While the Army has made progress in establishing an automated process

for analyzing and documenting personnel requirements, it is still faced

with larger issues and factors that overshadow efforts to improve

workload forecasting and efficient depot operations. First, workload

estimates have been subject to frequent fluctuation and uncertainty to

such an extent that it is difficult to use these projections as a basis for

analyzing workforce requirements. Second, DOD and Army policies have

resulted in the transfer of Army depot workloads to other

government-owned repair facilities and private sector contractors without

corresponding reductions in depot facilities and capacity. It is uncertain to

what extent workloads will be assigned to Army depots in the future.

Third, depot efficiency has been impacted by other factors—lower than

anticipated worker productivity, inefficient use of personnel resources,

and the timely availability of certain necessary repair parts.

Changing Workload

Estimates Inhibit

Army Efforts to

Predict Personnel

Requirements

Workload estimates for Army maintenance depots vary substantially over

time due to the reprogramming of operations and maintenance

appropriation funding and unanticipated changes in customer

requirements. The Army’s personnel budgets and staffing authorizations

are generally based on workload estimates established 18 to 24 months

before new personnel are hired or excess employees are terminated.

Therefore, if actual workload is less than previously estimated, the depot

is left with excess staff. Conversely, if actual workload is greater than

previously estimated, the depot would have fewer staff than it needs to

accomplish assigned work. Our work shows that workload estimates are

subject to such extensive changes that they hamper Army depot planners’

ability to accurately forecast the number of required depot maintenance

personnel. In discussing similar issues with Navy shipyard personnel, we

noted that in April 1996, the Navy issued guidance to encourage shipyard

customers to adhere to the workload plans established during the budget

process. Navy leadership found that past weaknesses in workload

forecasting contributed to inefficient use of depot resources, which led to

higher future operating rates to compensate for previously underutilized

shipyard personnel and facilities. After implementing a guaranteed

workload program to stabilize work being assigned to naval shipyards,

these activities report having 3 years of positive net operating results, after

operating at a loss for over 5 years.

Funding Transfers Affect

Estimated Depot

Maintenance Workloads

Appropriated operations and maintenance funding for the depot-level

maintenance business area—a key source of depot maintenance

funding—is reprogrammed by the Army to a much greater extent than

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funds for other operations and maintenance appropriation business areas

and create challenging fluctuations in workload execution. Table 3.1

shows the amount of depot maintenance funding the Congress

appropriated for fiscal years 1996, 1997, and 1998 and the amounts later

reprogrammed to cover funding shortfalls in other programs. For

comparison purposes, table 3.1 provides the same information for the

balance of the Army’s operations and maintenance funding.

Table 3.1: Operations and Maintenance Funds Appropriated by the Congress and Reallocated by DOD and Army

Headquarters Reprogramming

Depot maintenance business area Non-depot maintenance business areas

Dollars in millions

Operations and

maintenance funds FY 1996 FY 1997 FY 1998 FY 1996 FY 1997 FY 1998

Authorized by the

Congress

$966.4 $884.6 $780.2 $17,419.7 $16,928.2 $16,394.2

DOD-directed transfers –15.7

–1.62%

–4.6

–0.52%

0.0

0%

1,038.0

5.96%

10.7

0.06%

48.0

0.29%

Army-directed transfers

from unspecified

congressional

adjustments

–39.6

–4.09%

–105.7

–11.95%

–23.9

–3.06%

–34.5

–0.20%

–242.1

–1.43%

–469.8

–2.87%

Army-directed transfers –146.5

–15.16%

–55.2

–6.24 %

–16.4

–2.10%

148.1

0.85%

56.8

0.34%

21.1

0.13%

Final funds available $764.7

–20.87%

$719.1

–18.71%

$739.9

–5.17%

$18,571.3

6.61%

$16,753.6

–1.03%

$15,993.4

–2.44%

Notes: Estimated funding for fiscal year 1998 as of June 1998. Percentages reflect change from

total congressional authorization. Unspecified congressional adjustments refer to provisions in the

DOD Appropriations Act which reduce Army budget requests, but leave the allocation of funding

adjustments to the discretion of DOD.

Source: GAO analysis based on Army budget data.

As indicated, funds for depot maintenance were reprogrammed at a much

higher rate than funds for the other operations and maintenance business

areas. The non-depot maintenance business areas provide funding for

civilian salaries and private sector contractor support—funds that the

Army generally has considered must be paid. The depot maintenance

programs for the in-house overhaul and repair can be easily terminated

without cost to the government. Army officials explained that when depot

orders are terminated, financial losses are recovered by charging higher

rates to future customers . However, if contracted work is terminated for

the convenience of the government, the government often has to pay for

expenses incurred by the contractor. While Army officials stated that

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previous practices resulted in an inequitable distribution of funding

transfers, they stated that they planned to conduct future reprogramming

actions on a more equitable basis.

Unanticipated funding transfers as a result of reprogramming actions have

impacted depot staffing and contributed to inefficient depot operations.

For example, we estimate Army reprogramming actions moved funding

that might have supported about 1,400 direct labor positions and 

750 overhead positions in fiscal year 1996. Similarly, reprogramming

actions in fiscal year 1997 moved funding that might have supported about 

1,125 direct labor positions and 650 overhead positions. These

reprogramming actions contributed to net operating losses in the years

cited and higher rates in subsequent years.

Army Working Capital

Fund Availability and

Changing Customer

Requirements Also Affect

Estimated Depot

Maintenance Workloads

AMC holds semiannual workload conferences to review, analyze, and

document depot workload estimates. Our work shows that the command’s

estimates can differ significantly from reported spending, limiting their

value in documenting personnel budgets and requirements. For example,

in September 1994 the predecessor organization to the current Aviation

and Missile Command estimated that in fiscal year 1997 it would generate

workload requirements and provide funding to the Corpus Christi depot

valued at about $161 million for the repair of aviation components. At the

beginning of the fiscal year 1997, the projected workload value for that

year decreased to $141 million—a 12-percent reduction. Moreover, the

funded workload for that year was less than $94 million—a decline of

42 percent from the amount projected almost 3 years earlier. It is

important to note that the rates for fiscal year 1997 were developed using

the workload estimates projected in 1994. Partially as a result of the

decreased workload, Corpus Christi did not receive the revenues it needed

to break even. Losses for that year contributed to the need for increased

rates in subsequent years.

Army officials attributed the decline in forecasted workload to reduced

workload requirements resulting from slower-than-expected customer

revenues from the sales of repaired items and cash shortages in the Army’s

working capital fund. Reduction of work typically results in underutilized

personnel and can result in orders being placed for long lead-time parts

that are not needed as expected. The workload expected from the Aviation

and Missile Command, but not received, might have provided work for

about 250 direct labor employees and 150 overhead employees for a year.

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Workload estimates for overhaul and repair requirements generated by the

other military services have also been inconsistent. For example, in

September 1995, the Navy estimated that it would provide fiscal year 1998

funding for the overhaul of 38 helicopters at the Corpus Christi depot. In

May 1997, the Navy estimated that in fiscal year 1998 it would fund the

overhaul of 22, but in October 1997, it estimated the funded workload that

would likely materialize during fiscal year 1998 would support the

overhaul of only 12. Navy officials told us the estimated helicopter

overhaul requirements were reduced, in part, because the Army was

unable to complete prior year funded repair programs within agreed time

frames. Additionally, the Navy is exploring ways to have future overhaul

and repair work done incrementally by either contractor or government

employee field teams working at Navy bases. The Navy believes the

incremental overhaul and repair process can be done more expeditiously.

At this point, it is unclear what role the Corpus Christi depot will play in

providing future overhaul and maintenance support for Navy helicopters.

Figures 3.1 and 3.2 depict the fiscal years 1997 and 1998 funding estimates

for the Corpus Christi Army Depot at various points in time. For example

at the start of fiscal year 1995, the Army anticipated that the Corpus Christi

depot would receive fiscal year 1997 funding for workloads valued at

$349 million. Two years later, at the start of fiscal year 1997, the estimate

increased to $355 million, compared to actual funding of $326 million. On

the other hand, at the beginning of fiscal year 1996, the anticipated

workload for the depot was valued at about $302.5 million. At the

beginning of fiscal year 1998, the anticipated total had risen to about

$333.5 million, and in June 1998, estimates of revenues for the year were

about $360.5 million. Depot officials pointed out that with these variances

in workload, it is almost impossible to set accurate rates or to project with

precision the number of employees needed to perform the required work.

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Figure 3.1: Fiscal Year 1997 Workload

Estimates for Corpus Christi Army

Depot (dollars in millions)

Funding

0

50.0

100.0

150.0

200.0

250.0

300.0

350.0

400.0

1994 Estimate

1995 Estimate

1996 Estimate

1997 Estimate

1997 Actual

Fiscal Year

Total

DBOF

OMA

USN/USAF

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Figure 3.2: Fiscal Year 1998 Workload

Estimates for Corpus Christi Army

Depot (dollars in millions)

Funding

0

50.0

100.0

150.0

200.0

250.0

300.0

350.0

400.0

1994 Estimate

1995 Estimate

1996 Estimate

1997 Estimate

1998 Estimate

1998 6/12/98 Est.

Fiscal Year

Total

DBOF

OMA

USN/USAF

This experience at Corpus Christi illustrates the challenge depot planners

face in projecting personnel requirements when the workload estimates

change considerably over the 30 months between the time rate-setting is

initiated to the end of fiscal year for which rates have been set. Similarly,

under these conditions it is also difficult for budget personnel to set

labor-hour rates that will generate the desired net operating result.

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Implications of Depot

Workload

Assignments

As part of its overall depot maintenance strategy, the Army has established

policies and procedures for assigning potential depot workloads to other

government-owned repair facilities and the private sector.1

 These

practices have significant cost effectiveness and efficiency implications for

the depots, given the amount of excess industrial capacity that exists.

First, AMC has authorized performance of depot-level workloads at

government-owned repair sites located on and near active Army

installations and at National Guard facilities. Second, Army policies and

strategic plans emphasize the use of the private sector for depot-level

maintenance workloads, within existing legislative requirements.

Depot Work Assigned to

Other Government-Owned

Facilities

In recent years the Army’s Forces Command and its Training and Doctrine

Command. have operated an increasing number of regional repair

activities at active Army installations. Additionally, the Army National

Guard operates regional repair activities at state-owned National Guard

sites. Collectively, these repair activities are categorized as integrated

sustainment maintenance (ISM) facilities. Sustainment maintenance

includes repair work on Army equipment above the direct support level,

including general support and depot-level support tasks. Accordingly,

Army headquarters has allowed some ISM sites to perform depot-level

workloads under special repair authorities.2 ISM repair sites are staffed by

a mixture of military and civilian federal employees, state employees, and

contractors. AMC officials stated that ISM repair sites can perform

depot-level work to save transportation costs, expand employee skills and

capabilities, and shorten repair cycle times. We noted that many of the

items requiring depot repair are being shipped to other bases’ ISM repair

sites, under a center of excellence program that is designed to assign work

to the most cost effective repair source.

We did work at Army ISM facilities located at Fort Campbell, Kentucky, and

Fort Hood, Texas, and an Aviation Classification Repair Activity Depot

operated by the Connecticut National Guard.3

 We noted that each facility

was performing depot-level work that was similar, and sometimes

1

Our testimonies, Defense Depot Maintenance: Uncertainties and Challenges DOD Faces in

Restructuring Its Depot Maintenance Program (GAO/T-NSIAD-97-112, May 1, 1997) and

GAO/T-NSIAD-97-111, Mar. 18, 1997), noted that the Army would have 61 percent excess capacity in

fiscal year 1999, based on consideration of projected workload for 1999 and maximum potential

capacity at the Army depots.

2

Special repair authorities, are approved after AMC determines that the repair sites have adequate

facilities and equipment and sufficient trained personnel to accomplish the tasks.

3

In addition to the Connecticut facility, the Army National Guard has established similar facilities in

Missouri, Mississippi, and California and smaller facilities in almost every state.

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identical, to work currently being conducted at the Corpus Christi Army

Depot. For example, each repair site operated environmentally-approved

painting facilities large enough to strip and repaint an entire helicopter—a

task also being conducted at the Corpus Christi depot. Further, the

National Guard facility was refurbishing Blackhawk helicopters—a task

identical to work currently assigned to the Corpus Christi depot.

Additionally, each facility will undergo or has recently undergone

expansion and modernization. For example, the Fort Hood repair facility,

which was constructed in 1994 at a reported cost of about $60 million, is

scheduled for further expansion, and the National Guard facility was

recently doubled in size at an estimated cost of $20 million.

ISM repair sites are not working capital fund activities. Repair work at

these sites is financed through direct appropriations to the operational

units, which obligate a level of funding at the beginning of the year.

Field-level personnel believe they get a better value for repair work that is

performed at the unit level than at the depots and prefer to use field level

repair whenever they can.

The continuing reliance and expanded use of regional repair facilities for

depot-level workloads could have a substantial impact on the future

viability and efficiency of operations at the Army’s public sector depots.

While the overall impact on the depots’ workloads has not been estimated,

an AMC report shows that in fiscal year 1996, ISM and similar repair facilities

received at least $51 million for depot-level tasks. AMC personnel told us

they believe the actual amount of depot-level work is much higher because

not all depot-level tasks and related work is reported. Further, DOD’s 1998

logistics strategic plan envisions the eventual elimination of the public

depot infrastructure by expanding the use of regionalized repair activities

across all levels of maintenance and contracting more workloads. Lastly,

an AMC reorganization proposal suggests that the current Corpus Christi

Army Depot functions could be transferred to the four National Guard

Aviation Classification Repair Activity Depots.

In commenting on a draft of this report, DOD stated that the Army approves

Special Repair Authorities to enable regional repair facilities to conduct

specific depot-level maintenance tasks for a specified number of items,

after it evaluates the impact on depot workloads and core capabilities.

However, our work shows that some Special Repair Authorities were

granted for varying numbers of items to be repaired over prolonged time

frames creating some uncertainty over how well the long-term impact on

depot workloads and core competencies may have been assessed. Some

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Army officials told us that Army reviewers have historically had little

incentive to recommend disapproval of proposed Special Repair

Authorities since they would likely be overruled by higher headquarters.

More recently, Army headquarters officials told us they began to reject a

number of proposed Special Repair Authorities and that they are

undertaking a study to reevaluate the Special Repair Authorities process.

Work Shifting to Private

Sector

DOD strategic plans and policies express a preference for assigning

depot-level workloads to the private sector rather than public sector

depots.

Recent DOD policies and plans show that DOD expects to increasingly

outsource depot maintenance activities, within the existing legislative

framework. For example, the DOD logistics strategic plan for fiscal 

years 1996 and 1997 envisions that it will develop plans to transition to a

depot-level maintenance and repair system relying substantially on private

sector support to the extent permitted under the current legislative

framework. The 1998 plan states that DOD will pursue opportunities for

eliminating public sector depot maintenance infrastructure through the

increased use of competitive outsourcing. Further, in March 1998 we

reported, overall, DOD is moving to a greater reliance on the private sector

for depot support of new weapon systems and major upgrades, reflecting a

shift from past policies and practices, which generally preferred the public

sector. In that regard, the Secretary of the Army has announced plans to

pursue several pilot programs that would make the private sector

responsible for total life-cycle logistics support, including depot-level

maintenance and repairs.4

DOD policy also emphasizes the use of private sector contractors for

modifications and conversions of weapon systems. For example, in August

1996 the Army awarded a multiyear contract for the upgrade of Apache

Longbow helicopters. While it is difficult to predict the number of depot

maintenance jobs affected by this policy, the Army Audit Agency reported

in June 1998 that the Apache Longbow modification, conversion, and

depot maintenance workload will likely involve from 2,063 to 2,998

personnel.

In June 1998, the Secretary of the Army identified two weapon

systems—the Apache helicopter and the M109 combat vehicle—to

4

Defense Depot Maintenance: DOD Shifting More Workload for New Weapon Systems to the Private

Sector (GAO/NSIAD-98-8, Mar. 31, 1998).

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potentially pilot test prime vendor support concepts. Under this concept,

private sector firms would provide total life-cycle supply and maintenance

support. It is uncertain if or when these prime vendor contracts will be

awarded, or what impact this would have on future workload and staffing

of Army depots.5

Other Factors

Inhibiting Depot

Efficiency

We identified several factors contributing to depot inefficiency, including

(1) the less-than-expected productivity, (2) excess depot capacity, (3) the

lack of flexibility to shift workers among different functions, and (4) the

nonavailability of parts. Additionally, we have previously reported that the

Army’s current repair pipeline is slow and inefficient and could be

improved by implementing various private sector best practices, several of

which are being considered at the Corpus Christi depot.6

Productivity Less Than

Expected

Although DOD’s depot productive workyear standard for depots was

1,615 hours, for fiscal year 1997, each of the Army depots reported

productive levels below the standard (see table 2.3). Additionally, at the

Corpus Christi depot, we noted that the hours required to complete depot

maintenance projects exceeded the standard, which serves as the basis for

payment, resulting in significant losses for that fiscal year.

The most significant productivity problem at the Anniston depot appeared

to be that the expected levels of work that had been programmed did not

materialize, including work that was expected to transition from the Red

River and Letterkenny depots as a result of BRAC decisions. Anniston

officials said they were reluctant to eliminate positions since the

additional work should show up during 1998. Thus, in the short term, the

workforce did not have enough work to keep it fully employed.

At Corpus Christi, the inability to complete work within scheduled time

frames was a problem. As previously discussed, the use of large amounts

of sick leave and annual leave and more holiday leave than other depots

contributed to this problem. At the same time, we noted that this depot

used premium pay in the form of overtime to a much greater extent than

other Army depots.

5

We recently reported that DOD is currently close to the maximum amount of depot maintenance work

it may allocate to the private sector. See Defense Depot Maintenance: Public and Private Sector

Workload Distribution Reporting Can Be Further Improved (GAO/NSIAD 98-175, July 23, 1998).

6

Inventory Management: The Army Could Reduce Logistics Costs for Aviation Parts by Adopting Best

Practices (GAO/NSIAD-97-82, Apr. 15, 1997).

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We also noted that specific projects at Corpus Christi had consumed

significantly more hours than projected, resulting in financial losses and

schedule delays. For example, on average, depot employees charged

22,422 direct labor hours for each Seahawk helicopter repaired, compared

to the projected goal of 12,975 hours per aircraft. In commenting on a draft

of this report, DOD officials stated that this situation was caused by a

variety of factors, including lack of access to Navy managed parts, lack of

experience with some Navy-unique systems, and the fact that Navy

helicopters were in worse physical condition than most comparable Army

helicopters being inducted for overhaul work. Cumulative financial losses

on the completed overhaul and repair of 29 Navy Seahawk helicopters are

estimated at about $40.1 million, and total reported losses on completed

Navy helicopters exceed $80 million.

Recognizing these problems, the Army has implemented a process

reengineering plan to reduce the average repair cycle from the current 

515 days to 300 days. As previously noted, the Navy is considering shifting

repair work to field teams at Navy units. Since Navy work is about

30 percent of Corpus Christi’s workload, the depot could lose 400 to 

500 direct labor positions and increase its estimated future operating rates

by about $20 per hour. Similarly, time charged against the overhaul of the

T-53 engines used on the Huey helicopter was about 52,000 direct labor

hours for 60 engines, compared to the projected goal of about 

23,000 hours. The Army is considering plans to contract with the private

sector for the performance of this work. At this time, it is uncertain what

role, if any, the depot will have in future T-53 engine repair programs.

Excess Capacity Problems

Continue to Impede

Efficient Depot Operations

While the Army has not clearly articulated its long-range plans for its five

depots, in the past it has stated that only three are needed, and more

recent actions suggest that number may be even smaller. As discussed in a

1996 report, each of the five remaining depots has large amounts of

underutilized production capacity which require substantial financial

resources to support.7

 For example, the Army recently reported that its

depots have capability to produce about 16 million hours of direct labor

output, given the current plant layout and available personnel. The report

also states that in fiscal year 1998 depots will produce an estimated

11 million hours of direct labor output, meaning that 68 percent of the

available plant equipment and personnel are fully utilized on a single shift,

7

Army Depot Maintenance: Privatization Without Further Downsizing Increases Costly Excess

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

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40-hour week. Further, the depots are capable of producing even greater

amounts of work.

Until recently, no attempt had been made to look at maintenance

capability from a total Army perspective, including capability at the field

level and in the National Guard. In commenting on a draft of this report,

DOD cited several examples of efforts that they are starting to analyze

maintenance requirements from a total Army perspective. For example,

the ISM concept is designed to integrate and coordinate maintenance

provided by active Army units, Army reserve activities and the Army

National Guard installations. In addition, DOD stated that the Army will

establish a Board of Directors to manage and coordinate depot-level

maintenance from a total Army perspective.

Difficulty Shifting Workers Improved systems and procedures for shifting workers between different

organizational units and skill areas would offer better opportunities to

effectively use limited numbers of maintenance personnel. Depot officials

noted that prior practices made it difficult to transfer workers between

organizational units and skill areas to adjust for unanticipated work

stoppages caused by changes in work priorities, parts shortages, technical

problems, or temporary labor imbalances. For example, in late 1997 work

was suspended on repair of the T-53 engine at Corpus Christi due to a

safety of flight issue, but personnel in that shop were not reassigned to

other areas whose work was behind schedule.

Depot workers are trained in specific technical areas and perform work

within their specific specialty code and organizational units. Agreements

between the unions and the depots generally require that workers be

assigned work only in their specialty areas; therefore, depot managers

have limited capability to move workers to other areas. Depot managers

noted that, in some cases, a worker could work in another area under the

direction of a qualified specialist in the second skill area. Union officials at

one depot stated that members understand the benefits of more flexible

work agreements, but in the past have been reluctant to adopt them.

Depot managers cited a number of ongoing efforts that should, in the

future, lead to more effective use of skilled depot workers. For example,

depot managers said they were encouraging their workers to take courses

during their off-duty time to develop multiple skills. Further, depot

officials said completion of an ongoing AWPS system enhancement project

will provide an automated database reflecting the specific skills of each

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depot employee to facilitate identification of workers with the skills that

are needed to meet short-term labor imbalances. Lastly, depot mangers are

considering changes to organizational structures to better facilitate

movement of skilled workers between shops.

In discussing this issue with Navy officials, we were told that when the

Navy transferred civilians from the Pearl Harbor Shipyard to an

intermediate activity at the same location, they implemented a program

known as multi-crafting or multi-skilling through which workers trained in

a second, complementary skill area so that they were qualified to do more

tasks. Workers in seven different workload combination areas were

involved in the program and received training in multiple skill areas. In the

rubber and plastics forming skill area, cross-trained workers got a pay

raise in addition to the satisfaction of knowing they were multi-skilled and

more valuable employees. Maintenance facility managers said that the

added flexibility of multi-skilling allowed them to use a limited number of

workers more cost effectively and to be more responsive to emerging

requirements. While we have not evaluated the extent to which the use of

multi-crafting and multi-skilling has improved the efficiency of the Navy’s

combined operations, in concept it is in line with best practices employed

by the private sector and appears to have merit.

In commenting on a draft of this report, DOD stated that the Army’s direct

labor personnel can become multi-skilled through support of the labor

unions. They noted that while depot managers have the right to assign

employees to specific work areas, they need to work with labor

organizations to adopt more flexible work arrangements through

collective bargaining or other partnering arrangements.

Lack of Required Parts Parts shortages have also contributed to inefficient depot operations. For

example, we previously reported on the length of time it took to repair and

ship parts and an Army consultant recently reported that repair

technicians spend as much as 40 percent of their time looking for required

parts.8

 Army depots obtain parts from a variety of sources, including the

Defense Logistics Agency, inventory control points operated by the

military services, the private sector through local purchases, and limited

depot manufacturing. Since Army procedures give higher priority in

processing orders for parts to operational units and field-level repair

activities, parts shortages are more likely to occur at the depot level.

8

Inventory Management: The Army Could Reduce Logistics Costs for Aviation Parts by Adopting Best

Practices (GAO/NSIAD-97-82, Apr. 15, 1997).

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Further, parts shortage problems could increase as a result of a recent AMC

headquarters decision attempting to eliminate parts inventories that have

been procured for future depot use. For example, Corpus Christi

maintains an inventory at a reported value of about $37 million for

emergent work. AMC plans to have the depots turn in the material without

giving a financial credit, a process that could cause the depots to report a

financial loss equaling the inventory’s value.9

 Officials at the Corpus

Christi depot expressed concern that, without this inventory, their access

to aviation parts, especially those that have long leadtimes to order, will

deteriorate even more as will their ability to complete their work in a

timely manner.

According to a Corpus Christi official, depot workers waited an average of

144 days from the time they placed requisitions with the Defense Logistics

Agency until orders were received. Additionally, a large number of

requisitions placed by the Corpus Christi Army Depot for parts managed

by a Navy-operated inventory control point were initially rejected because

the automated requisition processing system had not been modified to

recognize the Army depot as a valid customer.

Although depot supply support depends largely on external sources,

Corpus Christi Army Depot has taken actions to address the inefficiencies

in the portions of the process they control. For example, a recent study by

an Army consultant concluded that the material management process

costs the depot an estimated $19 million per year and that a large

percentage of these costs represents nonvalue added time spent handling,

sorting, retrieving, inspecting, testing, and transporting parts between

various local storage locations. A depot official estimated that the process

reengineering plan, initiated in May 1997, will reduce the administrative

costs by $10 million. Some of these initiatives include reducing (1) the

average time required to obtain parts from the local automated storage

and retrieval system from 12 to 4 days, (2) the time required to complete

local purchase actions from 121 to 35 days, and (3) the number of days to

complete local credit card purchases from 49 to 10 days.

Conclusions Even though the Army has made progress in building an automated and

more rigorous process for analyzing and documenting personnel

requirements, important enhancements remain to be completed.

9

In commenting on a draft of this report, Army officials informed us that the value of Corpus Christi

Army Depot’s inventory and the extent of the loss will be less than originally contemplated as Corpus

Christi Army Depot has been able to consume a significant portion of the inventory. However, they did

not provide an estimate of the inventory value.

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Moreover, other severe problems—including significant fluctuations in

funding, rising costs and continued losses in the Army’s military

depots—create much instability and uncertainty about the effectiveness

and efficiency of future depot operations. Some reductions in the amount

of work assigned to the military depots has occurred while such work

performed by private sector contractors has increased. Further, by adding

to its maintenance infrastructure at Army operational units in the active

and guard forces and performing depot-level and associated maintenance

at those locations, the Army has been adding to the excess capacity,

underutilization, and inefficiency of its depots. The extent and financial

impact of this situation is unknown. However, the Army is clearly

suboptimizing use of its limited support dollars, and efforts are needed to

minimize the duplications and reduce excess infrastructure. The Army

needs to adopt reengineering and productivity improvement initiatives to

help address critical problems in existing depot maintenance programs,

processes, and facilities.

Recommendations We recommend that the Secretary of Defense require the Secretary of the

Army to

• establish policy guidance to encourage AMC customers to adhere to

workloading plans, to the extent practicable, once they are established

and used as a basis for the development of depot maintenance rates;

• require reevaluation of special repair authority approvals to accomplish

depot maintenance at field activities to determine the appropriateness of

prior approvals, taking into consideration the total cost to the Army of

underutilized capacity in Army depots;

• encourage depot managers to pursue worker agreements to facilitate

multi-skilling or multi-crafting in industrial facilities; and

• direct the depot commanders to develop specific milestones and goals for

improving worker productivity and reducing employee overtime rates.

Agency Comments

and Our Evaluation

DOD concurred with our recommendations and described several steps

being taken to address our recommendations. For example:

• AMC recently reemphasized the importance of realistic and stabilized

workload estimates to optimize depot capacity utilization, stabilize

operating rates, and support future personnel requirements

determinations.

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• DOD stated that it recently initiated “A Study of the Proliferation of Depot

Maintenance Capabilities” to include an examination of the current

approval process for Special Repair Authority requests.

• DOD stated its intention to work in concert with the Army and other

Services to pursue efforts to eliminate excess industrial capacity through

future BRAC rounds and facilities consolidation.

DOD concurred with our recommendation to pursue multi-skilling or

multi-crafting, but stated that such arrangements require implementation

by individual depot managers. We have revised our recommendation

accordingly.

While DOD agreed with our recommendation for developing milestones and

goals for improving the efficiency of its depot operations to include

reductions in employee overtime rates, it did not specify what actions

were planned. We also incorporated technical comments where

appropriate.

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The Army plans to begin installing the new AWPS in its manufacturing

arsenals in December 1998. However, it is not clear how effective the

system will be in terms of identifying the arsenals’ personnel

requirements—given the uncertainty surrounding their future workload

requirements. The arsenals are also confronted with larger problems and

uncertainties that could diminish the effectiveness of the Army’s efforts to

automate the process of determining workforce requirements, stabilize its

workforce, and increase productivity. At these facilities there have been

significant workload reductions as a result of defense downsizing and

increased reliance on the private sector. However, commensurate

reductions have not been made to arsenal facilities. The arsenals have

sought to diversify to improve the usage of available capacity and reduce

their overhead costs, but limitations exist on their ability to do so. The

Army is considering converting its two arsenals to government-owned,

contractor-operated facilities. However, key questions, such as the

cost-effectiveness and efficiency of this option, remain unanswered.

Automated

Requirements Process

Is Planned for

Arsenals

The Army plans to begin installing the AWPS system in its two weapons

manufacturing arsenals beginning in December 1998 and to complete that

installation by September 1999. In June 1998, the Army began installing a

prototype AWPS at one of its eight ammunition storage and surveillance

facilities. Upon completion of the prototype testing, the Army plans to

extend the system to the two weapons manufacturing arsenals.

Workload Is Declining

and Capacity Is

Underutilized

Since the end of the Cold War, workloads and employment at the two

remaining arsenals have declined substantially; however, operating costs

have continued to escalate as fixed costs have been spread among

increasingly smaller amounts of workload. Additionally, personnel

reductions have not kept up with workload reductions. At Rock Island, the

workload dropped a reported 36.9 percent between 1988 and 1997 while

the staffing dropped 30.8 percent. At Watervliet the reported workload

dropped 64 percent during the same period while staffing dropped

51.8 percent. As workloads continue to decline, the arsenals have been left

with relatively fixed overhead costs, including the salary expenses for an

increasing percentage of overhead employees. For example, as of fiscal

year 1998, the Watervliet Arsenal reported employing 409 direct labor

“revenue producers” and 473 overhead employees compared with 1,089

direct labor workers and 924 overhead employees reported 10 years ago.

Table 4.1 compares the arsenals’ workloads in direct labor hours and

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employment levels at the end of fiscal years 1988 through 1997 and

projections for fiscal year 1998.

Table 4.1: Reported Arsenal Workload

and Employment Levels for Fiscal

Years 1988 Through 1998

Rock Island Watervliet

Fiscal year Workloada Workforce Workloada Workforce

1988 1,944,291 2,501 1,894,000 2,013

1989 Not known 2,609 1,703,000 1,928

1990 1,843,268 2,442 1,583,000 1,767

1991 1,790,685 2,460 1,556,000 1,719

1992 2,029,436 2,377 1,444,335 1,623

1993 1,849,193 2,289 1,313,044 1,538

1994 1,583,674 2,144 1,129,575 1,422

1995 1,557,574 2,033 834,000 1,103

1996 1,258,073 1,853 800,000 1,024

1997 1,225,849 1,730 681,000 971

1998 1,140,941 1,531 593,000 897

aWorkload is expressed in the number of direct labor hours

Source: Rock Island and Watervliet Arsenals.

Currently, the arsenals are using only a small portion of their available

manufacturing capacity in the more than 3.3 million square feet of

reported industrial manufacturing space. An arsenal official estimated that

as of April 1998 the Watervliet facility was utilizing about 17 percent of its

total manufacturing capacity—based on a single 8-hour shift, 5-day

workweek—compared with about 46 percent 5 years ago and about

100 percent 10 years ago. Similarly, as of July 1998, officials at the Rock

Island Arsenal estimated the facility was utilizing about 24 percent of its

total manufacturing capacity compared with about 70 percent 5 years ago

and about 81 percent 10 years ago.1

 Underutilized industrial capacity

contributes to higher hourly operating rates. Over the last 10 years, the

hourly rates charged to customers increased by about 88 percent at

Watervliet and about 41 percent at Rock Island.

1

The arsenals determined industrial capacity based on the peak workload accomplished by the facility

using the current plant layout and complement of industrial plant equipments, assuming a single

8-hour shift, 5-day workweek. Capacity utilization rates are based on a comparison of current

workload levels to the peak industrial capacity.

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Movement Toward

Greater Reliance on

the Private Sector

The Arsenal Act (10 U.S.C. 4532) was enacted in 1920 and provides that the

Army is to have its supplies made in U.S. factories or arsenals provided

they can do so on an economical basis. The act further provides that the

Secretary of the Army may abolish any arsenal considered unnecessary.2

The importance of the arsenals as a manufacturing source has declined

over time. The declining workload noted in table 4.1 is a reflection both of

defense downsizing in recent years as well as increased reliance on the

private sector to meet the government’s needs.

In recent years, the Army has pursued a policy of contracting out as much

manufacturing work as possible to the private sector. When work was

plentiful for both the arsenals and the private sector during the Cold War

years, the allocation of work in accordance with the Arsenal Act was not

an issue. However, the overall decline in defense requirements since the

end of the Cold War has substantially reduced the amount of work needed.

When making decisions based on the Arsenal Act, the Army compares

public and private sector manufacturing costs to determine whether

supplies can be economically obtained from government-owned

facilities—a process referred to as “make or buy”. The comparison is

based on the arsenals’ marginal or additional out-of-pocket costs

associated with assuming additional work. However, the arsenals report

little use of the “make or buy” process. For example, Watervliet reported

that it has not participated in a “make or buy” decision since 1989 and has

not received any new work through the Arsenal Act since at least then.

Rock Island officials could identify only one item for which it received

new work through the Arsenal Act in recent years. Officials at both

arsenals said they do not expect to receive any future work as a result of

“make or buy” analyses.3

2

However, as we previously reported, the Congress enacted legislation, codified in 10 U.S.C. 2687,

which essentially halted base closures by DOD. Under the statute, the closure or realignment of any

military installation in the United States above a certain threshold of authorized civilian personnel

could not take place until the Secretary of Defense had satisfied certain study and reporting

requirements, notified the Congress of the proposed closure or realignment, and waited 30 legislative

days or 60 calendar days, whichever was longer, before proceeding. As a consequence, no major

domestic military bases were closed between 1977 and 1988. Bases closed under BRAC rounds held

between 1988 and 1995 were authorized under special legislation (P.L. 100-526 and the Base Closure

and Realignment Act of 1990, title XXIX, P.L. 101-510) which expired at the end of 1995. See: Military

Bases: Lessons Learned From Prior Base Closure Rounds (GAO/NSIAD-97-151, July 25, 1997).

3

In commenting on a draft of this report, DOD stated that the arsenals are incapable of producing the

majority of the products needed by today’s Army.

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Decreasing Workloads

Impact Arsenals

As their workloads have declined, the arsenals have become less efficient,

because each remaining direct labor job must absorb a greater portion of

the arsenals’ fixed costs. As noted earlier, rates charged to customers have

increased significantly in recent years at both arsenals. Some efforts have

been made to diversify into other manufacturing areas to better use excess

capacity and reduce costs, but limitations exist. AMC headquarters has

proposed converting the two arsenals to GOCO facilities. However, key

questions—such as how much of this type of capacity is needed, and the

cost-effectiveness of the various alternatives—remain unanswered.

Unlike maintenance depots, where workload is largely centrally allocated

by Army headquarters, arsenal managers market their capabilities to

identify potential military customers and workloads. Similar to private

sector business, arsenal managers recover operating expenses through

sales of products that produce revenues. However, as their volume of

work declines, the arsenals must either reduce costs or increase prices to

customers. If prices are increased, customers may go elsewhere to satisfy

their needs, further exacerbating the declining workload problem. Recent

proposals by the Watervliet Arsenal to balance workload and staffing were

disapproved by Army headquarters in anticipation of new workloads.

However, Watervliet officials stated that, as of October 1998, no new work

had materialized and none was expected. This lack of new work could

result in greater losses than planned at that facility.

Each year arsenal personnel estimate the amount of work they expect to

receive and then use this information as a basis for projecting personnel

requirements. The expected workload is divided into various categories

based on the estimated probability of workload actually materializing.

Work that is already funded is categorized as 100 percent certain.

Unfunded work is categorized based on its considered probability of

becoming firm. Watervliet, for example, uses three probability categories

for unfunded workloads: 90, 60, and 30 percent. Staffing is then matched

to the workload probability. Staffing needs for fully funded work and work

with a 90-percent probability is allocated at 100 percent of the direct labor

hour requirements. Staffing requirements for the remaining work is

allocated in accordance with the workload probabilities.

In October 1997, AMC headquarters gave Watervliet approval to eliminate

98 positions by the end of fiscal year 1998. Also, on the basis of an

expected decline in workload in fiscal year 1998, AMC headquarters gave

the Rock Island Arsenal approval in May 1998 to eliminate 237 positions

for a total arsenal workforce reduction of 335 positions. Employees who

Page 59 GAO/NSIAD-99-31 Army Industrial Facilities
Chapter 4 

Uncertainties Surround Future of Arsenals

voluntarily retire or resign will receive incentive payments, based on a

varying scale with a maximum payment of $25,000. These incentives were

intended to reduce the number of employees facing involuntary

separations. By the end of September 1998, 54 Watervliet and 146 Rock

Island employees had accepted incentive offers. As an additional incentive

to encourage voluntary separations, the arsenals, in August 1998, received

authority to offer early retirements to eligible employees.

Arsenals Are Diversifying,

but Other Options Are

Expected to Be Examined,

Including the

Establishment of a GOCO

Operation

Both arsenals have tried to develop new areas of work because their

traditional weapon-making roles no longer provide enough work to allow

them to operate efficiently. For a number of years, Rock Island has been

fabricating and assembling tool kits, maintenance trucks, and portable

maintenance sheds for the Army, other military services, and civilian

agencies. Rock Island personnel involved in this work made up about

22 percent of the arsenal’s total employment in fiscal year 1998. Watervliet

has tried to branch out into making propulsion shafts for Navy ships and

has done contract work for private industry, making such things as

ventilator housings and other metal fabrication items. The Rock Island

facility is still selling exclusively to government customers.

10 U.S.C. 4543 requires that the arsenals cannot sell items to commercial

firms unless a determination is made that the requirement cannot be

satisfied from a commercial source located in the United States. However,

section 141 of the 1998 Defense Authorization Act provides for a pilot

program enabling industrial facilities including arsenals during fiscal years

1998 and 1999 to sell articles to private sector firms that are ultimately

incorporated into a weapon system being procured by DOD without first

determining that manufactured items are not available from commercial

U.S. sources.

As a part of the Army’s plan to reduce personnel positions under the

Quadrennial Defense Review, the Army plans to study the cost benefits of

converting the arsenals to GOCO facilities.4

 The AMC plans to initiate

commercial activity studies for converting arsenal operations in fiscal year

1999. These studies will be conducted under the guidelines specified by

OMB Circular A-76. According to an AMC official, the Army has determined

that the government should retain ownership of the arsenals; however,

operational responsibility could be assigned to a private sector contractor.

4

The Quadrennial Defense Review, required by the fiscal year 1997 Defense Authorization Act, among

other things, targeted infrastructure reductions to achieve savings for increased funding of weapon

system modernization programs.

Page 60 GAO/NSIAD-99-31 Army Industrial Facilities
Chapter 4 

Uncertainties Surround Future of Arsenals

As a first step in the process, the arsenals are to develop proposed staff

structures, documenting the government’s most efficient operating

strategy, and commercial offerors will be asked to submit proposals for

operating the government-owned facility. A source-selection panel will

compare the government’s proposal with offers from private sector

contractors. According to an AMC official, if the source-selection panel

determines that a private sector offeror would provide the most

cost-effective solution, nearly all remaining government employees at the

arsenals would be terminated by 2002.

Conclusions If recent workload declines and the consequent workforce reductions at

the Rock Island and Watervliet arsenals continue, the long-term viability of

these facilities is uncertain. Arsenal workloads have declined to the point

that, even with significant personnel losses, their capabilities are

significantly underutilized and greatly inefficient. An important part of the

future decision making process will be analyzing the cost efficiency of

government-owned and -operated facilities compared to the cost

efficiency of GOCO facilities. If retention of a government-owned and

-operated facility is found to be the most cost-effective option, then

decisions will be needed that adjust capacity to better match projected

future workload requirements.

Recommendations We recommend that the Secretary of Defense require the Secretary of the

Army to (1) assess the potential for improving capacity utilization and

reducing excess arsenal capacity, and (2) evaluate options for reducing

costs and improving the productivity of the remaining arsenal capacity.

Agency Comments

and Our Evaluation

DOD concurred with each of our recommendations. It agreed that the

Watervliet and Rock Island Arsenals currently support considerable

amounts of excess manufacturing capability and stated that both facilities

are included in current AMC plans to conduct a complete installation A-76

review to identify the most cost-effective option for future operations,

including an evaluation of options for reducing costs and improving

productivity.

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Strategic Plan Is Essential for Addressing

the Future of Army Depots and Arsenals

The synergy of the issues discussed in this report highlights a broader and

more complex message regarding the effect of unresolved problems that

impact the future of industrial operations currently performed in the

Army. It also affects the cost-effectiveness of support programs for current

and future weapon systems. These problems include the need to

(1) clearly identify the workload requirements if‘capabilities are to be

maintained in-house, (2) consolidate and reengineer functions and

activities to enhance productivity and operating efficiencies, and

(3) reduce excess capacity. Resolution of these problems requires that

they be considered within the legislative framework pertaining to

industrial operations. We have previously cited the need for improved

strategic planning to deal with logistics operations and infrastructure

issues, such as those affecting the Army’s industrial facilities.

Summary of Issues The Army faces difficult challenges in deciding what, if any, depot-level

maintenance and weapons manufacturing workloads need to be retained

in-house to support national security requirements. The 1998 DOD Logistics

Strategic Plan states that, in the future, DOD will advocate the repeal of

legislative restrictions on outsourcing depot maintenance functions by

developing a new policy to obtain the best value for DOD’s depot

maintenance funds while still satisfying core capability requirements. Until

DOD and the Congress agree on a future course of action, it will be difficult

to plan effectively for dealing with other issues and problems facing DOD

and the Army’s maintenance programs and systems.

If the decision is made to retain certain amounts of in-house depot and

arsenal capabilities, it will be important to look at overall maintenance

infrastructure, including below depot as well as depot-level maintenance

requirements in active as well as reserve forces, to ensure that the

minimum level is retained that meets overall military requirements.

Consolidation of existing activities, to the extent practicable, within the

constraints of operational requirements, will be essential for developing a

more efficient and cost-effective support operation. Further, improvement

initiatives to address long-standing productivity issues are key to providing

required maintenance capability for the least cost. Finally, the elimination

of excess capacity—both in the public and the private sector, is another

critical area that, if not addressed, will continue to adversely affect the

cost of Army programs and systems.

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Chapter 5 

Strategic Plan Is Essential for Addressing

the Future of Army Depots and Arsenals

Legislation Impacting

Army Depots and

Arsenals

A number of statutes govern the operations of Army depots and arsenals.

For example:

• 10 U.S.C. 2464 provides for a DOD-maintained core logistics capability that

is to be GOCO and that is sufficient to ensure the technical competence and

resources necessary for an effective and timely response to a mobilization

or other national emergency,

• 10 U.S.C. 2466 prohibits the use of more than 50 percent of funds made

available in a fiscal year for depot-level maintenance and repair work to

contract for the performance of the work by nonfederal personnel. The

definition of depot-level maintenance and repair is set forth in 10 U.S.C.

2460,

• 10 U.S.C. 2469 provides that DOD-performed depot-level maintenance and

repair workloads valued at $3 million or more cannot be changed to

contractor performance without the use of competitive procedures for

competitions among public and private sector sources,

• 10 U.S.C. 2470 provides that depot-level activities are eligible to compete

for depot-level maintenance and repair workloads, and

• 10 U.S.C. 4532 requires that the Army have its supplies made in factories

and arsenals of the United States, provided that they can produce the

supplies on an economic basis.

DOD has stated that its depot maintenance initiatives would continue to

operate within the framework of existing legislation. On the other hand, it

has, in the past, sought repeal of these and other statutes and has stated in

the DOD Logistics Strategic Plan that it will continue to pursue this option.

Our Prior Reports

Have Reflected Need

for Strategic Planning

For several years, we have stated that DOD should develop a detailed

industrial facilities plan and present it to the Congress in much the same

way that it presented its force structure reductions in the Base Force Plan

and Bottom-Up Review. Our observations regarding the need for a

long-term plan for Army industrial facilities parallels observations we

made in our February 1997 high-risk report on infrastructure.1

 In that

report, we credited DOD for having programs to identify potential

infrastructure reductions in many areas. However, we noted that the

Secretary of Defense and the service secretaries needed to give greater

structure to these efforts by developing a more definitive facility

infrastructure plan. We said the plan needed to establish milestones and

time frames and identify organizations and personnel responsible for

accomplishing fiscal and operational goals. Presenting the plan to the

1

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

Page 63 GAO/NSIAD-99-31 Army Industrial Facilities
Chapter 5 

Strategic Plan Is Essential for Addressing

the Future of Army Depots and Arsenals

Congress would provide a basis for the Congress to oversee DOD’s plan for

infrastructure reductions and allow the affected parties to see what is

going to happen and when.

The need for such a plan is even more important given that the issue of

eliminating excess capacity in the industrial facility area is likely to raise

questions about the ability of DOD’s ability to accomplish this objective

absent authority from the Congress for additional BRAC rounds. While the

Congress has not approved additional BRAC rounds mainly due to concerns

about the cost and savings, timing of new rounds, and other issues, it has

asked DOD to provide it with information concerning the amount of excess

capacity on its military installations and information on the types of

military installations that would be recommended for closure or

realignment in the event of one or more additional BRAC rounds. DOD’s

report to the Congress on this subject provided most, but not all, of the

information requested by the Congress.2

 While this report indicates that

significant excess capacity remains in the Army’s industrial facilities, more

needs to be done to fully identify the extent of excess facilities before any

future BRAC round. In particular, the services must identify opportunities to

share assets, consolidate workloads, and reduce excess capacity in

common support functions so that up-front decisions can be made about

which service(s) will be responsible for which functions. We noted that

resolution of these issues would require strong, decisive leadership by the

Secretary of Defense.3

In another 1997 report, we recommended that the Secretary of Defense

require the development of a detailed implementation plan for improving

the efficiency and effectiveness of DOD logistics infrastructure, including

reengineering, consolidating, and outsourcing logistics activities where

appropriate and reducing excess infrastructure.4

 In response, the

Secretary of Defense stated that DOD was preparing a detailed plan that

addressed these issues. In November 1997, the Secretary issued the

Defense Reform Initiative Report, which contained the results of the task

force on defense reform established as a result of the Quadrennial Defense

Review.

2

Military Bases: Review of DOD’s 1998 Report on Base Realignment and Closure (GAO/NSIAD-99-17,

Nov. 13, 1998).

3

Military Bases: Lessons Learned From Prior Base Closure Rounds (GAO/NSIAD-97-151, July 25, 1997).

4

Outsourcing DOD Logistics: Savings Achievable, but Defense Science Board’s Projections Are

Overstated (GAO/NSIAD-98-48, Dec. 8, 1997).

Page 64 GAO/NSIAD-99-31 Army Industrial Facilities
Chapter 5 

Strategic Plan Is Essential for Addressing

the Future of Army Depots and Arsenals

While this report was a step in the right direction and set forth certain

strategic goals and direction, it did not provide comprehensive guidance.

Further, the report did not resolve long-standing questions concerning

what work in the depots and arsenals is of such importance that it should

be performed in-house. Sorting out this issue becomes even more

complicated when one introduces the prospect of moving toward GOCO

facilities, which seem to fall somewhere between a pure in-house and a

total contracted-out operation. Also, for the depots, existing policies do

not address the situation involving the proliferation of depot-like facilities

at regional repair sites, within both the active and reserve components,

and the impact that this proliferation has on excess capacity and increased

costs to the government for its total maintenance activities and

infrastructure.

Conclusions Uncertainties exist about the future economy and efficiency of depot and

arsenal operations and the extent to which the functions they perform

need to be performed by the government. In this context, recent

experiences at the Army’s maintenance depots and arsenals indicate that

the Army is facing multiple, difficult challenges and uncertainties in

determining staffing requirements, and in improving the efficiency and

effectiveness of its industrial activities. Further, the Army’s industrial

facilities currently have significant amounts of excess capacity and that

problem is aggravated because of the proliferation of maintenance

activities below the depot level that overlap with work being done in the

depots. Increased use of contractor capabilities without reducing excess

capacity also affects this situation. Productivity limitations suggest the

need to reengineer operations retained in-house to enable Army industrial

activities to operate more economically and efficiently. The Army has

inadequate long-range plans to deal with issues such as those currently

affecting the Army’s industrial facilities. Such a plan would need to be

developed in consultation with the Congress and within the applicable

legislative framework in an effort to reach consensus on a strategy and

implementation plan. We continue to believe such an effort is needed if

significant progress is to be made in addressing the complex, systemic

problems discussed in this report.

Recommendations We recommend that the Secretaries of Defense and the Army determine

(1) the extent to which the Army’s logistics and manufacturing capabilities

are of such importance that they need to be retained in-house and (2) the

Page 65 GAO/NSIAD-99-31 Army Industrial Facilities
Chapter 5 

Strategic Plan Is Essential for Addressing

the Future of Army Depots and Arsenals

extent to which depot maintenance work is to be done at regular depots,

rather than lower-level maintenance facilities.

We recommend that the Secretary of the Army develop and issue a clear

and concise statement describing a long-range plan for maximizing the

efficient use of the remaining depots and arsenals. At a minimum, the plan

should include requirements and milestones for effectively downsizing the

remaining depot infrastructure, as needed, and an assessment of the

overall impact from competing plans and initiatives that advocate

increased use of private sector firms and regional repair facilities for

depot-level workloads.

If a decision is made to retain in-house capabilities, we also recommend

that the Secretary of the Army develop a long-term strategy, with shorter

term milestones for improving the efficiency and effectiveness of Army

industrial facilities, that would, at a minimum, include those

recommendations stated in chapters 2 through 4 of this report.

Agency Comments

and Our Evaluation

DOD concurred with each of our recommendations and discussed actions it

has completed, underway, or planned as appropriate for each

recommendation. Among the key actions that DOD identified are:

• a study to assess the Army’s overall maintenance support infrastructure to

determine what functions need to be retained in-house to include its five

depot-level repair activities and the recently expanded regional repair

facilities;

• establishment of a board of directors to oversee and manage the Army’s

total maintenance requirements process, including the allocation of work

to in-house and contractor repair facilities; and

• development of a 5-year strategic plan for maximizing the efficient use of

remaining maintenance depots and manufacturing arsenals.

Fully implemented, these actions should lead to substantial improvements

in the economy and efficiency of Army depot and arsenal operations.

Page 66 GAO/NSIAD-99-31 Army Industrial Facilities
Page 67 GAO/NSIAD-99-31 Army Industrial Facilities
Appendix I 

Comments From the Department of Defense

Page 68 GAO/NSIAD-99-31 Army Industrial Facilities
Appendix I 

Comments From the Department of Defense

Page 69 GAO/NSIAD-99-31 Army Industrial Facilities
Appendix I 

Comments From the Department of Defense

Page 70 GAO/NSIAD-99-31 Army Industrial Facilities
Appendix I 

Comments From the Department of Defense

Page 71 GAO/NSIAD-99-31 Army Industrial Facilities
Appendix II 

Major Contributors to This Report

National Security and

International Affairs

Division, Washington,

D.C.

Barry Holman

Julia Denman

David Epstein

Glenn Knoepfle

Edward Waytel

Paul Newton

Office of the General

Counsel, Washington,

D.C.

John Brosnan

Atlanta Field Office Bobby Worrell

Terry Wyatt

Page 72 GAO/NSIAD-99-31 Army Industrial Facilities
Related GAO Products

Public-Private Competitions: Processes Used For Sacramento Depot

Maintenance Award Appear Reasonable (GAO/NSIAD-99-42, Nov. 23, 1998).

Navy Depot Maintenance: Weaknesses in the T406 Engine Logistics

Support Decision (GAO/NSIAD-98-221, Sept. 14, 1998).

Defense Depot Maintenance: Public and Private Sector Workload

Distribution Reporting Can Be Further Improved (GAO/NSIAD-98-175, July 23,

1998).

Defense Depot Maintenance: Contracting Approaches Should Address

Workload Characteristics (GAO/NSIAD-98-130, June 15, 1998).

Public-Private Competitions: Review of San Antonio Depot Solicitation

(GAO/OGC-98-49, May 14, 1998).

Defense Depot Maintenance: Use of Public-Private Partnering

Arrangements (GAO/NSIAD-98-91, May 7, 1998).

Public-Private Competitions: Review of Sacramento Air Force Depot

Solicitation (GAO/OGC-98-48, May 4, 1998).

Navy Ship Maintenance: Temporary Duty Assignments of Temporarily

Excess Shipyard Personnel Are Reasonable (GAO/NSIAD-98-93, Apr. 21, 1998).

Public-Private Competitions: DOD’s Additional Support for Combining

Depot Workloads Contains Weaknesses (GAO/NSIAD-98-143, Apr. 17, 1998).

Defense Depot Maintenance: DOD Shifting More Workload for New

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

Depot Maintenance: Lessons Learned From Transferring Alameda Naval

Aviation Depot Engine 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).

Force Structure: Army’s Efforts to Improve Efficiency of Institutional

Forces Have Produced Few Results (GAO/NSIAD-98-65, Feb. 26, 1998).

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

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

Page 73 GAO/NSIAD-99-31 Army Industrial Facilities
Related GAO Products

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

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

Public-Private Competitions: Processes Used for C-5 Aircraft Award

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

Defense 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).

Navy Regional Maintenance: Substantial Opportunities Exist to Build on

Infrastructure Streamlining Progress (GAO/NSIAD-98-4, Nov. 13, 1997).

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

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

Navy Depot Maintenance: Privatizing 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).

Defense Depot Maintenance: Uncertainties and Challenges DOD Faces in

Restructuring Its Depot Maintenance Program (GAO/T-NSIAD-97-112,

May 1,1997)and (GAO/T-NSIAD-97-111, Mar. 18, 1997).

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).

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

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

Page 74 GAO/NSIAD-99-31 Army Industrial Facilities
Related GAO Products

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 at 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 and (GAO/T-NSIAD-96-148, Apr. 17, 1996) and

(GAO/T-NSIAD-96-146, Apr. 16, 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, Workload, and 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).

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 Closures: Analysis of DOD’s Process and Recommendations

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

Page 75 GAO/NSIAD-99-31 Army Industrial Facilities
Related GAO Products

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 Work Force (GAO/NSIAD-93-123, Feb. 12, 1993).

(709290) Page 76 GAO/NSIAD-99-31 Army Industrial Facilities
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