United States General Accounting Office

GAO Report to the Chairman, Subcommittee

on Military Readiness, Committee on

National Security, House of

Representatives

November 1997 NAVY REGIONAL

MAINTENANCE

Substantial

Opportunities Exist to

Build on Infrastructure

Streamlining Progress

GAO/NSIAD-98-4

GAO United States

General Accounting Office

Washington, D.C. 20548

National Security and

International Affairs Division

B-276587 

November 13, 1997

The Honorable Herbert H. Bateman

Chairman, Subcommittee on Military Readiness

Committee on National Security

House of Representatives

Dear Mr. Chairman:

Navy force structure reductions since the end of the Cold War have

substantially reduced ship, aircraft, and other weapon systems

maintenance requirements. In line with those reductions, the Navy closed

several maintenance facilities during four rounds of base closures, which

concluded in 1995. The Navy recognized the need to improve efficiency in

maintenance operations and further reduce maintenance costs,1

 and in

1994, established the Regional Maintenance (RM) Program. In its 1995

program review,2

 the Navy reduced its planned operations and

maintenance budgets for fiscal years 1995-99 by $1.28 billion in

anticipation of RM Program savings. At your request, we reviewed the RM

Program to identify (1) the progress made in implementing the program,

(2) savings that have been achieved, (3) opportunities for additional

savings, and (4) barriers that inhibit full implementation of the program

and achievement of projected savings. Since the program’s principal

efforts thus far have been on reducing infrastructure, we focused our work

on that objective.

Background The Navy has reported that more than $8.5 billion of Navy resources was

applied in fiscal year 1996 to maintenance programs in support of fleet

ships and aircraft. Each type of “platform,”—surface ships, submarines,

aircraft carriers, and aircraft—has a separate maintenance infrastructure.

Maintenance is done at three different levels—organizational,

intermediate, and depot—depending on the nature and complexity of the

work required. Organizational maintenance is done by military personnel

on board ships or at aircraft squadrons. While at sea, intermediate

maintenance on large ships such as aircraft carriers and tenders is done by

military personnel; ashore, intermediate maintenance is done by military

1

We have identified the defense infrastructure as a high-risk area. High-risk areas are those critical

government operations that are highly vulnerable to waste, fraud, abuse, and mismanagement. High

Risk Series: Defense Infrastructure (GAO/HR-97-7, Feb. 1997) provides further discussion of our

assessment of the defense infrastructure.

2

The Navy’s fiscal year 1995 program review was conducted in 1994, and updated the fiscal 

years 1994-99 Future Years Defense Program.

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B-276587 

and civilian personnel at submarine refit facilities and aircraft and shore

intermediate maintenance activities. Depot-level maintenance is done

mostly by civilian personnel at aviation depots and shipyards. In 1996, the

Navy had over 21,000 military and 42,000 civilians participating in

maintenance activities at the intermediate and depot levels. In addition,

the Navy has reported that up to 40 percent of depot-level maintenance is

outsourced to private companies.

In response to force structure reductions since the mid-1980s and

subsequent defense planning guidance to reduce excess maintenance

infrastructure, the Chief of Naval Operations (CNO), early in 1993, tasked

the commanders of the Atlantic and Pacific Fleets to develop a strategy for

streamlining and consolidating maintenance functions. This led to the

Navy establishing the RM Program in March 1994. The Navy’s RM Program

efforts have been focused on reducing excess maintenance infrastructure.

However, the program has other objectives such as improving

maintenance processes, integrating supply support and maintenance

functions, and providing compatible data systems across the three

maintenance levels. The program was to be implemented in three

overlapping phases during fiscal years 1995-99.

Since the RM Program began, the number of Navy ships and aircraft has

continued to decline. For example, the Navy projects that by the end of

fiscal year 1999, it will have 186 fewer aircraft and 22 fewer ships to

maintain than in 1996. During the same period, the maintenance budget for

ships and aircraft is also expected to be reduced to about $7.5 billion (in

fiscal year 1996 dollars), a decrease of about $1 billion.

Results in Brief While the Navy has made progress in achieving its infrastructure

streamlining objective, thus far this progress has not been as great as

anticipated and challenges remain for accomplishing future plans. For

example, the Navy has made substantial progress establishing a

management structure and process for realigning and reducing its

maintenance infrastructure and has identified and started some specific

initiatives. However, many initiatives identified have not been completed

and savings are not being achieved as projected. More specifically, our

work shows that:

• To implement the infrastructure streamlining objective, the Navy

established steering committees, initiated a phased execution plan,

identified a regional structure, and developed business plans. Through

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B-276587 

fiscal year 1996, the Navy also identified 102 initiatives, 55 of which had

been started by the end of fiscal year 1997, and 47 of which are to be

implemented between fiscal year 1998 and 2001. The 55 initiatives mainly

represent the less controversial projects that are easier to implement,

though a few complex consolidations have occurred; for example, three

shore intermediate-level maintenance activities were combined into one

organization. Implementation of the program has taken longer than

expected, however.

• Regarding savings estimates, the Navy projected that its 102 initiatives

would save about $944 million, of which $198 million was expected to

accrue during fiscal years 1994 to 1997 and $746 million was expected to

accrue during fiscal years 1998 to 2001. Some of the initiatives are not

progressing as projected, however. For example, one initiative to

consolidate planning and engineering functions for ship repairs is not

occurring as planned, delaying planned reductions-in-force actions and

affecting up to $92 million in savings projected between fiscal year 1998

and 2001. Also, the Navy cannot identify actual savings achieved because

its accounting system does not track RM Program costs and related savings

and the Navy did not establish an independent system to track these costs

and related savings. The Office of the Secretary of Defense (OSD),

Comptroller, stated that the program has not progressed enough to reap

projected savings, Navy budgets recently submitted to Congress did not

reflect the expected savings, and the Navy recently requested additional

funding for depot maintenance. Since the Navy decreased its planned

budgets for operations and maintenance in anticipation of savings from

the RM Program and savings have not materialized as anticipated, the

reductions will have to be made up in other ways or fleet readiness may be

adversely affected in the future.

• The Navy has opportunities to build on its progress by working to achieve

the $746 million in expected savings during fiscal years 1998 to 2001,

moving more quickly to implement initiatives for savings that have been

identified, and pursuing other opportunities with high potential for

significant savings not already in its plans. For example, we identified

three opportunities to achieve potential annual savings of up to $26 million

and one-time savings of $22 million through selected intermediate- and

depot-level consolidations of common industrial shops in the Northwest

and Hawaii regions that were not in current plans.

• Accomplishing the infrastructure streamlining objective will be difficult.

The Navy identified many of its initiatives to achieve savings as high risk

because of barriers to implementation. The Navy faces parochial and

institutional resistance to the RM Program’s objectives and has other

complex issues to resolve. The biggest hurdle to overcome may be

Page 3 GAO/NSIAD-98-4 Navy Regional Maintenance
B-276587 

resistance to initiatives that eliminate organizations, reduce jobs and

promotions, and/or reduce a command’s or organization’s control over

resources. Other barriers are (1) the lack of management visibility over all

maintenance related costs; (2) multiple, unconnected management

information systems that do not provide adequate data for regional

maintenance planning and decision-making; and (3) the large number of

shore positions desired to support the sea-to-shore rotation program

compared to the smaller number needed to perform the intermediate

maintenance workload. Many commands involved in the RM Program have

chains of command that are independent of each other up to the CNO;

therefore, visible commitment by the CNO is critical to overcome

resistance, accelerate decision-making, and provide the necessary

resources and coordination needed for efficient and effective program

implementation.

RM Program’s

Implementation

Progress

The Navy has made substantial progress in implementing the

infrastructure streamlining objective of the RM Program through such

efforts as establishing a management structure, a phased execution plan,

and a process for realigning and reducing its maintenance infrastructure. It

also identified 102 initiatives aimed at regionalizing, consolidating, and

streamlining the maintenance infrastructure and achieving savings.

Implementation of the program has not been as rapid as predicted,

however, and milestones may not be met.

Detailed Management

Structure and Phased

Execution Plans Were

Developed

The Navy has established a management structure for planning and

implementing the RM Program. The structure is linked at the CNO level and

includes committees, systems commands, the fleets, and various quality

boards and other groups. For example, the management structure within

the CNO includes an Executive Steering Committee that provides overall

program guidance and direction. This committee chartered the Fleet

Support Quality Management Board to develop the transition strategy for

moving to regional maintenance.3

 Through this Board, regional

maintenance was planned and developed using focused working groups. A

Regional Maintenance Implementation Board (RMIB) was established to

coordinate among the Pacific and Atlantic Fleets, the systems commands,

and CNO-level units. The Board is co-chaired by the Fleet Maintenance

3

The Fleet Support Quality Management Board is comprised of representatives of both fleets, the

Naval Sea Systems, Naval Air Systems, Naval Supply Systems, Space and Naval Warfare Systems,

Naval Facilities Engineering Command, the Military Sealift Command, the CNO, and other Navy

organizations.

Page 4 GAO/NSIAD-98-4 Navy Regional Maintenance
B-276587 

Officers,4 who have key leadership responsibilities to implement regional

maintenance. This Board meets on a regular basis to address regional

maintenance and other issues. Each of the systems commands, the

Atlantic Fleet, and the Pacific Fleet report separately to the CNO.

Through this management structure, the Navy has developed concepts,

guidance, fleet business plans, and milestones for the RM Program

infrastructure streamlining objective. For example, the fleets developed

program guidelines for establishing regional repair centers, adopted a

business-case analysis approach for evaluating candidate activities for

consolidation, and formulated cost templates for measuring the monetary

impacts of consolidations. In March 1994, the CNO approved a three-phased

execution plan that assigned the following primary tasks in each phase:

• Phase 1: Minimize intermediate-level redundant capacity through process

improvements and resource sharing, and develop prototype centers of

excellence, called Regional Repair Centers. Implement phase during fiscal

years 1995-99.

• Phase 2: Integrate intermediate- and depot-level activities and establish

Regional Maintenance Centers (RMC), consisting of a confederation of

Regional Repair Centers. Implement phase during fiscal years 1996-99.

• Phase 3: Conduct fleet maintenance using a single maintenance process

supported by common business and production practices. Implement

phase during fiscal years 1997-99.

As part of phase 2, the Mid-Atlantic and Northwest RMCs, and later six

others, were established—a total of four in each fleet. The Navy has

included one or more of the states around where the centers are located

and where there are Navy maintenance activities into areas it refers to as

RM regions (see fig. 1).

4

The Navy has two Fleet Maintenance Officers, one for the Atlantic Fleet and one for the Pacific Fleet.

Page 5 GAO/NSIAD-98-4 Navy Regional Maintenance
B-276587 

Figure 1: The Eight Navy Regional Maintenance Centers and Regions

Northwest RMC

Bremerton, Wash.

Southwest RMC

San Diego, Calif.

Northeast RMC

New London, Conn.

Mid-Atlantic RMC

Norfolk, Va.

Southeast RMC

South Texas RMC Mayport, Fla.

Ingleside, Tex.

Hawaii RMC

Honolulu, Hawaii

Westpac RMC

Yokosuka, Japan

Note: Regions are shaded.

Each RM region established an executive steering committee for

maintenance, comprised of the commanders and maintenance managers

of activities in the region and chaired by the region’s RMC commander.

These committees have chartered process action teams to identify which

activities in the region should be evaluated for consolidation. The two

fleets have developed regional maintenance business plans, including

initiatives and estimates of savings to be achieved in each of their

respective regions, and the systems commands have added their own

initiatives with estimates of savings.

Page 6 GAO/NSIAD-98-4 Navy Regional Maintenance
B-276587 

Navy Has Experienced

Delays in Implementing

Regional Maintenance

Although the Navy began implementation as planned, phase 2 has been

redefined, and phase 3 has been delayed. As a result, implementation is

taking longer than anticipated. Full implementation, initially projected for

fiscal year 1999, is currently projected for fiscal year 2000 and could take

longer.

According to Navy officials, there have been delays in implementing the

program because many of the issues involved are complex and require

extensive studies and approvals. For example, the possible consolidation

of calibration laboratories in the Northwest region was identified as an

initiative in 1994, but it has taken 3 years and multiple studies to determine

which activity would do the calibration work and whether it would be

done using government or contract employees. Also, implementation

among the regions has been uneven. While all regions have made some

progress, the Mid-Atlantic region has led the way in establishing the

program and piloting regional maintenance initiatives to achieve savings.

For example, the Mid-Atlantic region has 18 (33 percent) of the 55

initiatives being implemented from 1994 to 1997, including consolidating

three shore intermediate maintenance activities (SIMA) into one

organization, consolidating calibration and material testing laboratories,

and establishing other regional repair centers. It also initiated the fleet

business plans and guidance for regional repair centers later used by other

regions. By contrast, the Hawaii and Northwest regions had implemented

eight initiatives each. The Northwest region established regional repair

centers for pumps, periscopes, gas turbine engines, and eliminated a

military construction project; and both the Northwest and Hawaii regions

have consolidated nuclear regional maintenance work.

Because of problems with the Navy’s financial information system and

other coordination issues, in 1996 phase 2 of the execution plan was

divided into a three-step process. During the first step, ship intermediateand depot-level maintenance were to be consolidated; aircraft

intermediate- and depot-level maintenance activities were to be

collocated; and ship and aircraft maintenance consolidations were to take

place where logical. During the second step, ship intermediate- and

depot-level maintenance planning and engineering functions were to be

consolidated into ship-planning and engineering centers,5

 reducing the

number of planning and other positions needed. As of July 1997, the third

5

All scheduled ship repair engineering, planning, and material support activities were to be

consolidated and done by personnel located mainly at the naval shipyards. However, in November

1997, OSD officials told us the Navy is significantly revising plans for this initiative in ways that could

negatively affect the amount of estimated savings.

Page 7 GAO/NSIAD-98-4 Navy Regional Maintenance
B-276587 

step had not been approved, and delays in phase 2 have postponed the

approval of phase 3.

In a regional maintenance briefing in May 1997, the Deputy Chief of Naval

Operations (Logistics) briefed the CNO that execution of the RM Program

would be completed in fiscal year 2000. Since then, in July 1997, the CNO

noted that although phase 2 was on track, challenges remained, much still

had to be done, and efforts must be accelerated. According to Navy

officials, the tendency is to be optimistic in establishing milestones for

such programs and organizational realignments are particularly difficult to

accomplish. They also said that developing regional maintenance will not

be completed in 1999 as planned, but will be a continuous process long

after fiscal year 2000 as new initiatives and refinements to existing

maintenance processes are identified.

Savings Have Not

Been Achieved at

Projected Levels

Through fiscal year 1996, 102 initiatives with projected savings of

$944 million6

 had been identified for the program. Of the 102, the Navy

estimated that it would achieve net savings of $198 million through

implementation of 55 initiatives during fiscal years 1994-97 and that these

projects would continue to provide savings in fiscal years 1998-2001

amounting to $272 million, or a total of about $470 million (see table 1). It

planned to implement 47 more between 1998 and 2001.7

Table 1: Navy Estimates of Net

Savings to Be Achieved From 55

Regional Maintenance Initiatives

Started During Fiscal Years 1994-97 Estimated savings

Dollars in millions

Source of savings

Fiscal years

1994-97

Fiscal years

1998-2001 Total

Atlantic Fleet $28.4 $148.5 $176.9

Pacific Fleet 60.5 7.6 68.1

Systems commands and other

initiatives

109.1 116.0 225.1

Total $198.0 $272.1 $470.1

6

The $944 million is a combination of savings derived from initiatives identified by the fleets, the naval

system commands, and Navy operations staff. It is actually savings and cost avoidances (about 

$1.367 billion) less funds used to implement these initiatives (about $423 million).

7

Other information indicated some fleet initiatives may have started earlier than the Navy reported to

us. Thus, some of the investments and savings would begin to occur earlier as well. Headquarters

program officials who provided the data said they were aware of some problems but that it was

generally accurate and would not be updated for some time.

Page 8 GAO/NSIAD-98-4 Navy Regional Maintenance
B-276587 

Program savings are not being achieved at the levels the Navy originally

estimated. According to fleet maintenance officials, initiatives that have

been implemented are mostly the less controversial projects that are

easier to implement and a few complex consolidations. They said they are

proceeding slowly because they believe Navy managers should be

encouraged, rather than forced, to accept regional maintenance.

The Navy has also reduced its estimates of savings for a number of

initiatives. For example, the savings estimate for an initiative to reduce the

overhaul for certain diesel engines was reduced from $5.4 million annually

to $1.2 million in fiscal year 1996 and $900,000 in fiscal years 1997-99.

According to officials at the maintenance facility responsible for the repair

of these engines, overhauls have not occurred at the anticipated rate per

year because a maintenance process change reduced the requirements. In

the Northwest region, a delay in a project to consolidate calibration

functions has delayed the realization of potential savings. Also, an

initiative to consolidate ship repair planning and engineering functions at

the Naval Sea Systems Command is not occurring as expected, delaying

planned reductions-in-force actions and affecting up to $92 million in RM

Program savings projected to accrue between fiscal year 1998 and 2001.

Although the Navy has incorporated its $944 million in estimated savings

from the RM Program into its projected maintenance budget, actual RM

costs and related savings are not systematically tracked to determine

whether they have actually been accrued. The Navy’s accounting system,

like all Department of Defense (DOD) accounting systems, tracks expenses

and disbursements but not savings, and the Navy did not establish an

independent system to track RM costs and related savings. CNO officials

told us they recognized the need for such RM Program data but that efforts

to collect it can involve many Navy activities and would be so labor

intensive that there are no current plans to do so.

The Navy Audit Service said it is in the process of evaluating RM savings

through baseline studies of initiatives and follow-up studies 1 year after

implementation. Only one of the studies has been completed. It showed

that savings achieved through the consolidation of activities in an electric

motor rewind shop in the Mid-Atlantic region was about $4.4 million a

year, or about 44 percent of the $9.9 million baseline cost each year prior

to consolidation.8

 Baseline costs were being evaluated for some other

8

Subsequent to the completion of our audit work, the Naval Audit Service informed us that it had

completed two other studies dealing with the consolidation of nuclear propulsion and nuclear

maintenance activities in the Hawaii region. These studies identified first year savings attributable to

RM consolidation of $4.8 million and $2.0 million, respectively.

Page 9 GAO/NSIAD-98-4 Navy Regional Maintenance
B-276587 

selected projects so that post consolidation studies could be done. While

the Naval Audit Service is looking at costs before and after consolidation,

it is not tracking RM savings into budget and accounting records to

determine if they have actually been accrued.

Actual savings achieved through the RM Program have been questioned

within OSD. An OSD Maintenance Policy, Programs, and Resources office

study of the RM Program concluded that savings had been achieved from

the restructuring of maintenance activities, but that some of the savings

might have been the result of the four base realignment and closure

rounds and other actions. The OSD Comptroller has gone further and

concluded in 1996 that savings projected from the RM Program for fiscal

years 1994 through 1997 have not materialized as anticipated and are not

evident in actual Navy budgets submitted to Congress each year.

Potential Maintenance and

Budget Impacts If RM

Savings Are Not Achieved

In a program review for fiscal year 1995, the Navy decreased its planned

fiscal year 1995-99 budgets for operations and maintenance by

$1.28 billion, anticipating that savings from regionalizing maintenance

would offset the impact of the reductions (see table 2). According to Navy

officials in each fleet and in the CNO’s Supportability, Maintenance, and

Modernization Division, RM savings did not materialize to cover the

amounts taken from the programs, and the reductions had to be made up

in other ways. While program budgets were reduced by $1.28 billion, the

commands and fleets did not have records available showing how the

reductions were finally absorbed. According to the OSD Comptroller,

evidence indicates that other factors such as base closures, force structure

reductions, directed civilian drawdowns and the general reduction in

depot workloads resulting from force structure cuts during fiscal years

1992-97, have accounted for the actual reductions in costs.

Table 2: Navy Program Reductions in

Operations and Maintenance Budgets

Taken in Anticipation of Regional

Maintenance Savings Fiscal year

Dollars in millions

Command 1995 1996 1997 1998 1999 Total

Naval Sea Systems $92 $117 $121 $139 $163 $632

Naval Air Systems 56 71 94 106 87 414

Space and Warfare

Systems

22 20 21 21 23 107

Atlantic Fleet 8 10 10 9 10 47

Pacific Fleet 22 12 14 15 17 80

Total $200 $230 $260 $290 $300 $1,280

Page 10 GAO/NSIAD-98-4 Navy Regional Maintenance
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The OSD Comptroller stated in a November 1996 budget memorandum that

the RM Program has not progressed enough to reap projected savings and

that further review of regional maintenance might be in order to ensure

savings occur and readiness is not degraded as a result of the reductions.

In August 1997, OSD Comptroller officials said that savings anticipated

from the RM Program have not materialized; in fiscal years 1995 and 1996

regional maintenance did not progress much past isolated, small and

informal tests; and in fiscal years 1997 and 1998, savings were offset by the

need to finance construction of new facilities in Navy SIMAs. The officials

noted that the Navy has recently requested additional funding for depot

maintenance and that more requests for additional funding were

anticipated. They further noted that depot maintenance budgets in a

number of areas have had to be increased over the Navy’s proposed

budget levels. For example, in fiscal year 1995, rates were increased

significantly over the Navy’s proposed budget levels to ensure full costs

were recouped; and in fiscal year 1998, Navy air depot budgets were

increased each year in the Future Years Defense Program, with over

$200 million added in both fiscal years 1998 and 1999.

According to Atlantic Fleet officials, they have thus far been able to absorb

the reductions in planned budgets for ships with no impact on readiness.

They said this is because they are focusing on fixing specific problems,

which reduces the total amount of maintenance to be done, rather than

performing entire scheduled depot-level maintenance overhauls. They also

said that an initiative started in fiscal year 1995, to better balance expected

naval shipyard workloads with the available workforce, has resulted in

improved operating results for naval shipyards. CNO officials

acknowledged that fixing specific maintenance problems rather than

overhauling entire components would likely result in maintenance cost

reductions. However, they were concerned that by using this approach the

overall material condition of ships might be adversely affected over the

long term, but noted that the Navy currently does not have adequate

measures of material condition and its relationship to readiness.

Additional

Opportunities for

Future Substantial

Savings

The Navy has many opportunities to build on its maintenance

infrastructure streamlining progress. The Navy anticipates that the largest

savings will accrue during fiscal years 1998-2001 (see fig. 2); that is, of the

estimated $944 million its 102 initiatives are projected to save, $746 million

would accrue during that period. The Atlantic and Pacific Fleets have

identified additional opportunities for savings, and in 1997 added 34 more

initiatives to their regional maintenance business plans. They have not

Page 11 GAO/NSIAD-98-4 Navy Regional Maintenance
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estimated the amounts of savings from many of these initiatives, however.

During our review, we identified additional opportunities for

infrastructure reductions in two regions with potential savings of up to

$48 million. These included potential annual savings of $26 million based

on maintenance infrastructure consolidations in the Hawaii and Northwest

regions, and $22 million in one-time savings by transferring work at the

SIMA, Everett, Washington, to other existing shops and eliminating a

military construction project and two barge overhauls.

Figure 2: Navy Projections of $746

Million in Regional Maintenance

Program Savings to Be Achieved

During Fiscal Years 1998-2001

1998 1999 2000 2001

0

50

100

150

200

250

222

150

214

160

Fiscal year

Dollars in millions

The Navy has identified other potential regional maintenance

opportunities that need to be studied. In the regions we reviewed, for

example, the Northwest region in June 1994 identified 41 areas of

redundant capabilities, but still has not studied many of them to determine

whether initiatives could be developed to reduce unnecessary

infrastructure and achieve savings. In a February 1997 Regional

Maintenance Implementation Board meeting, in an effort to spur progress,

Page 12 GAO/NSIAD-98-4 Navy Regional Maintenance
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the fleets were tasked to identify regional maintenance consolidation

initiatives that could be considered. In May 1997, the RM Program manager

for the Hawaii region told us his region had followed the lead of the earlier

Northwest region project and compiled a comprehensive inventory of

regional maintenance capabilities to be used to help identify future

initiatives.

In addition, the Mid-Atlantic region, in its 1997 update to the fleet business

plans, identified 29 new savings initiatives. The update did not determine

when about half of them would be implemented or estimate the savings

that could be achieved. These initiatives include establishing two regional

repair centers—one for special tool design and manufacture and another

for sheet metal component fabrication—and a regional training support

center. Other regions identified a total of five additional initiatives.

Opportunities for the

Hawaii and Northwest

Regions to Reduce and

Consolidate Additional

Maintenance Activities

In the Hawaii and Northwest regions, we identified three examples of

opportunities to consolidate intermediate- and depot-level maintenance

activities that were not in current business plans. We observed common

industrial facilities, called backshops, at six activities.9

 The backshops

consisted of electrical and electronic, machining and metal-forming shops

and material testing laboratories. At most of these backshops, we were

provided estimates showing unused infrastructure—facilities and

equipment. We estimated that consolidating and reducing excess capacity

in these shops could save up to $48 million—from about $2 million to

$26 million annually and about $22 million in one-time savings. (See apps. I

and II for details of our analysis.) These are not budget quality estimates,

however, because complete and compatible data on the facilities were not

available, alternative consolidation arrangements are possible, and there

was no consensus on what workforce savings could be achieved.

Both regions had considerably more maintenance capacity than workload,

particularly at the shipyards. For example, we observed first shift

operations in a total of 25 backshops at 6 activities in the 2 regions.

Although usually the busiest shift, supervisors estimated that on average,

this shift was operating at about 30-percent utilization, with a range of

between 4 and 70 percent. Of the 25 shops, 16 had a second shift and only

7 had a third shift. Estimates of utilization during second shifts were

markedly lower, an average of 12 percent and a range of from about 1 to

9

Work takes place on the ships, and in supporting shops and laboratories called “backshops” where

removed parts and components are sent for test and repair, overhaul or replacement. For purposes of

these examples, we limited our analysis to the backshop work because RM Program and fleet

maintenance officials identified backshop consolidations as less controversial.

Page 13 GAO/NSIAD-98-4 Navy Regional Maintenance
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39 percent. Some shop supervisors noted their shops had supported

several times the number of workers in the 1980s than were currently

employed. Navy data indicated that excess facilities and equipment

capacity were due to reductions in labor hours and numbers of employees

at these shipyards. For example, Navy data on direct labor hours at the

Pearl Harbor Naval Shipyard showed a reduction from about 6.1 million to

3.2 million (48 percent), and the Puget Sound Naval Shipyard showed a

reduction from 12.0 million to 11.3 million (6 percent) between 1989 and

1996. (See fig. 3.) At the same time, employment was reduced from 6,044

to 2,879 ( 52 percent) at the Pearl Harbor Naval Shipyard, and from 12,240

to 9,424 (23 percent) at the Puget Sound Naval Shipyard.

Figure 3: Direct Labor Hour Trends at

the Pearl Harbor and Puget Sound

Naval Shipyards (fiscal years 1989-96)

1989 1990 1991 1992 1993 1994 1995 1996

2

4

6

8

10

12

14

16

18

6.1

5 4.8 5.1 4.6

3.8

4.8

3.2

12 12.3 12.1

15.1

13.3

12.3 12

11.3

Fiscal year

In millions of hours

Pearl Harbor 

Naval Shipyard 

Puget Sound 

Naval Shipyard

Our specific findings, suggestions for consolidations, and estimated

savings for the Hawaii and Northwest regions are summarized in 

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appendix I, with detailed data on labor, facilities, and costs provided in

appendix II.

Barriers to Achieving

Infrastructure

Reductions and

Savings

The Navy has barriers to overcome before it can fully achieve expected

infrastructure reduction savings and other RM Program objectives.

According to the Navy, in May 1996, 54 percent of the $944 million in

projected savings would come from projects considered high risk.

Initiatives were considered high risk to achieving expected savings when a

large number of organizations and funding accounts were involved and/or

they required significant manpower reductions. For example, 1 high-risk

initiative, to save $4 million a year by consolidating the calibration

functions in the Mid-Atlantic region, involved 22 activities and 3 funding

sources.

The Navy recognizes that parochial and institutional resistance to the RM

Program’s objectives and other issues will be difficult to resolve. The

biggest barrier to overcome may be resistance to initiatives that eliminate

organizations, reduce jobs and promotions, or reduce control over

resources. Other barriers to integrating intermediate- with depot-level

capabilities are (1) the lack of management visibility over all

maintenance-related costs; (2) multiple, unconnected management

information systems that do not provide adequate data for regional

maintenance planning and decision-making; and (3) the large number of

shore duty intermediate-level maintenance positions needed to support

the Navy’s sea-to-shore rotation program compared to a lesser number

needed to perform the work.10 The Navy has RM Program working groups

and committees in place to address some of these issues. According to

Navy officials, these issues are intertwined and some planned resolutions

would be subject to legal and congressional review.

Resistance to Downsizing

and Loss of Control Are

Major Barriers to

Implementing the RM

Program

The RM Program requires managers to forgo the traditional

platform-oriented structure and substantially reduce or close some

maintenance activities as work is eliminated or reassigned. Many

commands involved in the RM Program have chains of command that are

independent of each other, and visible commitment by the CNO is critical to

program implementation. For example, reductions will result in fewer

commands and promotion opportunities and a need to share resources,

10In another assignment, we are reviewing opportunities for Navy personnel returning from sea duty to

work in comparable positions during their stateside tours.

Page 15 GAO/NSIAD-98-4 Navy Regional Maintenance
B-276587 

prioritize work, and reassign responsibilities. According to fleet officials,

this organizational resistance may be the greatest inhibitor to RM progress.

According to fleet maintenance officials, overcoming resistance to

organizational changes is difficult. The fleets’ type

commanders—shore-based commanders responsible for supporting the

fleet, including providing maintenance for aircraft, surface ships, and

submarines—did not fully support the proposed changes. These fleet

officials told us that since the type commanders are responsible for the

intermediate maintenance facilities for their respective platforms, they

may view the regionalization of maintenance as a loss of control or

responsibility, including a potential loss of their ability to assure readiness

of their assigned units. These officials also noted that the Fleet

Maintenance Officers’ influence over the type commanders is limited.

More progress has been made in the Mid-Atlantic region, where (1) the

fleet command, type commanders, and regional maintenance officials are

collocated; (2) the program has had strong support from the fleet

commander; and (3) the Fleet Maintenance Officer initially started

regional maintenance.

Also, according to CNO and fleet officials, RM initiatives that cut across

major commands may prove difficult to achieve, particularly if they

involve loss of control or responsibility. Initiatives to integrate and

consolidate depot-level maintenance activities with intermediate-level

maintenance activities require the cooperation and support of most of the

Navy’s major commands and the CNO. Naval Air Systems commanders,

Naval Sea Systems commanders, and fleet and their subordinate type

commanders all have a stake in how RM initiatives are implemented and

how the initiatives will affect their particular activities and staffing.

Various representatives of the activities, regions, fleets, and headquarters

offices expressed concern that CNO-level managers had not decisively

endorsed regional maintenance and this had caused problems in

participation, particularly outside the surface ship community. Fleet and

headquarters officials also noted that the Naval Air Systems command

activities have had limited involvement in the program primarily because

they consider their maintenance systems different and airworthiness a

critical criterion that surface ship maintenance activities are not used to.

Similarly, submarine platform officials voiced their concerns to us about

their strict maintenance requirements and safety standards.

Fleet and headquarters officials further noted that many commands

involved in the RM Program have chains of command that are independent

Page 16 GAO/NSIAD-98-4 Navy Regional Maintenance
B-276587 

of each other up to the CNO. Therefore, visible commitment by the CNO is

critical to implementing the RM Program, as this involvement accelerates

the provision of resources and the coordination needed for efficient and

effective program implementation. For example, there was a significant

increase in activity after the CNO directed the Hawaii region to implement a

pilot project to study the consolidation of the Pearl Harbor shipyard with

the naval intermediate maintenance facility and to complete the

integration by September 30, 1998. In another streamlining effort,

regionalizing base operations, the CNO has provided crucial support. For

example, in September 1995, the CNO approved a major Navy-wide

infrastructure reduction initiative to (1) reduce the number of activities

that own and manage shore installations, (2) regionalize installation

management functions where it makes sense, and (3) find excesses,

duplications and redundancies among the numerous tenants on bases,

using San Diego and Jacksonville as pilot locations. The San Diego project

is to be completed as soon as possible, but no later than fiscal year 1999.

According to these officials and the information provided, this effort has

affected many activities, commands and the way business is conducted;

therefore, the support of the CNO was crucial for accomplishing the

components of the initiative.

Existing Navy Financial

Systems Do Not Provide

Adequate Data on Costs of

Depot- and

Intermediate-Level

Maintenance

The Navy has identified the need to provide visibility over all

maintenance-related costs as an issue in implementing the RM Program.

The Navy has also identified a need for a flexible and responsive

managerial accounting system because the Navy’s current financial system

does not provide the data needed for informed decision-making. For

example, the Navy has in some cases increased capacity in its shore

intermediate activities’ backshops without regard to the fact that a nearby

shipyard had excess capacity in similar backshops. Fleet maintenance

officials said efforts to develop full cost visibility and the necessary

financial system are underway.

According to OSD Comptroller officials, a central issue is that Navy

depot-level maintenance activities are funded under the Navy Working

Capital Fund (formerly the Defense Business Operations Fund),11 and

intermediate-level maintenance facilities are funded directly from the

appropriations accounts. One of the basic tenets of the Working Capital

11The 1997 Defense Authorization Act required DOD to conduct a comprehensive study of the Defense

Business Operations Fund. Pending the results of this study, the Defense Comptroller dissolved the

Fund in December 1996 and created four working capital funds: Army, Navy, Air Force, and

Defense-wide. The four funds continue to operate under the revolving fund concept and charge

customers the full costs of providing goods and services to them.

Page 17 GAO/NSIAD-98-4 Navy Regional Maintenance
B-276587 

Fund financial structure is to focus on total cost visibility and full cost

recovery for depot-level maintenance activities. Operating under this tenet,

managers of the fund’s activities are to be held accountable for the costs

of all the resources that they manage, and military customers are to pay

the full costs of the maintenance work performed.

In contrast to the full costing visibility of the Navy’s depot-level

maintenance, intermediate-level maintenance activities are not operated

using the Working Capital Fund concept. Military customers at the

intermediate activities are usually only charged the incremental costs of

the work performed, such as the costs of materials. Most of their other

costs are subsumed in the mission funded operating budget and have little

to no visibility. The mission funded operating budget includes the costs of

civilian personnel and all overhead type costs to include real property

maintenance and utilities. In addition, these intermediate maintenance

activities are manned with military personnel, and their personnel costs

are directly borne by the Military Personnel Appropriation and are not

costed as part of the repair work they perform. By excluding these costs,

the full costs of products and services are concealed, and customers see

the work done at the intermediate activities as significantly less expensive

than the work done at the shipyards. As a result, there is an incentive for

customers to use intermediate facilities to the maximum extent possible.

For example, according to officials in the Northwest region, sailors from

the aircraft intermediate-level maintenance activity at Whidbey Island

Naval Air Station fabricated components at Whidbey Island and traveled to

the shipyard, a distance of 35 miles, to install the components on a ship

when the fabrication work could have been done at the underutilized

shipyard sheet metal shop.

According to OSD Comptroller officials, until the Navy can accumulate

complete, comparable, and reliable data on the costs of its intermediate

and depot-level maintenance facilities, decisions on how best to use and

integrate these facilities will continue to be impaired. Fleet officials told us

the Navy has recognized this problem and has pilot projects underway to

obtain total cost visibility data at the job-order level in regional repair

centers. They said that experience with regional repair centers that have

been established under the RM Program has shown that such efforts are

complicated, particularly by the problems associated with obtaining the

required data from multiple systems. As a result, accumulating reliable

cost data will be difficult, and require dual systems for some time, thereby

reducing potential savings.

Page 18 GAO/NSIAD-98-4 Navy Regional Maintenance
B-276587 

Multiple Unconnected

Information Systems Do

Not Provide Adequate Data

for Regional Maintenance

Planning and

Decision-making

The Navy does not have well-defined and consistent data on its

maintenance shops’ capacity, capability, workforce, and current and

projected workloads. Without such data, the Navy cannot systematically

identify potential regional consolidations and related savings estimates.

The Navy has recognized that it lacks compatible and interconnected

maintenance information systems that could identify similar maintenance

capabilities across activities. Although the Navy has made some attempts

to address this issue, its systems do not yet collect the critical information

needed to identify excess capacity.12

In the Northwest and Hawaii regions, incomplete and unreliable data has

hindered the Navy’s ability to identify excess maintenance capacity. For

example, data is not available or compatible within and among activities in

such areas as shops’ capacity, productivity, labor efficiency, workloads,

and equipment utilization rates. According to the fleet business plans,

having separate maintenance infrastructures for ships, submarines,

aircraft carriers, and aircraft has fostered the development of unique

maintenance management information systems for the different platforms

and levels of maintenance. A Northwest region process action team has

studied the issue and found a wide disparity in the information available

among its regional activities. It developed a strategic implementation plan

to establish, first, an interconnection among information systems; second,

an ability for these systems to exchange data; and third, the ability to

manage, control, and use the data. Although phases 1 and 2 were to have

been implemented by fiscal years 1995 and 1996, respectively, as of

August 1997, the team was still in phase 1.

According to CNO and fleet officials involved in the establishment of an

automated information system, it is critical to have a system that allows

for the exchange of technical and management data among various

maintenance activities. In one instance where several databases were

evaluated, none provided sufficient common data to determine capabilities

across activities. Although the Navy contracted for the development of a

concept model that would recognize capabilities among activities in two

regions, it concluded that the model developed required intensive data

collection and was not cost-effective to implement. Navy fleet officials

said that some progress has been made in providing access and linkages of

data among platforms and RM regions, but efforts have been delayed

because activities have not made it a priority or do not have the computer

equipment needed.

12Our report, Defense IRM: Poor Implementation of Management Controls Has Put Migration Strategy

at Risk (GAO/AIMD-98-5, Oct. 20, 1997), addresses the status and progress of DOD’s efforts to deploy

standard information systems to support common business practices.

Page 19 GAO/NSIAD-98-4 Navy Regional Maintenance
B-276587 

Sea-to-Shore Rotation and

Other Needs Are Barriers

to Workload-Based

Reductions in

Intermediate-level

Maintenance Positions

The Navy’s need to support requirements other than workload at shore

intermediate-level maintenance facilities can hinder RM regions’ efforts to

reduce military positions. For example, these facilities need positions to

support maintenance workload, the Battle Force Intermediate

Maintenance Activity (BFIMA) program13 and sea-to-shore rotation

requirements. These facilities’ positions are also used for personnel

identified as excess to the requirements or on limited duty. According to

the Navy, however, the number of shore intermediate-level positions

should not be less than BFIMA program requirements and should not

exceed sea-to-shore rotation requirements.

As of March 1996, the Navy had 12,668 shore intermediate-level positions.

The Navy needed only 11,704 of these positions to support the

maintenance workload. Thus, it had an excess of 964 positions. Also, the

workforce is unevenly distributed across the regions. For example, three

regions had 1,409 positions that exceeded their maintenance workload

requirements, while four regions had 445 positions less than their

projected maintenance workload requirements. The Navy identified a need

for 4,649 positions to support the BFIMA program; thus, the 12,668 existing

positions far exceed BFIMA requirements.

On the other hand, the number of intermediate-level maintenance

positions desired to support the sea-to-shore rotation program14 far

exceeds the number needed to support the maintenance workload. In

March 1996, the Navy reported to the CNO that 19,819 shore

intermediate-level positions were desired to support sea-to-shore rotation.

Thus, it had a shortfall of 7,151 positions. This shortfall acts as a

disincentive for the Navy to reduce the number of shore intermediate-level

positions.

The Navy also uses positions at intermediate-level maintenance facilities

for personnel awaiting reassignment or on limited duty. This practice

further hinders efforts to reduce excess maintenance capacity. For

example, the Navy indicated that of the Southwest region’s 753 excess

positions, 335 were positions for sailors displaced by the decommissioning

of a Navy tender. Sailors affected by this decommissioning are typically

waiting for funding for permanent changes of station or reassignment.

13In order to promote combat readiness and sustainability, each deployed battle force, battle group,

and amphibious readiness group operating independently is to establish its own intermediate

maintenance activity capable of providing this level of maintenance.

14The CNO’s goal for sea-to-shore rotation is a maximum of 3 years of sea duty, followed by a minimum

of 3 years of shore duty for all career (E5-E9) enlisted personnel.

Page 20 GAO/NSIAD-98-4 Navy Regional Maintenance
B-276587 

Also, in June 1997, the intermediate-level maintenance facility at Everett,

Washington, and its detachment at Bremerton, Washington, reported a

workforce of 521, of which 84 (over 16 percent) were on limited duty. The

facility had recommended a reduction of its detachment workforce of 91

positions—from 197 to 106. An efficiency review to determine the

appropriate number of staff has been done but was not finalized during

our review.

Conclusions Although the Navy has made substantial progress in establishing a

structured RM Program to achieve its infrastructure streamlining objective,

it has reported only limited progress in accruing savings from the program.

Thus far, the reported savings have not materialized as anticipated

because projects have been changed and delayed. Further, the accuracy of

claimed savings is questionable because they are not tracked and verified.

Consequently, the Navy’s actual savings may be far less than the

$944 million it originally projected. They also may be achieved much later

than expected. These conditions could negatively affect maintenance

programs, the overall material readiness of ships and aircraft, or future

fleet readiness, since reductions have already been made to spending

plans in anticipation of savings.

Nonetheless, the Navy can still achieve significant savings by studying and,

where appropriate, implementing other initiatives that can yield savings

without impacting readiness. To implement such initiatives, it must also

resolve difficult organizational, financial, management information system,

and sea-to-shore rotation issues that have slowed the RM Program’s

progress. Further, overcoming resistance to change, perhaps the greatest

inhibitor to RM Program implementation, will require continued high-level

commitment, cooperation, and coordination from the CNO, the fleet, and

type and systems commanders, to ensure that regional initiatives reach

fruition and achieve the savings projected.

The Navy’s RM Program is extremely important to improving the

effectiveness and efficiency of its maintenance activities and we

encourage DOD to move forward as quickly as possible. If successful, the

program can result in a more streamlined, regionalized maintenance

program. As we stated in our high-risk report on the defense

infrastructure, breaking down cultural resistance to change, overcoming

parochialism, and setting forth a clear framework for a reduced

infrastructure are key to effectively achieving savings.

Page 21 GAO/NSIAD-98-4 Navy Regional Maintenance
B-276587 

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

Navy to annually report on the RM Program initiatives identified, savings

achieved that have been verified in Navy budget and accounting records,

and the progress made to overcome the barriers to achieving

infrastructure reductions and savings. We also recommend that program

implementation plans be established and tied to milestones, with regular

reporting to the CNO.

Agency Comments

and Our Evaluation

DOD’s written comments on the draft of this report are presented in

appendix IV. DOD stated that the Navy has many actions underway to

address the issues contained in this report. Specifically, DOD noted that the

RM Program was started to help the Navy perform maintenance more

efficiently, not to offset specific budget reductions. We agree that the

program was designed to generate greater efficiencies; however, as noted

in our report, it was also expected to generate significant cost savings. We

revised our report to clarify that our work focused on the infrastructure

streamlining objective, which has been the program’s principal focus thus

far and to which savings projections are linked.

DOD also stated that the Navy varied from the original plans for achieving

efficiencies, because it wanted to ensure that its operational commitments

would continue to be met while efforts to reduce its infrastructure were

being implemented. We agree that achieving savings through regional

maintenance should not be done at the expense of meeting operational

commitments. However, our work indicates the greatest impediments to

progress are nonoperational issues, such as resistance to initiatives that

eliminate organizations, reduce jobs and promotions, and reduce control

over resources.

DOD concurred in principle with our recommendation that the Secretary of

Defense direct the Secretary of the Navy to annually report on the RM

Program initiatives identified, savings achieved that have been verified in

Navy budget and accounting records, and the progress made to overcome

the barriers to achieving infrastructure reductions and savings. DOD stated

that the Navy, through the staffs of the CNO, Naval Sea Systems Command,

and the Atlantic and Pacific Fleet Maintenance Officers are already in

regular communication with the OSD staff on all matters relating to the

Navy’s RM Program. We agree that there is communication between the

OSD staff and the Navy on various program matters. However, we believe

that the communication needs to be more formal and comprehensive and

Page 22 GAO/NSIAD-98-4 Navy Regional Maintenance
B-276587 

cover such items as savings achieved and verified and progress made to

overcome barriers to program implementation.

DOD also agreed with our recommendation that program implementation

plans be established and tied to milestones, with regular reporting to the

CNO. DOD commented that the Navy has a management structure in place

that provides unfettered information to the CNO on relative merits of

potential initiatives as well as the success or failure of ongoing initiatives.

While we agree that the CNO does get program information, the program

lacks a strategic plan that identifies the Navy’s ultimate goal for the

program and provides a baseline and a roadmap, with milestones, for

achieving the goal. Such a plan is needed to show the Navy has made a

high-level commitment to the program and to increase the likelihood of

successful program implementation.

DOD had several suggested technical and editorial changes; we considered

them and made changes as appropriate.

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 of the

Subcommittee on Defense, Senate Committee on Appropriations; the

Senate Committee on Armed Services; and the Subcommitee on National

Security, House Committee on Appropriations. We are also sending copies

of the report to the Secretaries of Defense and the Navy; the CNO; and to

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 the report, please

contact me on (202) 512-8412 or my Assistant Director, George A.

Jahnigen, on (202) 512-8434. Major contributors to this report are listed in

appendix V.

Sincerely yours,

David R. Warren, Director

Defense Management Issues

Page 23 GAO/NSIAD-98-4 Navy Regional Maintenance
Contents

Letter 1

Appendix I 

Estimated Savings

From Potential

Consolidations Not in

Current Business

Plans

26

Opportunities for Savings in the Hawaii Region 26

Opportunities for Savings in the Northwest Region 28

Appendix II 

Labor and Facilities

Cost Data on Potential

Hawaii and Northwest

Region Consolidations

32

Appendix III 

Scope and

Methodology

36

Appendix IV 

Comments From the

Department of

Defense

38

Appendix V 

Major Contributors to

This Report

40

Tables Table 1: Navy Estimates of Net Savings to Be Achieved From 55

Regional Maintenance Initiatives Started During Fiscal Years

1994-97

8

Page 24 GAO/NSIAD-98-4 Navy Regional Maintenance
Contents

Table 2: Navy Program Reductions in Operations and

Maintenance Budgets Taken in Anticipation of Regional

Maintenance Savings

10

Table II.1: Potential Annual Facilities Savings From Consolidating

Activities in the Hawaii Region

33

Table II.2: Potential Annual Labor Savings From Consolidating

Activities in the Hawaii Region

34

Table II.3: Potential Annual Facilities Savings From Consolidating

Activities in the Northwest Region

34

Table II.4: Potential Annual Labor Savings From Consolidating

Activities in the Northwest Region

35

Figures Figure 1: The Eight Navy Regional Maintenance Centers and

Regions

6

Figure 2: Navy Projections of $746 Million in Regional

Maintenance Program Savings to Be Achieved During Fiscal

Years 1998-2001

12

Figure 3: Direct Labor Hour Trends at the Pearl Harbor and Puget

Sound Naval Shipyards

14

Figure I.1: Machine Shops in Two Hawaii Region Activities 27

Figure I.2: Electric Motor Rewind Shops in Three Northwest

Region Activities

30

Abbreviations

BFIMA Battle Force Intermediate Maintenance Activity

CNO Chief of Naval Operations

DOD Department of Defense

OSD Office of the Secretary of Defense

RM regional maintenance

RMC Regional Maintenance Center

RMIB Regional Maintenance Implementation Board

SIMA shore intermediate maintenance activity

Page 25 GAO/NSIAD-98-4 Navy Regional Maintenance
Appendix I 

Estimated Savings From Potential

Consolidations Not in Current Business

Plans

We identified examples of opportunities for consolidation of activities

with potential annual savings of up to $26 million based on infrastructure

reductions in the Pacific Fleet’s Hawaii and Northwest regions. Depending

on the extent to which operations are consolidated in Hawaii, we estimate

the range of annual savings to be from about $1 million to about

$14 million. In the Northwest region, again depending on the extent of the

consolidation, we estimate the range of annual savings to be from about

$1 million to about $12 million. In addition, work at the Shore Intermediate

Maintenance Activity (SIMA) at Everett, Washington, might be transferable

to other existing shops, eliminating the need for a military construction

project estimated to cost about $17 million and two barge overhauls

planned at an estimated cost of about $5 million.

Opportunities for

Savings in the Hawaii

Region

In the Hawaii region, the Pearl Harbor Naval Shipyard and the Naval

Intermediate Maintenance Facility are adjacent to each other, and the

Public Works Center is about 1 mile away. At all three locations, the

backshops have excess facilities and equipment. At the shipyard, for

example, one electrical shop was not in use during the first shift at the

time we observed operations. Also, a separate machine shop for

tool-making supported the machine shop that did the repair work.

Maintenance managers said this separate tool-making shop was

unnecessary. (See fig. I.1 for pictures of machine shop capabilities in this

region.)

Page 26 GAO/NSIAD-98-4 Navy Regional Maintenance
Appendix I 

Estimated Savings From Potential

Consolidations Not in Current Business

Plans

Figure I.1: Machine Shops in Two

Hawaii Region Activities

Intermediate Maintenance Facility

Pearl Harbor Naval Shipyard

Page 27 GAO/NSIAD-98-4 Navy Regional Maintenance
Appendix I 

Estimated Savings From Potential

Consolidations Not in Current Business

Plans

For purposes of this review, we estimated a range of potential savings. If

selected backshop industrial work was combined and done by the

shipyard, (1) facility savings alone might be about $1 million annually and

(2) facility and personnel savings could be about $14 million annually if

the work could be done just at the shipyard by a workforce the size of the

current shipyard workforce.

When we first reviewed operations in the Hawaii region in December 1996,

we observed that a consolidation of intermediate-level maintenance

activities with the shipyard appeared practicable; the Pacific Fleet

Maintenance Officer agreed. On our return, in May 1997, fleet maintenance

officials said that the Navy had begun to study issues surrounding the

consolidation of the Intermediate Maintenance Facility and the Pearl

Harbor Naval Shipyard, with a target date for complete integration by

September 30, 1998.

Opportunities for

Savings in the

Northwest Region

In the Northwest region, the Trident Refit Facility and the Naval Undersea

Warfare Center, Keyport, are located within 4 miles of each other and

about 14 miles from the Puget Sound Naval Shipyard. As in the Hawaii

region, there were indications of excess facilities and equipment. The

shipyard has a greatly reduced workload in 1996 compared to 1992, and

the Keyport facility was subject to downsizing based on base realignment

and closure action. Also, officials at these facilities told us that the

shipyard had the facilities and equipment to do all of the region’s

backshop industrial work. As other indicators, the shipyard had four

machine shops scattered throughout the facility, and the sheet-metal shop

was noticeably underused, employing about 65 workers on three shifts

versus about 100 when it operated at full capacity, according to the shop

supervisor. Similar to the Hawaii region, we estimated a range of savings.

For example, if the industrial backshops at the Trident Refit Facility and

the Warfare Center were declared excess and if all the workers needed to

do that work were moved to the shipyard and used just the shipyard’s

facilities and equipment, then there might be annual savings of about

$1 million. If this industrial backshop work could be done just at the

shipyard by a workforce the size of the current shipyard workforce, then

facility and personnel savings could be about $12 million annually.

Chief of Naval Operations (CNO), Regional Maintenance (RM) Program,

fleet, and Northwest region officials agreed that there are significant

amounts of excess industrial backshop facilities and equipment and that

consolidation is possible and necessary. They said that consolidating

Page 28 GAO/NSIAD-98-4 Navy Regional Maintenance
Appendix I 

Estimated Savings From Potential

Consolidations Not in Current Business

Plans

industrial backshop work of all types into one industrial complex is key

and that the goal should be to have one regional backshop for each type of

capability.

Figure I.2 shows electric motor industrial backshops at the Puget Sound

Naval Shipyard and Trident Refit Facility in the Northwest region that

have similar facilities and equipment for rewinding electric motors. A SIMA,

Everett, Washington, detachment located at the shipyard also had its own

facilities to rewind smaller electric motors. The Naval Undersea Warfare

Center does not repair electric motors.

Page 29 GAO/NSIAD-98-4 Navy Regional Maintenance
Appendix I 

Estimated Savings From Potential

Consolidations Not in Current Business

Plans

Figure I.2: Electric Motor Rewind Shops in Three Northwest Region Activities

Trident Refit Facility

Puget Sound Naval Shipyard

Shore Intermediate Maintenance Activity

Page 30 GAO/NSIAD-98-4 Navy Regional Maintenance
Appendix I 

Estimated Savings From Potential

Consolidations Not in Current Business

Plans

In addition to the consolidation suggested above, the work of the SIMA at

Everett, Washington, might be transferable to existing shops at Whidbey

Island Naval Air Station, the Puget Sound Naval Shipyard, and the Trident

Refit Facility. This transfer might eliminate the need for a military

construction project at the SIMA. This military construction project is

estimated to cost about $17 million, according to information provided by

Everett SIMA officials. Northwest regional maintenance officials told us this

military construction project is currently in the budget for fiscal year 2000.

Also, other facilities at the SIMA could be converted to support waterfront

maintenance activity requirements and eliminate the need for two barges

and planned docking and repairs that Everett SIMA officials estimated

could cost about $5 million.

Page 31 GAO/NSIAD-98-4 Navy Regional Maintenance
Appendix II 

Labor and Facilities Cost Data on Potential

Hawaii and Northwest Region

Consolidations

Tables II.1 and II.2 show the potential range of annual savings for the

Hawaii region from consolidating at the Pearl Harbor Naval Shipyard

selected industrial backshop work of the shipyard, the Intermediate

Maintenance Facility, and the Public Works Center. Savings of about

$1 million annually (table II.1) would be realized from lower facility

operations (maintenance, utilities, and janitorial) costs if the entire

workforce from all three activities is retained, but located at the shipyard.

However, additional savings of about $13 million annually

(table II.2) could be realized if the work were to be consolidated into the

shipyard and could be absorbed by a smaller workforce the size of the one

at the shipyard.

Tables II.3 and II.4 show a similar range of annual savings for the

Northwest region from consolidating at the Puget Sound Naval Shipyard

selected industrial backshop work from the shipyard, the Trident Refit

Facility, and the Naval Undersea Warfare Center, Keyport. The savings

would be about $1 million annually (table II.3) from lower facility

operations costs if the entire labor force is retained after consolidation. It

shows additional savings of about $11 million annually (table II.4) if the

work is absorbed by a smaller workforce the size of the one at the

shipyard. Total annual savings from consolidations in both regions would

be about $2 million if just facilities were consolidated and current staffing

levels relocated to the shipyards, or about $26 million if the facilities were

consolidated and all the work was done at the shipyards using a reduced

labor force the size of the two shipyards.

Data in the tables on labor-years and square footage of facilities were

obtained from the six activities identified. Estimated total square footage

costs and estimated costs of retaining only shipyard square footage were

developed by multiplying the number of square feet identified by a cost

factor used for RM studies. (See tables II.1 and II.3, footnote a.) Estimated

savings is the difference between total square footage costs and the costs

of retaining just the shipyard square footage. The lower range of projected

total annual savings is derived by adding estimated facilities savings for

both the Hawaii and Northwest regions, about $1 million each, or a total of

about $2 million.

Estimated total workforce costs and estimated costs of retaining just the

shipyard level workforce were developed by multiplying the number of

labor years identified by a cost factor also used the Navy uses for its RM

studies. (See tables II.2 and II.4, footnote a.) Estimated labor savings is the

Page 32 GAO/NSIAD-98-4 Navy Regional Maintenance
Appendix II 

Labor and Facilities Cost Data on Potential

Hawaii and Northwest Region

Consolidations

difference between estimated total costs and estimated costs retaining just

the shipyard force.

The upper range of projected total annual savings is derived by adding the

facilities and labor labor savings for both regions, about $1 million and

$13 million, respectively, for the Hawaii region and about $1 million and

$11 million, respectively, for the Northwest region, for a total of about

$26 million.

Table II.1: Potential Annual Facilities Savings From Consolidating Activities in the Hawaii Region

Dollars in millions

Selected

backshop work

Pearl Harbor

Naval

Shipyard

(square

footage)

Intermediate

Maintenance

Facility

(square

footage)

Public Works

Center (square

footage)

Total

(square

footage)

Estimated

total square

footage costsa

Estimated

costsa

retaining just

the shipyard

square footage

Estimated

savings

retaining just

the shipyard

square footage

Electric motor

overhaul/repair

168,574 4,627 0 173,201 $2.252 $2.191 $0.061

Electronic

equipment repair

132,968 44,382 0 177,350 2.306 1.729 0.577

Machining 134,700 13,392 3,953 152,045 1.977 1.751 0.226

Material testing 18,538 316 0 18,854 0.245 0.241 0.004

Metal forming 189,569 13,040 4,000 206,609 2.686 2.464 0.222

Total 644,349 75,757 7,953 728,059 $9.466 $8.376 $1.090

aBased on Navy RM Program estimates of $13 per square foot.

Page 33 GAO/NSIAD-98-4 Navy Regional Maintenance
Appendix II 

Labor and Facilities Cost Data on Potential

Hawaii and Northwest Region

Consolidations

Table II.2: Potential Annual Labor Savings From Consolidating Activities in the Hawaii Region

Dollars in millions

Selected backshop work

Pearl Harbor

Naval

Shipyard

(labor years)

Intermediate

Maintenance

Facility (labor

years)

Public Works

Center (labor

years)

Total costs

(labor years)

Estimated

total labor

year costsa

Estimated

costsa

retaining

just the

shipyard

level

workforce

Estimated

savings

retaining

just the

shipyard

level

workforce

Electric motor overhaul/repair 39 22 0 61 $4.255 $2.720 $1.535

Electronic equipment repair 29 58 0 87 6.068 2.023 4.045

Machining 56 51 3 110 7.673 3.906 3.767

Material testing 12 3 0 15 0.979 0.783 0.196

Metal forming 20 39 7 66 4.604 1.395 3.209

Total 156 173 10 339 $23.579 $10.827 $12.752

aCost estimates are a total of (1) Navy RM Program estimate of $45,000 in labor cost per year for

military and civilian total compensation; (2) production support costs, which are estimated at

40 percent of direct labor for all shops or 30 percent for material testing laboratories; and

(3) administrative and general costs, which are estimated at 15 percent of direct labor.

Table II.3: Potential Annual Facilities Savings From Consolidating Activities in the Northwest Region

Dollars in millions

Selected

backshop work

Puget

Sound

Naval

Shipyard

(square

footage)

Trident Refit

Facility

(square

footage)

Naval

Undersea

Warfare Center

(square

footage)

Total (square

footage)

Estimated

total square

footage costsa

Estimated

costsa

retaining just

the shipyard

square footage

Estimated

savings

retaining just

the shipyard

square footage

Electric motor

overhaul/repair

15,725 6,506 0 22,231 $0.289 $0.204 $0.085

Electronic

equipment repair

30,650 6,344 0 36,994 0.481 0.398 0.083

Machining 57,526 24,209 13,740 95,475 1.241 0.748 0.493

Material testing 13,520 1,479 5,600 20,599 0.268 0.176 0.092

Metal forming 107,998 12,827 5,245 126,070 1.639 1.404 0.235

Total 225,419 51,365 24,585 301,369 $3.918 $2.930 $0.988

aBased on Navy RM Program estimates of $13 per square foot.

Page 34 GAO/NSIAD-98-4 Navy Regional Maintenance
Appendix II 

Labor and Facilities Cost Data on Potential

Hawaii and Northwest Region

Consolidations

Table II.4: Potential Annual Labor Savings From Consolidating Activities in the Northwest Region

Dollars in millions

Selected

backshop work

Puget Sound

Naval

Shipyard

(labor years)

Trident Refit

Facility (labor

years)

Naval

Undersea

Warfare

Center (labor

years)

Total (labor

years)

Estimated

total labor

year costsa

Estimated

costsa

retaining just

the shipyard

level workforce

Estimated

savings

retaining just

the shipyard

level

workforce

Electric motor

overhaul/repair

20 25 0 45 $3.139 $1.395 $1.744

Electronic

equipment repair

48 46 0 94 6.557 3.348 3.209

Machining 79 32 23 134 9.347 5.510 3.837

Material testing 33 6 6 45 2.936 2.153 0.783

Metal forming 8 17 8 33 2.302 0.558 1.744

Total 188 126 37 351 $24.281 $12.964 $11.317

aCost estimates are a total of (1) Navy RM Program estimate of $45,000 in labor cost per year for

military and civilian total compensation; (2) production support costs, which are estimated at

40 percent of direct labor for all shops or 30 percent for material testing laboratories; and

(3) administrative and general costs, which are estimated at 15 percent of direct labor.

Page 35 GAO/NSIAD-98-4 Navy Regional Maintenance
Appendix III 

Scope and Methodology

To identify the Navy’s progress made in implementing the RM Program, we

interviewed officials from the Office of the Secretary of Defense (OSD),

Office of the Comptroller, the Deputy Under Secretary of Defense

(Logistics), the Deputy Chiefs of Naval Operations for Manpower and

Personnel and for Logistics, the Naval Sea and Air Systems Commands,

and the Assistant Secretary of the Navy for Financial Management and the

Comptroller and reviewed studies, briefings, and other documents on the

RM Program. At the Atlantic Fleet headquarters, we interviewed the Fleet

Maintenance Officer, reviewed documents, and obtained briefings from

the Mid-Atlantic region—one of the four regions under the Atlantic Fleet.

For the Pacific Fleet, we met with the Fleet Maintenance Officer and his

staff, reviewed documents, and obtained briefings and other information

from the Hawaii and the Northwest region—two of the four regions under

the Pacific Fleet. Further, we talked to the officials of the Naval Audit

Service about regional maintenance progress and its management

consulting work for the RM Program.

The Navy has identified seven objectives for the RM Program: (1) process

improvement to maintain customer responsiveness and fleet readiness,

(2) elimination of excess maintenance infrastructure, (3) integrated supply

support, (4) maintenance cost visibility, (5) compatible maintenance

management automated data processing, (6) positive control of technical

elements, and (7) support the Department of Defense’s (DOD) industrial

core policy. However, the program’s principal efforts thus far have been

on the elimination of excess maintenance infrastructure; therefore, we

focused our work on that program objective.

To obtain cost and related-savings information for the RM Program, we

interviewed officials with the Navy Financial Management and

Comptroller offices, the CNO’s Naval Operations Supportability,

Maintenance, and Modernization Division, and financial managers with the

Naval Sea Systems Command, Naval Air Systems Command, and the

Atlantic and Pacific Fleets. We also reviewed documents generated during

the budget program review, the fiscal year 1998 program objective

memorandum review, the net savings summary, and various memoranda

discussing the budget reductions and projected savings.

To identify opportunities for additional excess maintenance infrastructure

reductions and cost savings in the Hawaii and the Pacific Northwest

regions, we reviewed Atlantic and Pacific Fleet business plans, regions’

lists and studies of redundant capabilities. From the lists, we selected for

further analysis industrial backshops for electric motor repair, electronics

Page 36 GAO/NSIAD-98-4 Navy Regional Maintenance
Appendix III 

Scope and Methodology

equipment repair, machining, and metal-forming shops and material

testing laboratories. We obtained data, observed work, and discussed

issues with maintenance officials and shop supervisors at six activities in

two regions—the Pearl Harbor Naval Shipyard, the Intermediate

Maintenance Facility, and the Public Works Center in the Hawaii region;

and the Puget Sound Naval Shipyard, the Trident Refit Facility, and the

Naval Undersea Warfare Center, Keyport, in the Northwest region. To

calculate costs for these shops, we obtained information on square footage

of facilities, and direct labor years and RM Program cost estimate factors

($13 per square foot for costs to operate and maintain facilities; $45,000

per year for each staff; 40 percent of direct labor for production support

costs for all shops and 30 percent for material testing laboratories; and

15 percent of direct labor for administrative and general expense costs).

We used this data to calculate estimated total costs, estimated total costs

to retain the total workforce in just the shipyard facility, and estimated

total costs of doing the work just at the shipyard with just a shipyard-level

workforce. We compared the difference in these estimated total costs to

identify estimated savings from retaining the total workforce at the

shipyard, and estimated total savings with just a shipyard-level workforce

at the shipyard.

We conducted our work between December 1996 and September 1997 in

accordance with generally accepted government auditing standards.

Page 37 GAO/NSIAD-98-4 Navy Regional Maintenance
Appendix IV 

Comments From the Department of Defense

Page 38 GAO/NSIAD-98-4 Navy Regional Maintenance
Appendix IV 

Comments From the Department of Defense

Now on p. 22.

Now on p. 22.

Page 39 GAO/NSIAD-98-4 Navy Regional Maintenance
Appendix V 

Major Contributors to This Report

National Security and

International Affairs

Division, Washington,

D.C.

James F. Wiggins

George A. Jahnigen

Los Angeles Field

Office

Lionel C. Cooper, Jr.

Dennis A. DeHart

Samuel S. VanWagner

Gary W. Kunkle

Jean M. Orland

(709219) Page 40 GAO/NSIAD-98-4 Navy Regional Maintenance
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