United States General Accounting Office

GAO Report to the Honorable

Robert A. Borski, House of

Representatives

April 1998 MILITARY BASE

CLOSURE

Questions Relating to

Relocating Two Navy

Activities to North

Island, California

GAO/NSIAD-98-90

GAO United States

General Accounting Office

Washington, D.C. 20548

National Security and

International Affairs Division

B-278431 

April 30, 1998

The Honorable Robert A. Borski

House of Representatives

Dear Mr. Borski:

This report responds to your request that we review the Navy’s planned

relocation and consolidation of the Naval Air Technical Services Facility

and the headquarters of the Naval Aviation Engineering Service Unit,

currently located in Philadelphia, Pennsylvania, to the Naval Air Station at

North Island, California. These actions are being taken in response to the

recommendations of the 1995 Base Closure and Realignment (BRAC)

Commission. You noted a change to the Navy’s original plan regarding

how these functions would be consolidated at North Island. On the basis

of questions raised in your request and discussions with your office, this

report addresses (1) the current plan’s compliance with the Commission’s

recommendations, (2) the effect of the new alignment on the original

savings estimate, (3) the cost estimate associated with moving the

Technical Services Facility and the Engineering Service Unit functions to

North Island, and (4) the feasibility of consolidating these functions at less

cost in Philadelphia.

Background As part of the Naval Air Systems Command, the Technical Services Facility

and the Engineering Service Unit have roles in the naval aviation support

and maintenance mission. The Technical Services Facility is responsible

for the management of technical data, engineering drawings, and technical

manuals. The Engineering Service Unit is the headquarters component of a

worldwide organization providing engineering assistance and instruction

to naval aviation activities. Both organizations are tenants of the Naval

Inventory Control Point in Philadelphia. The 1995 BRAC Commission

recommended in July 1995 that the Secretary of Defense close both

activities and consolidate all necessary functions, personnel, and

equipment with the Naval Aviation Depot, North Island, California. The

Commission estimated the consolidation would cost a total of about

$8.6 million and would result in annual recurring savings, based on

personnel reductions, of $4.6 million. At the time, the Technical Services

Facility and the Engineering Service Unit headquarters had about 210 and

80 employees, respectively.

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The Navy originally planned to combine the Technical Services Facility

and the Engineering Service Unit with the Naval Aviation Depot, a Defense

Business Operations Fund activity. However, in January 1997, the

Commander of the Naval Air Systems Command directed the Technical

Services Facility and the Engineering Support Unit to combine and form a

separate command—the Naval Air Technical Data and Engineering

Service Command—at the Naval Air Station, North Island. Necessary

support functions are expected to be purchased from the Naval Air Station

or the Naval Aviation Depot. Relocation of Technical Services Facility and

Engineering Service Unit activities to North Island is scheduled to occur in

late fiscal year 1998, and termination of these activities in Philadelphia is

expected to be completed by mid-January 1999.

Results in Brief The Navy’s current plan to combine the Technical Services Facility and

Engineering Service Unit complies with the Base Closure and Realignment

Commission’s recommendations. The Department of Defense believes,

and we agree, that the Commission’s recommendations on closing and

moving the activities to North Island are legally binding but that the

Department has latitude in how it chooses to organize and manage

activities that have been realigned in accordance with the

recommendations. However, we found no indication that Naval Air

Systems Command officials had assessed the cost impact or potential

savings to the Navy of consolidating the activities with the Naval Aviation

Depot. As a result, the Navy may be missing an opportunity to achieve

greater savings by not merging the affected activities with the Aviation

Depot.

The estimated one-time implementation cost of the planned relocation of

the Technical Services Facility and the Engineering Service Unit to North

Island is $12.7 million, or about $4.1 million higher than the Commission

initially estimated. Our work shows the current estimate is based on

credible Navy plans and data. The increase over the Commission’s

estimate appears reasonable and is primarily attributable to the

unanticipated renovation of Naval Aviation Depot facilities for housing

Technical Services Facility employees and equipment and more realistic

personnel cost estimates that exceeded the standard cost factors used in

the Commission’s analysis.

Although it appears that the personnel costs would have been minimized

or avoided by consolidating the affected activities with other Navy

activities in Philadelphia, the Navy believes that the planned move

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B-278431 

provides operational benefits that outweigh the cost of the move.

Moreover, consolidation in Philadelphia is not an option because the

Commission’s recommendations require that the activities be moved to

North Island.

Navy’s Plan Complies

With the

Commission’s

Recommendations

The Naval Air Systems Command’s decision in January 1997 to consolidate

the Technical Services Facility and the Engineering Service Unit into a

new command at North Island Naval Air Station, rather than integrating

them with the Naval Aviation Depot, raised questions about compliance

with the BRAC Commission’s recommendations. The Department of

Defense (DOD) believes that the establishment of the Naval Air Technical

Data and Engineering Service Command complies with the Commission’s

recommendations. The Deputy Under Secretary of Defense for Industrial

Affairs and Installations said that, although DOD is legally bound to

implement the Commission’s recommendations, it is free to decide how a

military department will organize and manage a realigned activity once

that realignment has occurred.

We agree with DOD’s position. Under the Base Closure and Realignment

Act of 1990, the Secretary of Defense is required to close or realign all

military installations recommended for closure or realignment by the BRAC

Commission. The act does not define what is meant by “close,” but it

defines “realignment” as any action that reduces and relocates functions

and civilian personnel positions. The Commission’s recommendations for

both the Technical Services Facility and the Engineering Service Unit

contain all of the elements of a realignment. Therefore, to satisfy its

obligation under the legislation, DOD must relocate the activities to North

Island. Once this action has been accomplished, DOD may determine the

appropriate organizational alignment. The definition of realignment does

not include a description of how a relocated function must be organized

and managed.

Option for Potentially

Greater Savings Has

Not Been Assessed

The Naval Air Systems Command did not assess the total cost impact to

the Navy from consolidating the activities with the Naval Aviation Depot.

Naval Air Systems Command officials told us that, before their decision to

establish a new command, a team of personnel from the Technical

Services Facility, the Engineering Service Unit, Naval Air Systems

Command headquarters, and North Island Naval Aviation Depot analyzed

the costs of various scenarios for accomplishing the consolidation of the

two functions as part of the Aviation Depot. According to Naval Air

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Systems Command officials, the ultimate decision about the organizational

alignment of the two units was largely affected by considerations of how

customers would be affected by the change. In Philadelphia, the units

were funded by appropriations. Their customers (e.g., the Pacific Fleet)

did not pay for services. The same arrangement will exist once the

activities are combined in a separate command at North Island.

If the activities were consolidated with the Naval Aviation Depot, they

would have become part of the Navy’s working capital fund, a type of

revolving fund.1

 Naval Air Systems Command officials were concerned

that, under such an arrangement, Technical Services Facility and

Engineering Service Unit customers would begin to pay for overhead

expenses that are unrelated to the activities. Although this arrangement

may have resulted in higher costs to Technical Services Facility and

Engineering Service Unit customers, it may have reduced overall costs to

the Navy because the addition of these two activities might have

decreased charges to other customers.

The Navy and the BRAC Commission originally anticipated annual recurring

savings of about $4.6 million once the realignment had been completed.

Specifically, they expected to reduce staffing by 72 (adjusted to

69) civilian support positions.2

 Naval Air Systems Command officials said

that, by implementing innovative reengineering practices within the new

command, they will be able to accomplish the organization’s missions at

the reduced funding and personnel levels. However, details on expected

reengineering efforts were not available at the time of our review.

Estimated Costs for

the North Island

Consolidation Have

Increased

The Navy’s current cost estimate for relocating the Technical Services

Facility and Engineering Service Unit from Philadelphia to North Island is

about $12.7 million, as shown in table 1. This one-time relocation estimate

is about $4.1 million higher than the BRAC Commission originally

estimated.

1

Under this arrangement, assets are capitalized, and all income—from offsetting collections derived

from the fund’s operations—is available to finance the fund’s continuing cycle of operations without

fiscal year limitation. Customers are billed a proportional share of the activity’s overhead costs.

2

We confirmed these reductions in our examination of preliminary fiscal year 1999 budget submissions

for the Technical Services Facility and the Engineering Service Unit.

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Table 1: Estimated One-Time

Relocation Costs for Technical

Services Facility and Engineering

Support Unit Activities

Dollars in millions

Cost category

Technical

Services

Facility

Engineering

Service Unit Total

Civilian personnel $6.0 $2.6 $8.5

Military construction 1.5a 0.4 2.0

Miscellaneous 1.5 0.7 2.2

Total $9.0 $3.7 $12.7

aThe fiscal year 1999 amended budget estimate for the Technical Services Facility, submitted to

the Congress in February 1998, includes $2.7 million for military construction. However,

according to Navy budget officials, the actual figure is $1.5 million.

Civilian personnel cost estimates include the cost of moving personnel to

North Island, severance pay, and voluntary separation incentives. These

estimates, which are currently about $1.5 million higher than the

Commission’s estimates, appear reasonable because Naval Air Systems

Command officials based these estimates on actual workforce data and

current personnel assumptions rather than standard cost factors drawn

from historical data and averages that were used by the Commission in

estimating costs.

Military construction costs include renovation and modification to existing

facilities at North Island to accommodate the new command. Originally,

no military construction funds were expected to be needed. However,

funds were necessary to convert existing shop and storage areas for use by

the command. These costs would have been incurred even if the activities

had been consolidated with the Naval Aviation Depot. The construction

cost estimate appears reasonable based on our discussions with the Naval

Facilities Engineering Command official that is monitoring the renovation

process. According to this official, the Navy had recently awarded a

$1.5 million contract for the renovation work, which is scheduled for

completion in late July 1998.

Miscellaneous costs include installing dedicated communication lines,

disassembling and packing equipment and furniture, reinstalling the items,

and purchasing equipment to make existing computers compatible with

those at North Island. The cost estimate for this category is reasonable

based on our review of supporting documentation.

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B-278431 

Consolidation at

Another Location Is

Not an Option

The Navy does not have the legal option to consolidate the Technical

Services Facility and Engineering Service Unit at another location in

Philadelphia because the BRAC Commission specifically recommended that

these activities be moved to North Island. Changes to Commission

recommendations to close or realign facilities require specific legislative

authority. Public Law 101-510 allowed DOD to propose changes to previous

Commission recommendations while it was considering new base closures

in rounds conducted in 1991, 1993, and 1995. However, such authority

expired in 1995. DOD may close or realign bases under 10 U.S.C. 2687, but

this provision has not been useful for that purpose.3

You asked that we consider whether the Navy could have achieved greater

savings through other consolidation alternatives in the Philadelphia area,

although not a legal option. Employee groups had developed alternatives

to the relocation, including consolidating the Technical Services Facility

with the Naval Inventory Control Point in Philadelphia. Under the

assumption that space was available at other Navy activities in the

Philadelphia area and that necessary renovation and modification costs

would be relatively limited, as is the case at North Island, the savings from

such a consolidation in Philadelphia would appear to be much greater

because the majority of the costs associated with relocating the Technical

Services Facility and Engineering Service Unit to North Island are

personnel costs.

Naval Air Systems Command officials agreed that the new command could

have been established in the Philadelphia area or, for that matter,

essentially anywhere else in the country. However, the officials believed

that intangible benefits can be gained by relocating the activities to a

geographic location, such as San Diego, with close proximity to one of

their principal customers—the Pacific Fleet. The officials also believed

that this advantage outweighs the one-time moving costs. Further, the

officials stated that the technical skill requirements for personnel in the

new command are different from the skills currently possessed by the

Philadelphia-based Technical Services Facility staff and that remaining in

Philadelphia would have necessitated other significant costs, such as

training, to meet the new workforce requirements.

3

Our report, Military Bases: Lessons Learned From Prior Closure Rounds (GAO/NSIAD-97-151, July 25,

1997), noted that the time-consuming processes associated with implementing the requirements of 

10 U.S.C. 2687 effectively stopped individual closure actions for a number of years before

implementing special legislative authorities for BRAC rounds in 1988, 1991, 1993, and 1995.

Page 6 GAO/NSIAD-98-90 Military Base Closure
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Recommendation Because the Navy has not fully analyzed the savings potential associated

with the current consolidation plan, we recommend that the Secretary of

Defense instruct the Secretary of the Navy to conduct such an analysis

before finalizing consolidation plans for the two activities and, if

appropriate, adjust the plans.

Agency Comments

and Our Evaluation

In commenting on a draft of this report, DOD agreed with our opinion that

the Navy’s plan to combine the Technical Services Facility with the

Engineering Service Unit at North Island Naval Air Station complies with

the BRAC Commission’s recommendation and that relocation of these

activities at another location is not a legal option. Also, DOD agreed with

our recommendation that the Navy conduct a cost and savings analysis

before finalizing its consolidation plans for these two activities and for

them to adjust those plans, if appropriate. DOD’s comments appear in

appendix I.

Scope and

Methodology

We made a comparative analysis of Naval Air Systems Command and BRAC

Commission realignment costs and savings estimates and plans for moving

Technical Services Facility and Engineering Service Unit operations to

North Island, California. We also obtained DOD’s response to several

questions, including the Navy’s compliance with the Commission’s

recommendations involving these activities.

We reviewed pertinent documents and interviewed officials from the

Department of the Navy and Naval Air Systems Command headquarters at

the Naval Air Station, Patuxent River, Maryland, and in the Washington,

D.C., area. We also visited officials and analyzed documents at the

Technical Services Facility and Engineering Service Unit in Philadelphia,

Pennsylvania. We met with Technical Services Facility representatives

currently assigned to North Island and officials from the Naval Aviation

Depot at North Island. We reviewed documents on Navy and BRAC

Commission work regarding the Technical Services Facility’s and

Engineering Service Unit’s relocation. In addition, we obtained available

documentation from Naval Air Systems Command officials concerning

planned personnel authorization reductions. To determine the

reasonableness of implementation cost estimates, we examined

documentation supporting those estimates and discussed their rationale

with officials from the Technical Services Facility and Engineering Service

Unit.

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B-278431 

We conducted our review between September 1997 and February 1998 in

accordance with generally accepted government auditing standards.

We are providing copies of this report to the Chairmen and Ranking

Minority Members of the Senate Committee on Armed Services and the

House Committee on National Security; the Director, Office of

Management and Budget; and the Secretaries of Defense and the Navy. We

will also make copies available to others on request.

Please contact me at (202) 512-8412 if you or your staff have any questions

concerning this report. Major contributors to this report are Barry W.

Holman; James R. Reifsnyder; Raymond C. Cooksey, Jr.; and Joseph J.

Faley.

Sincerely yours,

David R. Warren, Director

Defense Management Issues

Page 8 GAO/NSIAD-98-90 Military Base Closure
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Appendix I 

Comments From the Department of Defense

(709299) Page 10 GAO/NSIAD-98-90 Military Base Closure
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