United States General Accounting Office

GAO Report to Congressional Committees

July 1995 DEPOT

MAINTENANCE

Some Funds Intended

for Maintenance Are

Used for Other

Purposes

GAO/NSIAD-95-124

GAO United States

General Accounting Office

Washington, D.C. 20548

National Security and

International Affairs Division

B-259382 

July 6, 1995

Congressional Committees

During the past several years, the Congress and officials from the

Department of Defense (DOD) and military services have expressed

concerns about the adequacy of the depot maintenance funding levels and

the adverse effect on readiness as a result of growing maintenance

backlogs.1

The objectives of our review were to (1) determine the services’ processes

for deciding which end items of equipment will be overhauled,

(2) compare the depot maintenance funding received by the services from

the Congress to the amounts requested by the services and to the use of

these funds, and (3) assess the services’ management of maintenance

backlogs and the impact of depot maintenance backlogs on readiness.

Background The Army, the Navy, and the Air Force operate 24 major depot

maintenance facilities to repair equipment that cannot or should not be

repaired by field units. The types of maintenance and repair work

performed at the depots include

• repair and overhaul of major end items (tanks, personnel carriers, aircraft,

trucks, etc.) that are paid for with operation and maintenance (O&M) funds;

• repair of components and major assemblies that are initially paid for with

stock funds and that are returned to the supply system for issue to

customers who reimburse the stock fund with O&M funds; and

• modernization and conversion programs that are paid for with

procurement funds.

Results in Brief The services use such measurements as hours of usage/operations,

mileage, engineered standards, historical data, and inspection results to

identify end items of equipment that qualify for depot maintenance

(so-called depot maintenance candidates). They then assess the

candidates in terms of the depots’ ability to perform the maintenance and

the anticipated availability of funds. This process results in the depot

maintenance requirements that are reflected in the services’ budget

1

Maintenance backlog is defined as the difference between the total depot maintenance requirement

and that part of the requirement for which funds are provided. Another name for maintenance backlog

is unfunded requirements.

Page 1 GAO/NSIAD-95-124 Depot Maintenance
B-259382 

requests. After funding levels are determined, adjustments may be made to

the number and type of end items to be overhauled.

From fiscal years 1993 through 1995, the Army and the Navy received

about $591 million more and the Air Force about $75 million less than

requested for depot maintenance. A comparison of the amount of depot

maintenance work executed to the amount of funds requested and

received shows that for fiscal years 1993 and 1994, the amount of depot

maintenance work accomplished by the services was about $485 million

less than the amount requested and about $832 million less than the

amount received. The depot maintenance funds not used for depot

maintenance were used for military contingencies and other O&M

expenditures such as real property maintenance and base operations.

The depot maintenance backlogs at the time the services submit their

budget requests to the Congress tend to decrease during the year of budget

execution. These decreases are a result of the services’ reducing the

requirements for items requiring depot maintenance, not because more

depot maintenance was performed.

According to service officials, the depot maintenance backlogs are

manageable, represent an acceptable minimal level of risk, and have not

yet adversely affected equipment operational readiness rates. They

attribute the lack of adverse effect to the funding levels; the levels of depot

maintenance execution; and the reductions to the force levels, which have

made more equipment available to the remaining forces.

Services Generally

Use Same Process to

Determine

Maintenance

Requirements

Each of the services use the same general process for identifying its depot

maintenance requirements. The first step is to identify those end items of

equipment that meet the criteria as depot maintenance candidates. Then,

based on inputs such as force structure, fielding schedules, and operating

tempo, initial depot maintenance requirements are determined. These

requirements are reviewed and adjusted to reflect the capability and

capacity of the depots to accomplish the repairs. The product of this

process is referred to as executable requirements. The cost of the

executable requirements is then determined and the services decide what

portion of the total requirement can be funded. This amount then becomes

the basis for the services’ depot maintenance budget requests.

Once the budget process is completed and the funds are provided,

adjustments may be made to the number and type of end items to be

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B-259382 

overhauled. This amount then becomes the funded depot maintenance

requirements. The difference between the funded requirements and the

total executable requirements is the maintenance backlog.

Although the services use similar processes to develop their depot

maintenance requirements, the Army and the Navy vary significantly from

the Air Force in the way they determine whether an aircraft will be sent to

the depot for overhaul.

The Army and the Navy identify notional requirements for budget

purposes based on historical experiences. As the budget execution year

proceeds, the notional requirements are replaced with firm, actual

requirements that are the result of the Army and the Navy inspecting the

candidates to determine whether overhauls are needed. If an aircraft does

not need to be overhauled, a waiver is granted for a year. This process is

repeated each year until the aircraft fails inspection and is scheduled for

overhaul. The Air Force, on the other hand, does not have an inspection

and waiver process. It adheres to maintenance cycles based on flying

hours, engineered requirements, and historical usage data. When one of

these criteria is met, the aircraft is overhauled.

According to Navy officials, the inspection and waiver process has enabled

them to reduce the number of aircraft to be overhauled by 38 percent and

resulted in cost avoidances of $300 million a year. The Army has reported

similar experiences by using this process. It reported a 60-percent

reduction in the number of aircraft to be overhauled and cost avoidances

of about $4 billion over the past 5 years.

In commenting on a draft of this report, DOD pointed out that the Army’s

estimated savings were somewhat overstated because the estimate did not

consider the cost of maintaining the aircraft that would otherwise have

been overhauled.

Increased Depot

Maintenance Funds

Are Not Necessarily

Used for Depot

Maintenance Work

Although the services received more funds than requested for depot

maintenance, the services do not always use these funds for that purpose.

As shown in table 1, between fiscal years 1993 and 1995, the services

received about $15.3 billion for depot maintenance. This represents about

$516 million more than the services requested.

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B-259382 

Table 1: Funds Requested and Received for Fiscal Years 1993 Through 1995

Fiscal year 1993 Fiscal year 1994 Fiscal year 1995 Fiscal years 1993-95

Dollars in millions

Service Requested Received Requested Received Requested Received Requested Received Difference

Army $773 $995 $721 $796 $1,037 $1,169 $2,531 $2,960 $429

Navy:

 Air

 Ships

576

2,399

567

2,395

554

2,003

604

2,089

660

2,337

683

2,353

1,790

6,739

1,854

6,837

64

98

Air Force 1,234 1,149 1,062 1,074 1,387 1,385 3,683 3,608 (75)

Total $4,982 $5,106 $4,340 $4,563 $5,421 $5,590 $14,743 $15,259 $516

For fiscal years 1993 and 1994, the amount of depot maintenance work

executed was about $8.8 billion, as compared to $9.3 billion requested and

$9.7 billion received. Table 2 shows the depot maintenance funding level

and the depot maintenance work executed by service for fiscal years 1993

and 1994.

Table 2: Funding and Execution Levels

by Service for Fiscal Years 1993 and

1994 Fiscal year 1993 Fiscal year 1994

Dollars in millions

Service Received Executed Difference Received Executed Difference

Army $995 $917 $78 $796 $694 $102

Navy:

 Air

 Ships

567

2,395

492

2,287

75

108

604

2,089

477

1,741

127

348

Air Force 1,149 1,152 (3) 1,074 1,077 (3)a

Total $5,106 $4,848 $258 $4,563 $3,989 $574

aThe amount of depot maintenance executed exceeded the amount of depot maintenance funds

received because funds from other O&M accounts were transferred into the depot maintenance

account.

Army and Navy officials acknowledge that all the funds received for depot

maintenance are not necessarily used for that purpose. The funds may be

used for military contingencies, other O&M programs, or to compensate for

other congressional and service-level budget reductions as the following

examples illustrate.

• In fiscal year 1994, the Navy’s depot maintenance program for ships and

aircraft was $475 million less than the amount the Navy provided for these

purposes. This amount was moved to the flying hour program, Haiti/Cuba

operations, base operations, real property maintenance, and other O&M

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B-259382 

accounts. In fiscal year 1995, about $14.3 million of depot maintenance

funds were moved to nondepot maintenance activities such as contractor

and consulting services and information technology. The Navy determined

that the $14.3 million represented depot maintenance’s share of the

congressional reductions in these areas.

• In fiscal year 1994, the Army used $75 million of its depot maintenance

funds for base closure costs and for voluntary separation of personnel.

Thus far, in fiscal year 1995, the Army has transferred $12 million of its

depot maintenance funds to pay for temporary duty and information

management costs. Army officials said that this transfer represented depot

maintenance’s share of a congressional reduction to these areas.

Service officials said that if they had not received the depot maintenance

funding levels that they did, they would have had to either find other

sources to pay for the nondepot maintenance activities or reduce the

amount of depot maintenance work to be performed.

Maintenance Backlogs

Tend to Decrease

During the Year of

Budget Execution

The maintenance backlogs at the time the services submit their budget

requests to the Congress have often been reduced or eliminated during the

year of budget execution. The reduction or elimination has occurred

primarily because the funded depot maintenance requirements were

reduced as end items of equipment were removed from the services’

inventories. As a result, the services can reduce their backlogs by

transferring end items from the unfunded (backlog category) to the funded

category. The maintenance backlogs at the time of budget submission and

at the end of the year of execution are shown in table 3.

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Table 3: Maintenance Backlogs at Time

of Budget Submission and End of

Fiscal Years 1993 to 1995 Fiscal year 1993 Fiscal year 1994 Fiscal year 1995

Dollars in millions

Service

Budget

submission End

Budget

submissiona End

Budget

submissiona

End

(estimated)

Army $637 $494b $551 $577b $637 $122b

Navy:

 Air

 Ships

153

0

83

0

254

129

125

0

186

0

163

0

Air Force 185 110 275 231 338 146

Total $975 $687 $1,209 $933 $1,161 $431

aThe backlog at the end of a fiscal year does not become the beginning backlog for the next

fiscal year. The reason for this is that depot maintenance candidates are determined anew each

year and the new backlog is a function of the expected funding level.

bThe Army does not compute an end-of-year backlog. The figures shown in the table represent

the difference between the total requirement at budget submission and the amount of depot

maintenance funds obligated during the year. The other services do compute an end-of-year

backlog based on the difference between the total requirements adjusted for changes during the

year and the depot maintenance funds obligated during the year.

One reason for backlog reductions after the budget requests are submitted

to the Congress can be the implementation of new initiatives. For

example, the fiscal year 1995 Army budget request included depot

maintenance requirements for the Army Aviation and Troop Command of

$539 million and a maintenance backlog of $253 million. After the budget

was submitted, the requirements and backlog were reduced to

$307 million and $16 million, respectively. According to Army officials, at

the time the budget was submitted, the Aviation Restructuring Initiative

had not been approved. After budget submission, the restructuring

initiative was approved to eliminate older helicopters (AH-1, UH-1, and

OH-58) from the Army inventory. The effect of eliminating these

helicopters was to eliminate the associated depot maintenance

requirements and, in turn, reduce the overall depot maintenance backlog.

Other reasons are including depot work in the current year’s requirements

that has been previously funded and included in the carryover and

reducing requirements because of inadequate depot capability. For

example, at the beginning of fiscal year 1994, the Air Force’s Air Combat

Command’s backlog was $130 million. Later, the depot maintenance

requirements for engines were reduced when the San Antonio depot

informed the command that the depot did not have the capability to

execute the total engine repair requirements. The repair requirements

were also reduced because they included depot work that had already

Page 6 GAO/NSIAD-95-124 Depot Maintenance
B-259382 

been funded in a prior fiscal year and was included as part of the depot

maintenance carryover. As a result, the backlog was reduced to

$60 million. By the end of the fiscal year, the Air Force had reduced the

number of B-52s and F-111s in the force. This reduction decreased the

depot maintenance requirements for these aircraft, which, in turn, enabled

the command to fund all previously unfunded requirements and eliminate

the backlog.

Maintenance backlogs may also be eliminated if the funds provided

exceed the amount requested. For example, when the Navy submitted its

budget request for fiscal year 1994, it estimated a ship maintenance

backlog of $129 million. The Navy received $86 million more than it

requested for ship depot maintenance. The increased funds, coupled with

an overall reduction of depot maintenance requirements, enabled the Navy

to eliminate its backlog and transfer $390 million to other O&M programs.

Depot Maintenance

Backlog Has Not

Affected Readiness

Depot maintenance backlog consists of equipment items that meet the

criteria for overhaul or repair but for which funds are not available to

overhaul them. Generally, if an item that was categorized as part of the

backlog becomes inoperable, it is sent to a depot for repair and displaces

an item that has been scheduled for overhaul. The displaced equipment

item will then be moved from the funded to the unfunded category.

In testimonies before the Congress and internal studies, service officials at

the chief of staff level and officials responsible for the depot maintenance

program have stated that depot maintenance backlogs have not yet

affected equipment operational readiness rates. The officials attribute the

lack of adverse effect on readiness to the funding levels, the levels of

depot maintenance execution, and the reductions to the force levels

which, have made more equipment available to the remaining forces. Their

position is best illustrated by the following comments from service

officials.

• The Air Force does not consider depot maintenance backlog as a

readiness issue. Aircraft and engine maintenance backlogs have not

caused any aircraft to be grounded, and the Air Force believes that it can

continue to defer some depot maintenance over the Future Years Defense

Plan (a 6-year plan) without any serious impact.

• The Army’s depot maintenance backlog has not directly affected the

operational readiness of Army units. It has been shown that funding

streams and backlogs cannot be tied to readiness.

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B-259382 

• The Navy’s position is that no impact on readiness can be attributed to

maintenance backlogs and that the existing backlogs are manageable.

Furthermore, the readiness risks associated with maintenance backlogs

are minimal.

Service officials, however, agree that there could be some long-term effect

on sustainability and modernization. If depot maintenance funding levels

are reduced to a point where the services cannot repair needed inoperable

items, readiness could be affected. Sustainability could also be affected if,

rather than making needed repairs, inventory levels of major components

and assemblies are reduced.

Matters for

Congressional

Consideration

To enhance its oversight of DOD’s depot maintenance program, the

Congress may wish to require the services to include the following types of

information as part of their budget requests.

• The amount of funds received for depot maintenance that was not used for

that purpose. If funds were used for other than depot maintenance, the

other uses should be identified and the reasons for and the amounts of the

funds transferred should be explained.

We recognize that section 361 of the National Defense Authorization Act

for Fiscal Year 1995 addresses the essence of the above suggested

reporting requirement. However, the reporting requirement should be

revised to include identification of the other uses for which the funds were

transferred in addition to the amount and the reasons for the transfers.

• The maintenance backlogs at the (1) beginning and end of the most

recently completed fiscal year and (2) beginning of the current fiscal year

and at the time of the budget submission. Any changes to the beginning of

the year backlog should be explained in terms of the reasons for the

changes (i.e., increased or decreased maintenance efforts or changes to

the depot maintenance requirements).

• An assessment of the effect maintenance backlogs are having on

readiness. If readiness is being adversely affected, information concerning

the extent of the adverse effects and plans to correct the situation should

be provided.

Agency Comments

and Our Evaluation

In commenting on a draft of this report, DOD concurred with most of the

report. (See app. II for a copy of DOD’s comments.) However, DOD felt that

Page 8 GAO/NSIAD-95-124 Depot Maintenance
B-259382 

(1) one section of the report implied that there was no relationship

between depot maintenance funding and readiness and (2) our suggested

reporting requirements identified in the Matters for Congressional

Consideration would largely duplicate reporting requirements already set

forth in existing DOD procedures.

Our report does not imply a lack of relationship between depot

maintenance funding and readiness. It cites service officials’ testimonies

and internal military studies that state that the existing depot maintenance

backlog has not yet affected the readiness of the forces because of

(1) funding that the services have been receiving and (2) the drawdown in

the forces that resulted in the redistribution of more and better equipment

to the remaining forces. Moreover, our report also points out that there

could be some impact on readiness if the depot maintenance funding

levels were reduced to the point where the services could not repair

needed inoperable equipment. It should also be remembered that the

services have been able to maintain their readiness level while at the same

time transferring hundreds of millions of dollars appropriated for depot

maintenance to other O&M programs.

We agree that much of our suggested reporting requirement dealing with

the transfer of funds from depot maintenance for other uses is included in

the congressionally mandated reporting requirement. However, our

suggested DOD reporting requirement would link the amount and reason

for the transfer as currently required to the specific use for which the

transfers were made. We believe that a combination of this additional

information together with the information already required is needed so

that the Congress can readily discern what the funds were used for and

can decide whether these other uses should be funded at a higher level.

In the current reporting requirement, DOD is not required to address

changes in maintenance backlog that occurred after the budget request

was submitted. Without the more current data, the Congress has no way of

discerning whether backlogs are increasing or decreasing or the reasons

for the changes.

Based on comments received from DOD, we deleted our discussion and the

proposed reporting requirement dealing with the amount of depot

maintenance work carried forward from one fiscal year to the next. We

have included a new Matter for Congressional Consideration, which would

build on the backlog reporting requirement, previously discussed, by

requiring DOD to report the impact of the maintenance backlogs on

Page 9 GAO/NSIAD-95-124 Depot Maintenance
B-259382 

readiness. Because this reporting requirement was added after the draft

was sent to DOD for official comment, DOD comments do not address this

change. We advised DOD officials of the change and they told us that rather

than delaying the issuance of our report, they would respond to that

suggestion after our report was issued.

The scope and methodology of our review are discussed in appendix I.

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

Army, the Navy, and the Air Force; the Director of the Office of

Management and Budget; and the Chairmen of the House Committee on

Government Reform and Oversight, Senate Committee on Governmental

Affairs, and House and Senate Committees on Appropriations, Senate

Committee on Armed Services, and House Committee on National

Security.

Please contact me on (202) 512-5140 if you have any questions concerning

this report. Major contributors to this report are listed in appendix III.

Mark E. Gebicke

Director, Military Operations

 and Capabilities Issues

Page 10 GAO/NSIAD-95-124 Depot Maintenance
B-259382 

List of Congressional Committees

The Honorable Ted Stevens

Chairman, Subcommittee on Defense

Committee on Appropriations

United States Senate

The Honorable John McCain

Chairman, Subcommittee on Readiness

Committee on Armed Services

United States Senate

The Honorable John R. Kasich

Chairman, Committee on the Budget

House of Representatives

The Honorable C.W. Bill Young

Chairman, Subcommittee on National Security

Committee on Appropriations

House of Representatives

The Honorable Bill Zeliff

Chairman, Subcommittee on National Security,

 International Affairs, and Criminal Justice

Committee on Government Reform and Oversight

House of Representatives

Page 11 GAO/NSIAD-95-124 Depot Maintenance
Contents

Letter 1

Appendix I 

Scope and

Methodology

14

Appendix II 

Comments From the

Department of

Defense

16

Appendix III 

Major Contributors to

This Report

24

Tables Table 1: Funds Requested and Received for Fiscal Years 1993

Through 1995

4

Table 2: Funding and Execution Levels by Service for Fiscal

Years 1993 and 1994

4

Table 3: Maintenance Backlogs at Time of Budget Submission

and End of Fiscal Years 1993 to 1995

6

Abbreviations

DOD Department of Defense

O&M operation and maintenance

Page 12 GAO/NSIAD-95-124 Depot Maintenance
Page 13 GAO/NSIAD-95-124 Depot Maintenance
Appendix I 

Scope and Methodology

We reviewed studies and regulations and held discussions with depot

maintenance officials to determine how the services identify their depot

maintenance requirements. In addition, we compared the funding levels

requested by the services to the amounts received for fiscal years 1993 to

1995. When the amounts received exceeded the amounts requested, we

held discussions with service officials and reviewed budget documents to

determine whether the additional funds were used for depot maintenance

or for other purposes. We also compared the amount of funds received for

depot maintenance to the amount of funds used for depot maintenance.

When the amount of funds used for depot maintenance was less than the

amount received, we held discussions with budget and program officials to

identify how the remaining funds were used and why the funds were not

used for depot maintenance.

To evaluate the impact of depot maintenance backlogs on readiness, we

reviewed internal studies on the subject and held discussions with service

headquarters officials who manage depot maintenance programs. We also

reviewed testimonies by service officials before the Congress.

Our review was performed at the following locations:

Department of the Army • Office of the Deputy Chief of Staff for Logistics, U.S. Army Headquarters,

Washington, D.C.;

• U.S. Army Materiel Command, Alexandria, Virginia;

• U.S. Army Depot Systems Command, Chambersburg, Pennsylvania;

• U.S. Army Tank-Automotive and Armaments Command, Warren, Michigan;

and

• U.S. Army Aviation and Troop Command, St. Louis, Missouri.

Department of the Air

Force

• Office of the Deputy Chief of Staff for Logistics, U.S. Air Force

Headquarters, Washington, D.C.;

• Air Force Materiel Command, Dayton, Ohio; and

• Air Combat Command, Langley Air Force Base, Virginia.

Department of the Navy • Office of the Chief of Naval Operations, Washington, D.C.;

• Office of the Comptroller of the Navy, Washington, D.C.;

• Naval Air Systems Command, Washington, D.C.; and

• Naval Sea Systems Command, Washington, D.C.

Page 14 GAO/NSIAD-95-124 Depot Maintenance
Appendix I 

Scope and Methodology

We performed our review from October 1994 to March 1995 in accordance

with generally accepted government auditing standards.

Page 15 GAO/NSIAD-95-124 Depot Maintenance
Appendix II 

Comments From the Department of Defense

Page 16 GAO/NSIAD-95-124 Depot Maintenance
Appendix II 

Comments From the Department of Defense

Now on pp. 2-3.

Page 17 GAO/NSIAD-95-124 Depot Maintenance
Appendix II 

Comments From the Department of Defense

Now on pp. 3-5.

Page 18 GAO/NSIAD-95-124 Depot Maintenance
Appendix II 

Comments From the Department of Defense

Now on pp. 5-7.

Now on pp. 7-8.

Page 19 GAO/NSIAD-95-124 Depot Maintenance
Appendix II 

Comments From the Department of Defense

Page 20 GAO/NSIAD-95-124 Depot Maintenance
Appendix II 

Comments From the Department of Defense

Page 21 GAO/NSIAD-95-124 Depot Maintenance
Appendix II 

Comments From the Department of Defense

Now on p. 8.

Page 22 GAO/NSIAD-95-124 Depot Maintenance
Appendix II 

Comments From the Department of Defense

Page 23 GAO/NSIAD-95-124 Depot Maintenance
Appendix III 

Major Contributors to This Report

National Security and

International Affairs

Division, Washington,

D.C.

Robert J. Lane

Dallas Regional Office Kimberly S. Carson

Bonnie S. Carter

Norfolk Regional

Office

Norman L. Jessup, Jr.

Vincent C. Truett

Jeanett H. Reid

(703085) Page 24 GAO/NSIAD-95-124 Depot Maintenance
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