United States General Accounting Office

GAO Report to Congressional Requesters

December 1994 AEROSPACE GUIDANCE

AND METROLOGY

CENTER

Cost Growth and Other

Factors Affect Closure

and Privatization

GAO/NSIAD-95-60

GAO United States

General Accounting Office

Washington, D.C. 20548

National Security and

International Affairs Division

B-259135 

December 9, 1994

The Honorable Earl Hutto

Chairman

The Honorable John R. Kasich

Ranking Minority Member

Subcommittee on Readiness

Committee on Armed Services

House of Representatives

At your request, we reviewed selected issues related to the

implementation of maintenance depot closures and realignments resulting

from prior Defense Base Closure and Realignment Commission (BRAC)

decisions (see app. I for issues being reviewed). The Aerospace Guidance

and Metrology Center (AGMC) at Newark Air Force Base (AFB), Ohio, is one

of the activities being covered by this review.1

 Unlike other depot closures,

the Newark AFB/AGMC implementation plan provides for continuing to

perform the same missions at this facility after closure—largely as a

privatized operation, although the Air Force would retain ownership of

mission-related equipment valued at about $326 million.

Recently, we briefed your office on (1) the cost and savings issue related

to the Newark AFB/AGMC facility closure and privatization and (2) other

closure and privatization issues. As you asked, we are providing this report

on the areas discussed at that briefing and will report later on findings

related to the closure of all maintenance depots.

Background The sole purpose of Newark AFB is to house and support the large

industrial complex comprising the AGMC. Supporting two Air Force

missions—depot maintenance2

 and metrology and calibration—AGMC

provides depot level maintenance of inertial guidance and navigation

systems and components and displacement gyroscopes for the Minuteman

and Peacekeeper intercontinental ballistic missiles and most of the Air

1

The following maintenance depots have been identified for closure: Lexington/Bluegrass Army Depot,

Sacramento Army Depot, Tooele Army Depot, Pensacola Naval Aviation Depot, Alameda Naval

Aviation Depot, Norfolk Naval Aviation Depot, Philadelphia Naval Shipyard, Mare Island Naval

Shipyard, and Aerospace Guidance and Metrology Center.

2

Depot maintenance requires extensive shop facilities, specialized equipment, and highly skilled

technical and engineering personnel to perform major overhaul of parts; completely rebuilt parts, and

end items; modify systems and equipment by applying new or improved components; manufacture

parts unavailable from the private sector that are needed for performing depot maintenance activities;

and provide technical assistance by field teams at operational units.

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Force’s aircraft.3 In fiscal year 1994, AGMC’s depot maintenance workload

consisted of about 900,000 hours; almost 10,500 items were produced to

support repair requirements for 66 Air Force, Navy, and Army systems and

components. This work was accomplished by about 500 maintenance and

engineering personnel and 325 management and support personnel.

AGMC is different from the Air Force air logistics centers (ALC) in that it

does not have weapon system and item management responsibility

collocated at the same base.4

 For Air Force systems repaired at AGMC,

weapon system and item management functions are performed primarily

at the Ogden or Oklahoma City ALCs.5

 However, some of the engineering

support normally provided by the system program management offices at

ALCs is performed at AGMC for systems it repairs.

In its second Air Force mission, metrology and calibration, AGMC performs

overall technical direction and management of the Air Force Metrology

and Calibration Program and operates the Air Force Measurement

Standards Laboratory. About 200 personnel are involved in the metrology

and calibration mission—109 in generating technical orders, certification

of calibration equipment, and management operations and 89 in the

standards laboratory. As the single manager for the Air Force Metrology

and Calibration Program, AGMC provides all metrology engineering services

for the Air Force. The standards laboratory complex, consisting of 

47 laboratories, serves as the primary laboratory for calibrating and

certifying measurement standards used worldwide in all Air Force

precision measurement equipment laboratories. In fiscal year 1994, the

standards laboratory produced about 11,500 calibrated items.

The Department of Defense (DOD) considered AGMC’s work conducive to

conversion to the private sector and recommended closing Newark

AFB/AGMC through privatization and/or transferring the workload to other

depots. DOD justified the closure by (1) identifying at least 8.7 million hours

of excess Air Force depot maintenance capacity, with the closure of AGMC

3

Other AGMC workloads include control display units; periscopic sextants; cesium beam clocks; fuel

savings advisory systems; fiber optic borescopes; and a variety of test, measurement, and diagnostic

equipment.

4

Neither the Army nor the Navy collocates its weapon system and item management functions at

locations having depot maintenance activities. AGMC is substantially smaller than the other five Air

Force depot activities in number of items supported, production hours, workforce size, and number

and size of maintenance facility buildings.

5

The other ALCs are Sacramento ALC, McClellan AFB, California; San Antonio ALC, Kelly AFB, Texas;

and Warner Robins ALC, Robins AFB, Georgia.

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expected to reduce this excess by 1.7 million hours,6 and (2) applying the

eight base closure criteria to Air Force bases having depots and ranking

Newark AFB low relative to the others (see app. II for base closure

criteria). DOD assigned a low military value to Newark AFB primarily

because it was a single mission base with no airfield.

DOD estimated that implementing its recommendation on Newark AFB/AGMC

would cost $31.3 million, result in an annual savings of $3.8 million, and

have an 8-year payback period for closure and relocation expenses. In our

report on the base closure and realignment recommendations and

selection process, we estimated that the Newark AFB/AGMC closure costs

would be $38.29 million, with a 13-year payback period.7 BRAC determined

that the AGMC workload could either be contracted out or

privatized-in-place at the same location, although the BRAC noted that

industry interest in privatization-in-place was limited. The BRAC

recommended closing Newark AFB/AGMC—noting that some workload will

move to other depot maintenance activities, including the private sector.

The President agreed with the overall BRAC recommendations dealing with

maintenance depots, including the closure of AGMC. The Congress did not

challenge the overall BRAC recommendations. The Air Force has begun the

implementation of the closure and privatization of Newark AFB/ AGMC.

Results in Brief The justification of closing Newark AFB/AGMC is not clear. To date, the

closure of Newark AFB/AGMC is the only depot closure where almost all of

the work may be privatized-in-place. As such, we believe it merits careful

consideration before implementation proceeds. There are a number of

issues associated with this privatization that are barriers to its

implementation. Also, some projected costs are rising, while others are yet

to be determined. One-time closure costs have doubled in the past year

and may still be underestimated. As a result, the payback period has

increased to at least 17 years and as much as over 100 years—depending

on the assumptions used. Moreover, projected costs of conducting

post-privatization operations could exceed the cost of current Air Force

operations and reduce or eliminate projected savings.

Other closure and privatization matters create uncertainty about the

viability of the Air Force’s planned action: (1) the disposition of equipment

6

The 1.7 million hours come from historical figures for direct product actual hours for the depot

maintenance industrial fund activity at AGMC. AGMC downsized in fiscal years 1991 and 1993 to a

1.0 million hour capacity based on changes in the force structure.

7

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

Realignments (GAO/NSIAD-93-173, Apr. 15, 1993).

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manufacturers’ proprietary data claims, which are a potential barrier to

privatization and could significantly increase closure costs and/or

post-closure operation costs; (2) the failure of the closure/privatization to

reduce excess depot maintenance capacity by the 1.7 million hours

previously estimated; (3) the incongruity of privatizing workload that the

Air Force has defined as “core” capability that generally should be retained

in the DOD depot system; (4) the practicability or cost-effectiveness of

privatizing parts of the metrology and calibration mission while retaining

the management function as a government activity; and (5) the delay in

reaching agreement regarding the transfer of property and facilities to the

local reuse commission.

Air Force

Implementation of

Newark AFB/AGMC

Closure

Implementation of the Newark AFB/AGMC closure through privatization is

still in the early phases, with many details yet to be worked out. In general,

the Air Force has developed a three-pronged approach to implementing

BRAC’s decision. First, four systems, representing about 3 percent of AGMC’s

existing depot maintenance workload, will be transferred to other Air

Force depots.8

 Second, ownership of the Newark AFB/AGMC property and

facilities will be transferred to a local reuse commission. The commission

is to lease space to one prime guidance system repair contractor that will

provide depot maintenance work, one prime metrology contractor that

will perform calibrations and author calibration manuals, and the

remaining organic metrology program management contingent. While

privatization-in-place is the goal, based on a strategy option announced in

the Commerce Business Daily, contractors may elect to move workload to

other facilities. Hypothetically, this option could result in all workload

moving to other contractor locations—should the winning contractor(s)

demonstrate that moving workload to other locations would provide the

best value to the government. Third, the metrology and calibration mission

will be continued at AGMC, with some functions privatized and another

continued as an Air Force activity reporting to AFMC Headquarters or one

of the ALCs.

The Air Force originally planned to privatize all activities related to the

metrology and calibration mission, but it later determined that the Air

Force Metrology and Calibration Program’s materiel group manager

function could not be privatized because it is a function considered to be

8

The Air Force determined that relocation was practicable and cost-effective for sextants, ARC-200

radios, clocks, and some test measurement and diagnostic equipment.

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“inherently governmental.”9 In performing this function, AGMC civilian and

military employees provide policy and direction for all precision

measurement equipment laboratories Air Force wide, inspect these

laboratories for compliance with required policies and procedures, and

procure calibration standards10 used in calibration laboratories.

Current plans for the metrology and calibration program provide for

(1) retaining about 130 government employees to provide the metrology

and calibration management function—with the Air Force leasing space at

AGMC from the local reuse commission and (2) contracting out the primary

standards laboratory and technical order preparation, which will also

remain at AGMC, with the contractor leasing space from the reuse

commission.

The Air Force plans to retain ownership of mission-related maintenance

and metrology and calibration equipment, which will be provided to the

winning contractor(s) as government-furnished equipment. AGMC

accountable records indicate the value of the depot maintenance

equipment is $297.5 million and the value of the metrology and calibration

equipment $28.5 million. Details such as the cost of the lease arrangement,

allocation of utility and support costs between the Air Force and

contractor(s), and the determination of whether the government or the

contractor will be responsible for maintaining the equipment are not yet

known.

To manage the AGMC privatization, the Air Force established a program

management office at Hill AFB. This office is responsible for developing the

statement of work, request for proposal, acquisition plan, source selection

plan, and related documents. The award is scheduled for September 29,

1995. Several key milestones leading up to contract award have slipped,

compressing the schedule for the remaining tasks in the

pre-contract-award period. Air Force officials describe this schedule as

optimistic. After contract award, the Air Force plans to initiate a phased

process for transitioning individual maintenance workloads to the

contractor. Air Force officials stated that this 12-month transition period

reduces the risk of interrupting ongoing operations and allows the

contractor(s) an opportunity to build up an infrastructure and trained

workforce. However, according to the program management office, a

9

Office of Management and Budget Policy Letter 92-1, Sept. 23, 1992, provides that an inherently

governmental function is “. . . so intimately related to the public interest as to mandate performance by

Government employees. These functions include those activities which require either the exercise of

discretion in applying Government authority or the making of value judgements in making decisions

for the Government.”

10The acquisition cost of this equipment is about $10 million per year.

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“turn-key” transition where the contractor becomes fully responsible for

the AGMC workload at one point in time is the preferred strategy of the ALC

system managers and may be adopted.

Analysis of Cost and

Savings Raises

Concerns

Our work has identified several concerns regarding the cost, savings, and

payback period for the Air Force’s implementation of the AGMC BRAC

decision. These include concerns that (1) the projected cost of closing

AGMC has doubled and may increase further; (2) the $3.8 million annual

savings projected to result from AGMC’s closure is not likely to be realized

because of potentially higher costs for contract administration, contractor

profit, possible recurring proprietary data costs, and other factors that

have not been considered in the cost computation; and (3) the payback

period could be extended to over 100 years or never, depending upon the

Air Force’s ability to contain one-time closure costs and recurring costs of

performing the AGMC mission after privatization.

Recognizing that projected closure costs have increased, in August 1994,

the Air Force base closure group validated a Newark AFB/AGMC closure

budget of $62.2 million.11 This amount is $30.9 million more than the

original projection of $31.3 million. Almost all of the increase is

attributable to the estimated $30.5 million transition cost to convert from

Air Force to contractor operation. According to Air Force officials, the

original cost estimate only included costs associated with transferring and

separating personnel under the base closure process and for transferring a

limited amount of workload to other Air Force depots. They noted that

DOD has no prior experience with privatizing a large, complex depot

maintenance facility. Additionally, since the development of the closure

and privatization option for AGMC was done quickly, the time available to

identify all the factors and costs associated with this option at the time of

the 1993 BRAC was limited.

We recomputed the payback period using DOD’s 1993 Cost of Base

Realignment Actions (COBRA) model.12 We used the estimated nonrecurring

costs validated by the Air Force in August 1994 (adjusted for inflation) and

assumed that post-closure operations would result in $3.8 million annual

11The Air Force considered a range of closure costs from $47 million to $76 million before validating

the $62.2 million estimate.

12DOD uses the COBRA model to estimate the return on investment of its closure and realignment

decisions. The cost model consists of a set of formulas or algorithms that use standard factors and

base-specific data in its calculations. Each DOD component had its own set of standard cost factors

derived from readily available information. Some factors are identical for each component because

they are mandated by regulation or law or prescribed by policy.

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savings as DOD originally projected in 1993. The model indicated that, with

these costs and assumptions, the payback period would be over 100 years

rather than 8 years as originally projected by DOD. However, DOD approved

discount rate used in the COBRA model has been reduced from 7 percent in

the 1993 BRAC process to 2.75 percent in 1995.13 Consequently, we adjusted

the COBRA model to the revised discount factor—holding all other variables

constant—and found the revised payback period to be 17 years. Achieving

a 17-year payback is dependent on no further increase in one-time closure

costs and achieving the $3.8 million annual post-closure operational cost

savings originally projected by DOD. Our work has determined that neither

of these assumptions is likely because of significant cost uncertainties.

While the Air Force has recognized that an estimated $62.2 million will be

required as BRAC funded costs of closure, it also recognizes there will be

additional one-time closure costs not funded by BRAC. For example, an

estimated $4.86 million will be needed to cover costs such as interim

health benefits for personnel separating from government employment.

Also, there will be environmental cleanup costs of some undetermined

amount. Thus far, $3.62 million has been identified for environmental

cleanup.

As already indicated, we have also identified other potential closure costs

that the Air Force has not included. One is the cost to acquire the right to

provide data some equipment manufacturers consider proprietary to

contractors expecting to bid on the AGMC maintenance workload.

Proprietary rights involve the claim of ownership by equipment

manufacturers of some unique information, such as technical data,

drawings, and repair processes, to protect the manufacturer’s market

position by prohibiting disclosure outside the government. An Air Force

official said cost estimates were submitted by four equipment

manufacturers claiming proprietary rights, and these estimates were

“absurdly high.” While we cannot identify what these additional one-time

costs will be, any unidentified costs push the payback period even further.

At the time AGMC was identified for closure and privatization, DOD

estimated $68.09 million annual cost for contractor operations and

$71.84 million in net annual savings in personnel and overhead

13COBRA algorithms incorporate a discount rate to calculate both the number of years required to

obtain a return on investment and a 20-year net present value analysis. The source of identifying the

appropriate discount rate is Office of Management and Budget Circular A-94, “Guidelines and Discount

Rates for Benefit-Cost Analysis of Federal Programs.” In the 1993 BRAC, a discount rate of 7 percent

was used, under the assumption that COBRA analyses were “base-case” benefit-cost analyses as

defined by the circular. DOD determined that the approved discount rate associated with

“cost-effectiveness” analyses should be used for the 1995 BRAC.

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costs—resulting in an estimated annual savings of $3.8 million. Recurring

costs after AGMC closure and privatization probably cannot be determined

with any degree of assurance until after contract negotiation and award.

However, some Air Force officials have estimated that rather than

achieving savings, annual recurring costs could actually exceed current

costs of operations. For example, an Air Force Materiel Command (AFMC)

memorandum noted that prevailing labor rates and private sector charges

for similar items14 suggest that it will be difficult to keep the annual

contract value the same as the current annual civilian salary—a key

assumption in achieving the originally projected $3.8 million annual

savings.

An AFMC analysis determined that, assuming these costs are comparable,

additional costs for profit and contract administration could result in

post-closure operation costs exceeding the current operation costs by at

least $1.8 million. Additional costs for proprietary data and taxes could

increase the post-closure operation costs by $3.8 million annually.

A November 1994 AFMC memorandum informed system managers of

increased funding requirements for AGMC workloads to cover anticipated

increases in costs of operation under privatization-in-place. A

December 1994 meeting of the Acquisition Strategy Panel confirmed the

projected increases. For example, the projected fiscal year 1997 costs after

privatization-in-place were about 107 percent higher than projected costs

under government operation. Additionally, the projected costs of

contractor operations for the 5-year period between fiscal years 1996 and

2000 were estimated to be over $456 million more than previously

estimated costs of government operations over that period.

Other Closure and

Privatization Issues

Other privatization issues relate to (1) proprietary data claims, (2) the

effect of the closure on excess depot maintenance capacity, (3) the impact

of privatizing core workload, (4) the segmentation of the metrology and

calibration mission, and (5) the transfer of AGMC property and facilities to

the local reuse commission.

Proprietary Data Claims The proprietary rights to technical data is unresolved for some workloads

to be contracted out and could greatly increase the costs of privatization.

In this case, when contractors have a legitimate claim of ownership, the

14Analysis by the transition program management office determined that for 230 Air Force items

currently repaired at AGMC that also have repair history in the private sector, the contractor costs

were generally 1.5 to 3 times higher than the AGMC cost.

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government cannot make this information available to other private sector

firms that compete for the AGMC maintenance workload. The amount of

depot maintenance workload at AGMC that involves proprietary data, the

extent to which owners of proprietary rights are willing to sell these rights

to the government, or the potential cost of this acquisition have not been

determined. Air Force officials noted they are investigating possible

methods for the prospective bidders to gain the necessary data rights as

part of their proposal. However, proprietary data problems have already

contributed to the delay of several key program milestones, including

preparation of the statement of work and acquisition and source selection

plans, and are a potential barrier to the AGMC privatization.

Effect on Excess Capacity The privatization of AGMC will not reduce excess capacity by the 1.7 million

hours previously estimated if privatization-in-place is completed as

currently planned. Since many of the systems and components currently

repaired at AGMC are not repaired elsewhere, the AGMC depot maintenance

capability does not generally duplicate repair capability found elsewhere.

Where duplicate capability exists, consolidating like repair workloads and

eliminating redundancies would be expected to generate economies and

efficiencies. Currently, it is planned that almost all the AGMC capability will

be retained in place for use by private contractors. The Air Force will

retain ownership of depot plant equipment and the standards laboratory

equipment, which AGMC accountable records indicate are valued at about

$326 million. With this arrangement, it is difficult to understand how DOD

projects the elimination of 1.7 million hours of excess capacity.

Privatization of Core

Workload

All of AGMC’s maintenance workload has been identified as core work to be

retained in government facilities. Since 1993, when the Air Force

recommended that AGMC be closed and privatized, each of the services

identified depot maintenance capability for which it was considered

essential that this capability be retained as organic DOD

capability—referred to as core capability.15 According to Office of the

Secretary of Defense guidance, core exists to minimize operational risks

and to guarantee required readiness for critical weapon systems. The Air

Force determined that 100 percent of the AGMC depot maintenance

workload is core. AGMC is the only Air Force depot activity having all its

15Core is defined by DOD as the capability maintained within organic Defense depots to meet

readiness and sustainability requirements of the weapon systems that support the Joint Chiefs of Staff

contingency scenario. Core depot maintenance capabilities are intended to comprise only the

minimum facilities, equipment and skilled personnel necessary to ensure a ready and controlled

source of required technical competence.

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repair workload defined as core—with other depots’ core capability

ranging from 59 percent at Sacramento ALC to 84 percent at Warner Robins

ALC. An AFMC memorandum noted some inconsistency in planning to

contract out workload defined as 100 percent core, while continuing to

support the need for retaining core capability in DOD facilities. However,

the memorandum noted that the inherent risk of contracting out can be

minimized if the workload is retained at AGMC as a result of

privatization-in-place. Air Force officials stated that retaining government

ownership of the mission-related equipment at AGMC is essential to

controlling the risk of privatizing this critical core workload.

Segmentation of the

Metrology and Calibration

Mission

The current plan to retain part of the metrology and calibration mission to

be performed by Air Force personnel while privatizing the standards

laboratory function may be neither practicable nor cost-effective. We

found that the standards laboratory function is generally the training

ground where Air Force civilian personnel develop the skills they need to

perform the other metrology and calibration functions that will be

continued at AGMC as a government operation. We discussed this issue with

personnel from both the Army and the Navy who maintain similar organic

capabilities to support service metrology and calibration management

functions. They noted that from their perspective, contracting part of this

work while maintaining most of it as a government activity would not be

desirable. Navy officials noted that 100 percent of their metrology and

calibration program management personnel were formerly employed in

the primary standards laboratory. Army and Navy officials stated that the

experience and training gained from their prior work in laboratories was

essential to performance of program management responsibilities.

We questioned the viability of having the Air Force interservice its

metrology and calibration activities to the Army and/or the Navy, which

have similar activities. Army and Navy officials said they believe it would

be possible to combine the Air Force metrology and calibration function

with that of one or both of the other services. Air Force officials said they

considered interservicing but determined that neither the Army nor the

Navy facilities meet the tolerances required for calibrating some Air Force

equipment or have the capacity to assume the Air Force workload. Army

and Navy officials stated that an existing memorandum of agreement

among the three military departments provides that if one of the primary

standards laboratories loses its capability, the remaining laboratories

would assist in meeting calibration requirements. These officials said they

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believe that interservicing or joint operations should be further considered

by the Air Force.

Transfer of Property and

Facilities to Local Reuse

Commission

The AGMC privatization-in-place approach is based on transferring

ownership of the Newark AFB/AGMC property and facilities, which the Air

Force estimates to be worth about $331 million,16 to the local reuse

commission. To make this approach work, the Air Force must transfer

ownership of the property and facilities at no cost or less than fair market

value. Whether this transfer will take place is unclear since (1) the fair

market value has not been determined and (2) agreements as to the cost of

the property or means of payment and as to whether the reuse commission

is willing to assume responsibility for operating the property and facilities

have not been reached. To effect property transfer at below estimated fair

market value, the Secretary of the Air Force must explain the cost and

approve the transfer. Air Force officials noted that, pending results of the

environmental impact analysis, they expect to convey the property

through an economic development conveyance with very favorable terms

to the local reuse commission.

A local reuse commission official told us that until recently the

commission believed the Newark AFB/AGMC property would be transferred

to the commission at no cost. The official noted that it is questionable

whether the commission will be interested in acquiring the property under

other conditions.

Recommendation DOD historically has encountered difficulties in trying to close military

bases. This makes us reluctant—absent very compelling reasons—to

recommend that DOD revisit prior BRAC decisions. However, we believe that

the problems being faced in implementing this decision are of such an

unusual nature to warrant revisiting the planned closure and privatization

of AGMC. Therefore, we recommend that the Secretaries of the Air Force

and Defense reevaluate, as a part of the ongoing BRAC 1995 process, both

DOD’s 1993 recommendation to close Newark AFB/AGMC and the Air Force’s

approach to implementing the closure decision through

privatization-in-place.

16This amount does not include the value of the mission-related depot plant equipment and the

standards laboratory equipment, which will be retained as government-owned equipment.

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Scope and

Methodology

Part of the work on this assignment resulted from our ongoing effort to

review various depot maintenance issues, including an analysis of the

status of DOD’s efforts to implement depot closures resulting from prior

BRAC decisions. We completed work for this report in December 1994. Our

work was performed in accordance with generally accepted government

auditing standards. We discussed a draft of this report with agency

officials and have included their comments where appropriate. Our scope

and methodology are discussed in greater detail in appendix I.

We are sending copies of this report to the Director, Office of Management

and Budget; the Secretaries of Defense and the Air Force; and other

interested parties. We will make copies available to others upon request.

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

concerning this report. Major contributors to this report were Julia

Denman, Assistant Director and Project Director, and Frank Lawson,

Deputy Project Director.

Donna M. Heivilin

Director, Defense Management

 and NASA Issues

Page 12 GAO/NSIAD-95-60 Aerospace Guidance/Metrology Center
Page 13 GAO/NSIAD-95-60 Aerospace Guidance/Metrology Center
Appendix I 

Scope and Methodology

You asked us to review how the Department of Defense (DOD) is managing

various issues related to the closure of depot maintenance activities,

including (1) the allocation of workload that is currently being performed

at these activities, either to DOD activities or to the commercial sector;

(2) policies and procedures for the disposition of equipment at these

activities; (3) policies and procedures to provide the existing workforce

opportunities for employment; (4) the potential for conversion of these

activities into commercial repair activities; and (5) an update of DOD’s

estimates for closure costs and savings as a result of implementing prior

Defense Base Closure and Realignment Commission (BRAC) decisions for

depot closures.

We discussed the Newark Air Force Base closure and privatization of the

Aerospace Guidance and Metrology Center (AGMC) with Air Force officials

responsible for implementing the BRAC decision at AGMC, Air Force Materiel

Command (AFMC), and Air Force headquarters. We also (1) discussed

estimated closure costs and savings with Air Force officials at various

locations and (2) toured the AGMC facility, conducting interviews with

center personnel and reviewing historical and evolving documentation. In

addition, we contacted Defense Contract Management Command, Defense

Contract Audit Agency, and AFMC contracting personnel for

contract-related information and Army and Navy metrology officials

responsible for the primary standards laboratories to obtain information

on their capability to maintain the AGMC metrology workload and their

views on privatizing part of the metrology functions while continuing to

keep the management function as a government operation.

We analyzed laws, policies, and regulations governing core capability and

Office of Management and Budget Circular A-76 and Policy Letter 92-1 for

information on inherently governmental functions. To assess the impact of

the increase in the estimated cost of closing Newark AFB/AGMC, we used the

1993 Cost of Base Realignment Actions model to calculate the closure and

relocation cost payback period.

In conducting this review, we used the same reports and statistics the Air

Force uses to monitor the cost of closure and estimate the recurring costs

associated with AGMC privatization. We did not independently determine

their reliability.

Page 14 GAO/NSIAD-95-60 Aerospace Guidance/Metrology Center
Appendix II 

DOD Criteria for Selecting Bases for Closure

or Realignment

Category Criteria

Military value The current and future mission requirements and the

impact of operational readiness of DOD’s total force.

The availability and condition of land, facilities, and

associated airspace at both the existing and potential

receiving locations.

The ability to accommodate contingency, mobilization,

and future total force requirements at both the existing

and potential receiving locations.

The cost and manpower implications.

Return on investment The extent and timing of potential costs and savings,

including the number of years, beginning with the date of

completion of the closure or realignment.

Impacts The economic impact on communities.

The ability of both the existing and potential receiving

communities’ infrastructure to support forces, missions

and personnel.

The environmental impact.

(709110) Page 15 GAO/NSIAD-95-60 Aerospace Guidance/Metrology Center
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