United States Government Accountability Office

Washington, DC 20548 

May 15, 2008 

Congressional Committees 

Subject: Depot Maintenance: Issues and Options for Reporting on Military Depots 

This report formally transmits the attached briefing in response to the Senate Report on the 

National Defense Authorization Act for Fiscal Year 2008. The report required GAO to review 

and make recommendations regarding the reports, assessments, analyses, and documents used 

for determining the compliance of the Department of Defense and military departments with the 

percentage limitation in 10 U.S.C. 2466—frequently referred to as the 50/50 requirement. On April 

23 and 24, 2008, we provided the briefing to staff of your committees to satisfy the mandate 

requirement. 

We are sending copies of this report to the appropriate congressional committees. We are also 

sending copies to the Secretary of Defense; the Deputy Secretary of Defense; the Under

Secretary of Defense (Acquisition, Technology, and Logistics); the Secretaries of the Army, Navy, 

and Air Force; and the Commandant of the Marine Corps. This report will also be available at no 

charge on GAO’s Web site at http://www.gao.gov. Should you or your staff have any questions 

concerning this report, please contact me at (202) 512-8365 or solisw@gao.gov. Contact points 

for our Offices of Congressional Relations and Public Affairs may be found on the last page of

this report. Key contributors to this report were Julia Denman, Assistant Director; Carleen 

Bennett; Dawn Godfrey; LaShawnda Lindsey; and Randy Neice. 

William M. Solis 

Director, Defense Capabilities and Management 

Page 1 GAO-08-761R Depot Maintenance 
List of Congressional Committees

The Honorable Carl Levin 

Chairman 

The Honorable John McCain 

Ranking Member 

Committee on Armed Services 

United States Senate 

The Honorable Daniel K. Akaka 

Chairman 

The Honorable John Thune 

Ranking Member 

Subcommittee on Readiness and 

 Management Support 

Committee on Armed Services 

United States Senate 

The Honorable Ike Skelton 

Chairman 

The Honorable Duncan L. Hunter 

Ranking Member 

Committee on Armed Services 

House of Representatives 

The Honorable Solomon Ortiz 

Chairman 

The Honorable Randy Forbes 

Ranking Member 

Subcommittee on Readiness 

Committee on Armed Services 

House of Representatives 

Page 2 GAO-08-761R Depot Maintenance 
Enclosure: Briefing Slides Enclosure: Briefing Slides 

Issues and Options for 

Reporting on Military Depots

Briefing for the Senate and House Committees on 

Armed Services

April 23, 2008

Page 3 GAO-08-761R Depot Maintenance 
Enclosure: Briefing Slides 

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2

Briefing Agenda

• Introduction

• Objectives

• Scope and Methodology

• Summary of Preliminary Observations

• Background

• Preliminary Observations
Enclosure: Briefing Slides 

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Introduction

• The Senate Report on the National Defense Authorization Act for Fiscal Year 2008

requires GAO to review and make recommendations regarding the reports,

assessments, analyses, and documents used for determining the compliance of the 

Department of Defense (DOD) and military departments with the percentage limitation in

10 U.S.C. 2466 - frequently referred to as the 50/50 requirement. The committee

expressed particular interest in learning whether there are better methods than the

current system for meeting its oversight responsibilities of DOD compliance with the

50/50 requirement.

• The 50/50 requirement, which under certain circumstances can be waived by the

Secretary of Defense, provides that not more than 50 percent of the funds made

available in a fiscal year to a military department or a defense agency for depot-level

maintenance and repair workload may be contracted to non-federal government

personnel. DOD must report annually on the percentage of depot maintenance funds

expended during the preceding fiscal year, and are projected to be expended during the

current fiscal year and the ensuing fiscal year, for performance of depot-level

maintenance and repair workloads by the public and private sectors.
Enclosure: Briefing Slides 

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Objectives

1. To what extent does the current 50/50 reporting on the mix of 

depot maintenance funding between the public and private sectors

provide information for congressional oversight?

2. To what extent could reporting on core depot capabilities to 

Congress provide an alternative measure for assessing the 

balance of public and private sector depot maintenance workload?

3. What issues might Congress wish to consider to enhance 

reporting on military depots capabilities or funding allocations of 

the public sector versus private sector? 

This briefing is intended to satisfy the mandate that GAO review 50/50

reporting requirements.
Enclosure: Briefing Slides 

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Scope and Methodology

• To determine the extent to which the current 50/50 reporting on the mix of 

depot maintenance funding between the public and private sectors

provides information for congressional oversight, we reviewed prior GAO

and other audit agency products on 50/50 and core and we discussed 

50/50 issues with cognizant DOD officials.

• To determine the extent to which the reporting on core depot capabilities

could provide an alternative measure for assessing the balance of public

and private sector depot maintenance workload, we incorporated 

preliminary findings from our ongoing audit work on depot maintenance 

issues.

• To identify issues Congress might wish to consider to enhance reporting 

on military depot capabilities or funding allocations in the public and 

private sectors, we reviewed DOD’s depot maintenance policies and 

procedures, reviewed GAO and other audit agencies’ reports, incorporated preliminary findings from our ongoing audit work, and met 

with OSD and service officials to discuss alternatives for 50/50 reporting.
Enclosure: Briefing Slides 

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Summary of Preliminary Observations

• While the 50/50 reporting does not provide a precise accounting of the mix of depot

maintenance funding between the public and private sectors, it provides information

for approximating this mix. If Congress wishes to assess this mix, 50/50 may 

continue to provide a useful metric until a more meaningful process can be 

implemented. However, oversight could be enhanced with additional information 

such as analyses of annual funding allocation to prior years data, funding allocation

variances from year to year, and analyses of long term trends. Nonetheless, absence of information about workload limits 50/50’s usefulness to Congress as a 

stand-alone metric for evaluating the mix of depot maintenance between the public 

and private sectors.

• The concept of defining a level of core workload to be maintained in government

depots is an appropriate approach for addressing congressional requirements for 

organic maintenance. Since the current core policy and implementation has 

limitations and does not provide a comprehensive process for determining core 

requirements and capability, it is not a viable stand-alone alternative for measuring the depot maintenance workload mix, but as a complement to 50/50 does provide 

additional data that would be useful to congressional oversight if it were improved 

and provided to Congress. If improved to provide a more comprehensive 

assessment of core, this process could be used as an alternative to 50/50. 

• Additional information would benefit the decision-making process regarding the 

future of organic depot maintenance, 50/50, and core.
Enclosure: Briefing Slides 

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Background

• While both public and private sector activities have contributed to the performance 

of depot maintenance work, the statutory limitations on the percentage of private 

and public work have been amended several times since the inception of the 

legislative language on the mix of depot maintenance workload between the public

and private sectors. Several selected developments are listed below:

• 1982 – DOD directed that services plan for not more than 70 percent of depot maintenance to be repaired at organic [military] depots.

• 1984 – National Defense Authorization Act (NDAA), 1985 provided for 

maintaining core logistics capability.

• 1991 – NDAA for FY 1992 and FY 1993 set a 60 percent floor for organic depot maintenance.

• 1996 – DOD’s policy shifted to relying more on the private sector for depot 

maintenance.

• 1997 – NDAA for FY 1998 established that no more than 50 percent of depot 

maintenance funding can be allocated to the private sector.

• 1998 – Definition of depot maintenance at Section 2460 of Title 10 was

expanded to include all depot level maintenance and repair workload

regardless of location of where the work was performed, adding to the 

complexity of 50/50 reporting.
Enclosure: Briefing Slides 

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Background (continued)

• From 1998-2006 GAO was required to review DOD’s compliance 

with 50/50 requirement. 

• Although there is a legislative requirement for core to provide for 

retaining a minimum capability in military depots to support surge 

requirements to meet contingencies, the Secretary of Defense is

not required to submit to Congress an annual report regarding 

core capability requirements. The Secretary is required to report

waivers of the core statute and a notification and justification of 

the determination that a weapon system is a commercial item and 

not subject to core. According to the services, they have not 

submitted reports under these requirements.
Enclosure: Briefing Slides 

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Objective 1: Current 50/50 Reports Provide Information on

Public/Private Funding Mix But Shortcomings Limit Usefulness

• The 50/50 process collects and aggregates funding data for depot maintenance work accomplished

in both the public and private sectors, but the existing process has shortcomings that limit its ability 

to provide an exact measure of this funding mix. Some of the weaknesses identified in GAO and

service audit agency reports are listed below.

• Inadequate guidance and insufficient internal processes and procedures make it difficult to

maintain consistency in 50/50 reporting methods.

• Mathematical errors, under- and over-reporting workload, and the exclusion of certain

reportable depot workload raise questions about data accuracy.

• The commingling of depot and intermediate level maintenance and use of multiple types of

funding complicates 50/50 reporting.

• Use of funding rather than workload provides a misleading representation of the public/private

mix since funding for military depots includes the price of parts which are often procured from

the private sector. Further, because 50/50 does not provide information about workloads, it 

provides no insights about specific workload capabilities in the maintenance depots.

• During the years when GAO was required to review and report on 50/50 compliance, generally

the reports noted that GAO could not determine compliance with precision due to factors such

as weaknesses in DOD’s financial systems and the processes used to collect and report the

data.
Enclosure: Briefing Slides 

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Objective 1: Current 50/50 Reports Provide Information on

Public/Private Funding Mix But Shortcomings Limit Usefulness

• OSD and the services have worked to improve the 50/50 data accuracy by developing improved guidelines and using service audit agencies to review the

data.

• Despite some continued weaknesses, the collection and aggregation of 50/50 data

allows an approximation of depot maintenance dollars between the public and 

private sectors – information not available through other sources.

• The availability of 50/50 data and the need to follow 50/50 procedures have in

certain cases, influenced the services to consider shifting maintenance work to

military depots to improve their 50/50 postures. 

• The requirement to develop a mitigation plan when the service comes within 2

percent of the 50 percent private sector ceiling has impacted the Air Force 

and more recently the Army to develop plans for shifting workloads to military

depots.

• The requirement that only the Secretary of Defense may waive the 50/50 

requirement has generated discussions among high level officials in the Air 

Force regarding source of repair decisions.

• We have reported that 50/50 reporting could be made more useful to Congress

with the addition of such information as analyses of annual funding allocation to

prior years data, funding allocation variances from year to year, and analyses of 

long term trends.
Enclosure: Briefing Slides 

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Objective 2: Information on Core Capabilities at

Military Depots has Shortcomings But If Improved Could Provide an 

Alternative Measure for Congressional Oversight

• The concept of identifying a core workload that should be maintained in military depots is

a systematic process for delineating what should be performed in the public sector, but

the existing core process has limitations.

• The legislative requirement for core provides, in part, that a minimum capability should be retained in military depots to support the surge requirement to meet

contingencies.

• DOD’s biennial core process is designed to identify required core capabilities for

depot maintenance and the associated workloads needed to sustain those

capabilities. But our preliminary work indicates that the process may not be

comprehensive in establishing core capabilities required by DOD guidance in the 

military depots.

• The core requirement is vague and results in different service interpretations.

• The core process, which uses direct labor hours is more difficult to quantify than 50/50, which uses dollars. Workload information is collected by each

depot in a work breakdown structure format, aggregated for each service, and

reported to Office of Secretary of Defense – but not to Congress.

• Our preliminary work indicates that each service implements DOD’s core

policies differently.

• The biennial core process, which addresses legacy and modified systems

does not interface with the acquisition process, which addresses emerging

requirements for new and future systems.
Enclosure: Briefing Slides 

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Objective 2: Information on Core Capabilities at

Military Depots has Shortcomings But If Improved Could Provide an 

Alternative Measure for Congressional Oversight

• Lack of internal controls within DOD (1) brings into question the accuracy of

the core data and (2) does not ensure maintaining sufficient core workloads to

meet core capability requirements.

• To address core requirements for new and modified systems, DOD’s acquisition

guidance requires that a core logistics analysis be conducted before acquisition 

milestone B (or milestone C (if no milestone B)) and the core logistics capability be

established within four years of initial operational capability for mission essential 

weapon systems and materiel, but the process for performing the core logistics

analysis is not clearly defined and implementation varies among the services.

• Based on our ongoing work, it is not clear that program offices are establishing

core within timeframes required by DOD guidance.

• Program office officials cited an inconsistency between the core

requirement and their perception of DOD’s preference for private

contractor support.

• Not having technical data and lack of funding for depot plant equipment 

are reasons program offices gave for not establishing core.

• Despite its weaknesses, the core process does provide information about required

capabilities and the workloads needed to sustain it – information not available from

other sources. As such it is a complement to 50/50 and if improved could be used as an

alternative measure for assessing the balance of public and private sector depot

maintenance workload.
Enclosure: Briefing Slides 

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Objective 3: Key Issues for Congress as it Considers Reporting

Options for Oversight of the Public/Private Mix

To better evaluate potential changes to existing requirements on depot maintenance, consideration of a number of issues would provide meaningful insights to aid in the 

decision-making process. • To what extent are 50/50 and core still relevant for assessing a required level of

organic maintenance capability?

• What role are the depots to have in DOD weapons system support? Are they to be

only used for legacy systems and as repairers of last resort when a contractor is not

available, or are they to be a key source of repair for new and modified weapon 

systems?

• How does core depot maintenance fit into a DOD support scenario in light of DOD’s 

preference for using performance-based logistics?

• If the maintenance depots are to remain relevant in the future, what actions are 

needed to ensure they are modernized and capable of performing maintenance on 

new systems?

• As it becomes more difficult to distinguish depot from intermediate maintenance and 

maintenance from other supportability functions, to what extent does it remain

practicable to quantify a balance of public and private sector depot maintenance?

• Is it important for DOD to continue to define some level of core capability that it

should perform using DOD military or civilian employees?
Enclosure: Briefing Slides 

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Objective 3: Key Issues for Congress as it Considers Reporting

Options for Oversight of the Public/Private Mix (continued)

• What kind of capability, if any, should DOD retain in organic depots to

assure that they have a ready and controlled source of technical

competence and the resources necessary to ensure its ability to respond to

current and future national defense emergencies?

• To what extent should the depots be capable of performing maintenance on

weapon system commodities?

• How would DOD assure that maintenance would continue to be cost

effective if the depots were no longer available as an alternative source of

repair?

• Should there continue to be a required level of organic logistics capability and if so should it be only for maintenance?

• What changes can be made to the 50/50 and or core process to improve 

their accuracy and internal controls?

• Could a modified strategic-level core process be developed to simplify the

development of required information regarding essential capabilities to be

retained in the military depots?
Enclosure: Briefing Slides 

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Agency Views

We obtained oral comments and the agency concurred with the 

facts presented. On the basis of the comments, we made 

several technical changes as appropriate. 
Enclosure: Briefing Slides 

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Generally Accepted Government Auditing 

Standards (GAGAS) Statement

• We conducted this performance audit from February 2008 

through April 2008 in accordance with generally accepted 

government auditing standards. Those standards require that

we plan and perform the audit to obtain sufficient, appropriate 

evidence to provide a reasonable basis for our findings and 

conclusions based on our audit objectives. We believe that

the evidence obtained provides a reasonable basis for our

findings and conclusions based on our audit objectives.

(351228) 
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