Navy Small Boats: Maintenance Report Addressed Most Directed Elements, but Additional Information Needed
Published: 2012-03-13T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: The Navy has noted that successful execution of its maritime strategy requires the acquisition of not only surface combatants, but also small boats. The Navy reported that it received about $135 million in fiscal year 2010-2012 base procurement funding for small boats. These small boats vary widely in the missions they perform, their sizes, and the approaches for their maintenance. The House Armed Services Committee directed the Navy in House Report 112-78 to conduct a study on strategies to reduce maintenance and repair costs associated with small boat storage and harboring and to submit a report to the House and Senate Armed Services Committees on its findings by October 31, 2011. The committee directed GAO to assess the Navys report for completeness, including the methodology used in the Navys analysis. For this report, GAO evaluated the extent to which (1) the Navy's report addressed the committees direction and (2) the findings in the Navy's study are supported by the data and information examined. GAO analyzed study documents and the business case analysis, obtained and analyzed key documents, and interviewed cognizant officials.
section_title: What GAO Found
paragraphs: The Navy report addressed four of the five elements specified in House Report 112-78, while partially addressing one of the five elements. The Navy report addressed the potential for reducing maintenance and repair costs for the Navys small boat fleet by using advanced boat lifts, and it addressed recommendations regarding the potential establishment of improved boat corrosion control and prevention as key performance parameters. The Navy report partially addressed the committees direction to include an evaluation and business case analysis of the impact of advanced boat lifts for potential improvements to small boat acquisition costs and life-cycle sustainment. The reports business case analysis evaluated potential improvements to life-cycle sustainment, focusing on potential maintenance cost savings associated with boat lifts. However, this business case analysis did not evaluate the impact of the use of advanced boat lifts on potential improvements to small boat acquisition costs. Navy officials told GAO that the use of advanced boat lifts would not significantly contribute to extending the service life of the boats or produce any other additional benefits that would lead to reduced small boat acquisition costs. This is primarily because a critical feature of current procurement strategies is to select, specify, or design boats that are made from corrosion-resistant materials and use components that are corrosion resistant. Nonetheless, the Navy did not include this justification in the report or analyze the potential effects of the use of boat lifts on small boat acquisition costs in the reports business case analysis.
While the Navy completed a business case analysis of the impact of reduced maintenance and repair costs for the Navys small boat fleet through the use of advanced boat lifts, GAO found several areas in which more complete information could have been included to better support the findings of the Navy study. The April 2011 DOD Product Support Business Case Analysis Guidebook provides standards for the DOD business case analysis process used to conduct analyses of costs, benefits, and risks. GAO identified several areas in which more comprehensive information, consistent with the DOD guidebook, could have been included in the Navys business case analysis. For example, the Navy did not include (1) actual lift installation and maintenance cost data or (2) qualitative data on other potential costs and benefits associated with the use of boat lifts, particularly location- and mission-specific benefits, from Navy installations that are using 72 recently acquired boat lifts. The DOD guidebook indicates that authoritative data sourcesthose used to conduct the financial and nonfinancial analysis for a business case analysisshould be comprehensive and accurate. Navy officials recognized that more comprehensive information would have been useful, but noted that they were unable to systematically survey all current boat lift users within the few months they had to complete their business case analysis. The Navy noted in its report that a significant number of boat lifts have recently entered service in the fleet and that the Navy will monitor service experience, data that may provide a basis for future decisions regarding the use of boat lifts. Without more complete information, the Navy may not be fully informed when it considers making future investments in boat lifts or other storage and harboring techniques at individual locations.
section_title: What GAO Recommends
paragraphs: GAO recommends that the Navy collect and include more complete information when evaluating future investment decisions at individual locations. DOD concurred with the recommendation.

section_title: Letter
paragraphs: The Navy has noted that successful execution of its maritime strategy  requires the acquisition of not only surface combatants, such as cruisers  and destroyers, but also numerous high-performance small boats. To that  end, the Navy is investing millions of dollars to acquire small boats to  meet emerging fleet, antiterrorism, and force protection needs and to  support ongoing operations. The Navy reported that it received about  $135 million in fiscal year 2010-2012 base procurement funding for small  boats. These small boats vary widely in the missions they perform, their  sizes, the materials of which they are composed, their locations, and the  approaches for their maintenance—including corrosion prevention  measures. In the current constrained fiscal environment, the Department  of Defense (DOD) must maximize its investment in small boats and  reduce maintenance and repair costs where appropriate.
In House Report 112-78, accompanying the House bill for the National  Defense Authorization Act for Fiscal Year 2012 (H.R. 1540), the House  Armed Services Committee directed the Navy to conduct a study on  strategies to reduce maintenance and repair costs associated with small  boat storage and harboring and to submit a report to the House and Senate Armed Services Committees on its findings by October 31, 2011.The study was to include an evaluation and business case analysis of the  impact that certain strategies, such as the use of advanced boat lifts,  would have on potential improvements to small boat acquisition costs and  life-cycle sustainment. The Navy’s report was to include  recommendations on the potential establishment of improved boat  corrosion control and prevention through various means. In the House  report, the committee also directed GAO to assess the Navy’s report for  completeness, including the methodology used in the Navy’s analysis.  For this report, we evaluated the extent to which (1) the Navy’s report  addressed the committee’s direction and (2) the findings in the Navy’s  study are supported by the data and information examined.
To determine the extent to which the Navy’s report addressed the  committee’s direction, we analyzed House Report 112-78 to identify each  element of the committee’s direction for the Navy report. We developed  an evaluation tool based on House Report 112-78 to assess the extent to  which the Navy’s report addressed these elements. Using scorecard  methodologies, two GAO analysts independently evaluated the Navy  report against the elements specified in the House report. After the two  analysts had completed their independent analyses, they compared the  two sets of observations and discussed and reconciled any differences.  We also interviewed Navy subject matter experts to obtain additional  information and corroborate the statements made in the Navy report, and  we obtained the officials’ opinions of our assessments.
To determine the extent to which the findings in the Navy’s study are  supported by the data and information examined, we reviewed the study  and obtained information on the objectives, scope, and methodology  officials used to conduct it. We evaluated the Navy study’s business case  analysis using criteria found in the DOD Product Support Business Case  Analysis Guidebook, which provides standards for the DOD business  case analysis process as well as generally acceptable economic  methodologies.which the Navy incorporated elements of the DOD guidebook into the  planning, design, and execution of the study. We also obtained and  analyzed key data sources, such as maintenance cost savings inputs and   We reviewed the Navy’s study to determine the extent to  boat lift cost data, for information included in the study. We interviewed  officials from the Office of the Deputy Assistant Secretary of the Navy for  Ships, Naval Sea Systems Command, and the Naval Surface Warfare  Center to obtain their views on key aspects of the study, findings and  conclusions, and any limitations that may have affected the study’s  findings. We assessed the reliability of the data we analyzed by reviewing  existing documentation related to the data sources and interviewing  knowledgeable agency officials about the data that we used. We found  the data sufficiently reliable for the purpose of evaluating the planning,  design, and execution of the Navy’s business case analysis.
We conducted this performance audit from November 2011 to March  2012 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. We discuss our scope  and methodology in more detail in appendix I.
subsections: section_title: Background
subsections: section_title: Small Boat Inventory and Responsibilities
paragraphs: Navy boats are self-propelled craft, suitable primarily to be carried on  board ships and to operate in and around naval activities. As of  November 2011, there were 2,872 small boats in the Navy’s inventory  and 58 different types of small boats, varying in length from 16 feet to  over 200 feet, with expected service lives ranging from 7 to 12 years.  Small boat types include rigid inflatable boats, riverine command boats,  riverine assault boats, force protection boats, fleet harbor security boats,  and unmanned craft.
These small boats vary widely in the missions they  perform, which include maritime interdiction, antiterrorism, force  protection, and oil spill response operations, as well as riverine operations  in Iraq. Table 1 provides the inventory and mission descriptions for  various types of Navy small boats. Appendix II contains photographs of  selected Navy small boats.
Navy small boats are military equipment and are centrally procured,  managed, and tracked by Naval Sea Systems Command (Program  Executive Office, Ships, Support Ships, Boats and Craft Program Office).  Naval Surface Warfare Center (Carderock Division, Detachment Norfolk,  Combatant Craft Division) is responsible for boat inventory management  and other activities, including boat allocation changes for certain  activities.
A small boat may be assigned to and carried aboard a ship as  a ship’s boat. Also, small boats may be assigned to an expeditionary  command, shore station, or fleet operating unit. Navy officials reported  that currently the Navy has assigned small boats to over 320 separate  commands and activities (e.g., Navy Expeditionary Combat Command).  According to Chief of Naval Operations Instruction 4780.6E, these  commands and activities are responsible for proper maintenance of their  small boats and for establishing a boat maintenance program for them.
section_title: Small Boat Storage and Harboring
paragraphs: The Navy utilizes several techniques to store and harbor small boats,  including trailers and lifts. The Navy may use trailers, which can be  purchased as an accessory to the boat and may allow for the boat to be  kept out of the water and then launched back into the water via a boat  ramp. According to the Navy, the use of trailers can also facilitate timely  logistical movement. The Navy has over 1,800 boat trailers in stock.  Another technique is to use boat lifts, which are designed to raise a boat  out of the water to reduce the effects of the saltwater environment on the  hull, appendages, and exposed machinery components. The Navy has 72  boat lifts in stock located at Navy installations around the world (e.g.,  Norfolk, Virginia; Pearl Harbor, Hawaii; and Bahrain). These lifts were  acquired from fiscal year 2007 to fiscal year 2010 at a cost of about $7  million. Small boats can also be stored in the water or on a ship. Figure 1  displays various techniques the Navy uses to store and harbor small  boats.
section_title: Navy Report Addressed Four of the Five Elements Specified in the House Report
paragraphs: The Navy report addressed four of the five elements specified in the  House report, while partially addressing one of the five elements. Figure 2  identifies the five elements the House report directed the Navy to address  and our assessment of the degree to which the Navy report addressed  each of them.
The Navy report addressed the following elements:  Investigate the potential for reduced maintenance and repair costs for  the Navy’s small boat fleet by using advanced boat lifts: The report  discussed potential benefits associated with using boat lifts to remove  boats from water during periods of nonuse. These potential benefits  included reducing some types of corrosion and lowering maintenance  costs by eliminating the need to remove the boat from the water for  inspection.  Include a recommendation regarding the potential establishment of  improved boat corrosion control and prevention as a key performance  parameter for the selection of boat maintenance and storage  equipment: The report did not recommend improved boat corrosion  control and prevention as a key performance parameter for the   It noted that  selection of boat maintenance and storage equipment.boat maintenance and storage equipment should be selected based  on its potential benefit to corrosion control and prevention on boats  and craft, but added that improved corrosion control and prevention  will be hard to clearly define and measure, making them inappropriate  for key performance parameters.  Include a recommendation regarding the potential establishment of  improved boat corrosion control and prevention as a key performance  parameter for sustainment: The report did not recommend improved  boat corrosion control and prevention as a key performance  parameter for sustainment. It stated that boat corrosion control and  prevention is certainly an important aspect of sustainment; however, it  is not sufficiently definable to be used as a key performance  parameter. Specifically, the report noted that the boat corrosion and  control prevention aspect of sustainment is not a stand-alone testable  quantity; therefore it fails to meet an important criterion for a key  performance parameter.  Include a recommendation regarding the potential establishment of  improved boat corrosion control and prevention as a requirement for  Naval Sea Systems Command to incorporate into its acquisition  strategies: The report stated that corrosion control and prevention are  already a well-established part of the requirements used by Naval Sea  Systems Command in its acquisition strategies for procurement  contracts for small boats. It noted that corrosion control and planning  are addressed through performance requirements, design  requirements, and contractual requirements to the extent possible. A  review of current fleet repair and maintenance procedures and  records does not reflect a need for additional requirements, according  to the Navy report.
The Navy report partially addressed the following element:  Include an evaluation and business case analysis of the impact of  advanced boat lifts for potential improvements to small boat  acquisition costs and life-cycle sustainment: The report’s business  case analysis evaluated potential improvements to life-cycle  sustainment, focusing on potential maintenance cost savings  associated with boat lifts. However, this business case analysis did  not evaluate the impact of the use of advanced boat lifts on potential  improvements to small boat acquisition costs. Navy officials told us  that the use of advanced boat lifts would not significantly contribute to  extending the service life of the boats or produce any other additional  benefits that would lead to reduced small boat acquisition costs. This  is primarily because a critical feature of current procurement  strategies is to select, specify, or design boats that are made from  corrosion-resistant materials and use components that are corrosion  resistant. Nonetheless, the Navy did not include this justification in the  report or analyze the potential effects of the use of boat lifts on small  boat acquisition costs in the report’s business case analysis.
section_title: Navy Would Benefit from More Comprehensive Information in Future Analyses
paragraphs: While the Navy completed a business case analysis of the impact of  reduced maintenance and repair costs for the Navy’s small boat fleet  through the use of advanced boat lifts, we found several areas in which  more complete information could have been included to better support the  findings of the Navy study. Navy officials told us that they broadly used  service experience and general guidance from the Naval Center for Cost  Analysis to structure and execute the business case analysis. The Navy  collected data from the existing boat inventory; maintenance procedures  and practices, such as inspections; and maintenance actions to  determine potential maintenance cost savings associated with boat lifts  and compared them with data collected on lift installation and lift  maintenance costs to determine the payback on a boat lift investment.  The Navy assigned risk ranges to each data input and ran them through a  software program that used Monte Carlo simulation techniques and ran  5,000 simulations. Based on this analysis, the Navy concluded that it  was unlikely that implementing boat lifts would provide a positive return  on investment.
The April 2011 DOD Product Support Business Case Analysis Guidebook  presents a uniform methodology for developing accurate, consistent, and  effective support of value-based decision making while better aligning the  acquisition and life-cycle product support processes. The guidebook  provides standards for the DOD business case analysis process used to  conduct analyses of costs, benefits, and risks. We identified several areas  in which more comprehensive information, consistent with the DOD  guidebook, could have been included in the business case analysis. For  example:
The Navy did not utilize discounting in the business case analysis and  did not document its reasons for not doing so within the report or in  additional documentation provided to us. The DOD guidebook  indicates that as a general rule, discounting should be done unless  there is a documented rationale not to discount. Discounting future  benefits and costs using an appropriate discount rate illustrates the  time value of money, as benefits and costs are worth more if they are  experienced sooner. Discounting benefits and costs transforms gains  and losses occurring in different time periods to a common unit of  measurement.
The Navy did not include comprehensive data from Navy installations  that are using 72 recently acquired boat lifts on (1) actual lift  installation and maintenance cost data or (2) qualitative data on other  potential costs and benefits associated with the use of boat lifts. Navy  officials reported that they contacted one primary boat lift user  command to gather a significant amount of data for the study and  relied on boat lift vendors’ estimates for lift cost and maintenance  data. The DOD guidebook indicates that authoritative data sources— those used to conduct the financial and nonfinancial analysis for a  business case analysis—should be comprehensive and accurate.  Navy officials explained that because the way boat lifts are used and  any benefits associated with their use are location and mission  specific, qualitative data would be particularly valuable. For example,  Navy officials told us that boat lifts may improve the operational  availability of small boats at installations that have limited access to  boat ramps that allow boat trailers to launch boats in the water.
Navy officials responsible for conducting the business case analysis were  unaware of the DOD Product Support Business Case Analysis  Guidebook, but acknowledged its applicability to their analysis. Navy  officials recognized that more comprehensive information would have  been useful, but noted that they were unable to systematically survey all  current boat lift users within the few months they had to complete their  business case analysis. Navy officials reported that including this  information would likely not have changed the study’s conclusions, as the  analysis showed that the opportunity for a positive return on investment  from implementing boat lifts for storage and harboring was so low. Navy  officials also noted that the business case analysis did not address other  potential costs associated with the use of boat lifts, such as the cost of  adding new pier space to accommodate boat lifts. Although a more  comprehensive analysis may not reverse this study’s conclusions,  decision makers would benefit from collecting and including more  complete information in future analyses, particularly when evaluating  investment decisions at individual locations, such as using discounting  and conducting comprehensive surveys of boat lift users to obtain all  potential costs and benefits associated with implementing boat lifts. The  Navy noted in its report that a significant number of boat lifts have  recently entered service in the fleet and that the Navy will monitor service  experience, data that may provide a basis for future decisions regarding  the use of boat lifts. Without more complete information, the Navy may  not be fully informed when it considers making future investments in boat  lifts or other storage and harboring techniques at individual locations.
section_title: Conclusions
paragraphs: The Navy continues to rely on small boats to meet emerging fleet,  antiterrorism, and force protection needs and support ongoing operations.  While these boats vary widely in the missions they perform and the  approaches for maintaining them, fiscal challenges require DOD to  maximize its investment in small boats by reducing maintenance and  repair costs where appropriate. Making informed decisions on effective  and efficient small boat storage and harboring options will play a key role  in doing so. While the Navy report addressed nearly all of the elements  specified in House Report 112-78, additional information would better  inform Navy decision makers. In particular, collecting and including more  complete information—such as using discounting and conducting  comprehensive surveys of boat lift users to obtain all potential costs and  benefits associated with implementing boat lifts—would better inform the  Navy when it considers making future investments in boat lifts or other  storage and harboring techniques at individual locations.
section_title: Recommendation for Executive Action
paragraphs: To enable the Navy to make informed decisions when it considers making  future investments in boat lifts or other storage and harboring techniques,  we recommend that the Secretary of Defense direct the Secretary of the  Navy to collect and include more complete information when evaluating  investment decisions at individual locations, for example, by using  discounting and conducting comprehensive surveys of boat lift users to  obtain all potential costs and benefits associated with implementing boat  lifts.
section_title: Agency Comments
paragraphs: We provided a draft of this report to DOD for comment. DOD concurred  with our recommendation to have the Secretary of Defense direct the  Secretary of the Navy to collect and include more complete information  when evaluating investment decisions at individual locations (DOD’s  comments are reprinted in app. III). DOD provided technical comments  during the course of the engagement, and these were incorporated as  appropriate.
We are sending copies of this report to the Secretary of Defense, the  Secretary of the Navy, and appropriate congressional committees. In  addition, the report is available at no charge on the GAO website at  http://www.gao.gov.
If you or your staff have any questions about this report, please contact  me at (202) 512-5257 or merrittz@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 are listed in appendix  IV.
section_title: Appendix I: Scope and Methodology
paragraphs: To determine the extent to which the Navy’s report addressed the House  Armed Services Committee’s direction, we analyzed House Report 112- 78 to identify each element of the committee’s direction for the Navy  report. We developed an evaluation tool based on House Report 112-78  to assess the extent to which the Navy’s report addressed these  elements. Using scorecard methodologies, two GAO analysts  independently evaluated the Navy report against the elements specified  in the House report. The analysts rated compliance for each element as  “addressed,” “partially addressed,” or “not addressed.” We considered the  element to be addressed in the report when the Navy explicitly addressed  all parts set forth in the element. We considered the element partially  addressed in the report when the Navy addressed at least one or more  parts of the element, but not all parts of the element. We considered the  element not addressed by the Navy when the report did not explicitly  address any part of the element. After the two analysts had completed  their independent analyses, they compared the two sets of observations  and discussed and reconciled any differences. The final assessment  reflected our consensus. We also interviewed Navy subject matter  experts to obtain additional information and corroborate the statements  made in the Navy report, and we obtained the officials’ opinions of our  assessments. We interviewed officials from the Office of the Deputy  Assistant Secretary of the Navy for Ships, Naval Sea Systems Command,  and the Naval Surface Warfare Center.
To determine the extent to which the findings in the Navy’s study are  supported by the data and information examined, we reviewed the study  and obtained information on the objectives, scope, and methodology  officials used to conduct it. We evaluated the Navy study’s business case  analysis using criteria found in the DOD Product Support Business Case  Analysis Guidebook, which provides standards for the Department of  Defense’s (DOD) business case analysis process as well as generally  acceptable economic methodologies. We reviewed the Navy’s study to  determine the extent to which the Navy incorporated elements of the  DOD guidebook into the planning, design, and execution of the study. We  also obtained and analyzed key data sources, such as maintenance cost  savings inputs and boat lift cost data, for information included in the  study. We interviewed Navy officials to obtain their views on key aspects  of the study, findings and conclusions, and any limitations that may have  affected the study’s findings. We also interviewed officials responsible for  procuring and maintaining Navy small boats, to determine the extent to  which the Navy factored appropriate costs and benefits into the study’s  key assumptions and related findings. We assessed the reliability of the  data we analyzed by reviewing existing documentation related to the data  sources and interviewing knowledgeable agency officials about the data  that we used. We found the data sufficiently reliable for the purpose of  evaluating the planning, design, and execution of the Navy’s business  case analysis.
We conducted this performance audit from November 2011 to March  2012 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.
section_title: Appendix II: Photographs of Selected Navy Small Boats
paragraphs: Figures 3 through 5 contain photographs of different types of Navy small  boats in use.
section_title: Appendix III: Comments from the Department of Defense
section_title: Appendix IV: GAO Contact and Staff Acknowledgments
subsections: section_title: GAO Contact
section_title: Staff Acknowledgments
paragraphs: In addition to the contact named above, Carleen Bennett, Assistant  Director; Tarik Carter; Joanne Landesman; Mehrzad Nadji; Terry  Richardson; Mike Shaughnessy; Amie Steele; and Chris Watson made  key contributions to the report.