Depot Maintenance: Key Unresolved Issues Affect the Army Depot System's Viability
Published: 2003-07-07T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: The Army's five maintenance depots produced work valued at $1.5 billion in fiscal year 2002, with the remaining 49 percent of the Army's depot work performed by contractors. GAO was asked to assess (1) the trends in and the reliability of depot workload projections; (2) whether workloads are sufficient for efficient depot operations, initiatives are under way to improve efficiency, and additional workloads are possible; (3) whether the Army has identified depots' core capability and provided workload to support that capability; and (4) whether the Army has a long-range plan for a viable, efficient depot system.
section_title: What GAO Found
paragraphs: The work assigned to Army maintenance depots has declined by 36 percent, although the cost of the Army's total maintenance program has increased since fiscal year 1987. Except for fiscal year 2003, projections for future work in the depots through fiscal 2008 show further decline. Depot work also changed from predominately overhauling Army end items to the increased repair of components. In addition, work from non-Army customers has increased from 6 to 26 percent. Army component and recapitalization work is projected to be the majority of depot work in the future. Depot planners generally do not have reliable projections of work requirements for non-Army customers. Because of this and other factors, including changing conditions, future projections have limitations. Potential increases in depot work resulting from the Iraq war are not yet clear. Various factors, including workload reductions and workload performance issues, have resulted in efficiency and productivity problems in Army depots. Such initiatives as facility and equipment rightsizing, depot maintenance partnerships, and "lean manufacturing" have been implemented. Trends in two metrics--capacity utilization and employee productivity--show that, while more needs to be done, efficiency and productivity improvements have been made. Additional workloads, particularly for new and upgraded systems, are essential for future depot viability. However, in the past most new work has gone to private contractors. Some new-systems work is being explored for depots, and depot managers believe that partnering with the private sector may be the best chance for getting such work. The Army has not identified its depots' core capability requirements using a revised DOD methodology meant to overcome weaknesses in the core process. At the same time, it is unclear whether the revised methodology, which is undergoing further changes, will correct weaknesses in the core process. Moreover, no one in the Army assesses the extent to which depot work compares with identified core capability requirements. Depot managers are concerned about the loss of work and the failure to obtain work necessary to support core capabilities. The Army does not have a comprehensive and current strategic plan for the depots and has not implemented the limited plan it developed. GAO concluded in a 1998 report that the Army had inadequate long-range plans for its depots and that such planning is essential if significant progress is to be made in addressing the complex, systemic problems facing the depots. Despite the time that has passed, the same issues remain. DOD has not implemented a comprehensive and current plan for resolving continuing issues about (1) reduced workloads being assigned to Army maintenance depots and (2) deficiencies in the process of quantifying both core depot maintenance capabilities and the workload needed to ensure cost efficiency and technical competence and to preserve surge capability. Without such a plan, the long-term viability of Army depots is uncertain.

section_title: Letter
paragraphs: Army maintenance depots were established to support Army fighting units  by providing repair and manufacturing capability, in concert with the  private sector, to meet peacetime and contingency operational  requirements. In recent years, we have identified deficiencies in the  Department of Defense’s (DOD) planning for depot maintenance  operations. For example, in 1998 we reported, “Uncertainties exist about  the future of the Army’s depots and arsenals and the extent to which the  functions they perform should be retained as government-owned and  -operated facilities or performed by private sector contractors.” We also  said that recent experiences at the Army’s maintenance depots and  arsenals indicate that the Army is facing multiple, difficult challenges and  uncertainties in determining staffing requirements and in improving the  efficiency and effectiveness of its industrial activities. We pointed out that  uncertainties about the workload to be assigned to these facilities was a  critical factor that needed to be addressed, and we recommended that the  Secretary of the Army develop and issue a long-range plan for maximizing  the efficient use of depots and arsenals.
You requested that we review the following Army depot maintenance  issues:    What are the trends in historical and future maintenance workloads  assigned to the depots, and are future projections reliable?
Do the depots have sufficient workload to promote efficient maintenance  operations, are initiatives being implemented to improve efficiency, and  are additional workloads possible?
Has the Army identified the depots’ core capability requirements and  provided its depots with workload needed to ensure cost efficiency and  technical competence?
Does the Army have a long-range plan for the future viability of an efficient  depot system?
We briefed your office on the preliminary results of our work on April 7,  2003. This report summarizes and updates the information presented at  that briefing. The scope and methodology for our work are discussed in  appendix I. We conducted our review from September 2002 through June  2003 in accordance with generally accepted government auditing  standards.
subsections: section_title: Background
paragraphs: The Army maintains maintenance depots for overhauling, upgrading, and  maintaining missiles, combat vehicles, tactical vehicles, and  communication and electronic equipment for the Army, other military  services, and foreign countries. These depots, which were established  from 1941 through 1961, repair end itemssuch as ground combat  systems, communication systems, and helicoptersand reparable  secondary itemsvarious assemblies and subassemblies of major end  items, including helicopter rotor blades, circuit cards, pumps,  transmissions, and thousands of other components. The number of these  facilities has been reduced from 10 in 1976 to the existing 5 as of June  2003, and 2 of the remaining 5 were significantly downsized and realigned  as a result of implementing the 1995 Base Realignment and Closure  (BRAC) decisions. Figure 1 shows the locations of the remaining five  Army maintenance depots.
In fiscal year 2002, the depots reported that the total value of work  performed was $1.5 billion. In a separate report on the distribution of  depot maintenance funds between the public and private sector, the Army  stated that DOD employees performed about 51 percent of the work  included in the Army’s fiscal year 2002 depot maintenance program.   Table 1 provides the name and location of each of the five Army depots,  the primary work performed in each, the hours of work performed in fiscal  year 2002, the value of that work, and the number of civilian personnel  employed at each depot in fiscal year 2002.
section_title: Trends in Historical and Future Workloads and Reliability of Future Projections
paragraphs: Depot maintenance work performed in Army depots has declined  significantly since fiscal year 1987. However, the total depot maintenance  program, of which the work assigned to the depots is a part, has grown in  dollar value by 72 percent from $1.55 billion to $2.66 billion over that  period. The decline in the amount of work performed in Army depots  reflects the downsizing in the number of systems that followed the end of  the Cold War, the trend toward greater reliance on the private sector, and  the use of regional repair activities at Army active installations and Army  National Guard activities for depot-level maintenance.
The type of work performed in the depots also changed from fiscal year  1987 through fiscal year 2002. While workloads were once predominately  the overhaul of Army end items, the percentage of work for non-Army  customers and for repair of Army secondary items has increased over the  last 16 years. Projections of future work indicate further decline, except  that 2003 is likely to have a slight increase at least partially because of  support for Operation Iraqi Freedom (the recently completed conflict in  Iraq). The extent to which Operation Iraqi Freedom will result in increases  in future years is not clear. Future projections may not be a reliable  indicator, since they change with changing conditions. The reliability of  the estimates decreases with an increase in the projection beyond the  current year.
subsections: section_title: Dollar and Labor Hour Trends
paragraphs: Comparing the amount of maintenance work accomplished in the Army  depots with the Army’s total maintenance program shows that the total  program has increased, while the amount of work assigned to the depots  has declined. Figure 2 shows the dollar value of the total Army depot  maintenance program from fiscal year 1987 through fiscal year 2002. The  dollar value of the total Army depot maintenance program grew by   72 percent from fiscal year 1987 through fiscal year 2002.
As reflected in figure 3 the labor hours for maintenance programs  completed in each of the fiscal years from 1987 to 2002 at the five current  Army depots show a significant overall decline in work during much of  this period, with a slight upturn from fiscal year 2000 to fiscal year 2002.  The total number of hours for depot maintenance programs completed in  Army depots in fiscal year 2002 was 11.0 million—-36 percent less than the  17.3 million hours for maintenance programs completed in fiscal year  1987.
Figure 3 indicates that in fiscal year 2000, the number of hours for  maintenance programs completed in Army depots were the lowest since  1987.  In fiscal year 1999, the Army completed the transfer of operational  command and control of Army depots to the depots’ major customers, the  Army Materiel Command’s (AMC) subordinate commands, which are also  the coordinating inventory control points for the depots’ products. In  making these realignments, the Army has tasked AMC to pay more  attention to the amount of work assigned to the depots, since these  commands are now responsible for the depots’ budgets and operations.
section_title: Workload Type and Customer Trends
paragraphs: The type of work performed in Army depots has changed significantly  from fiscal year 1987 through fiscal year 2002. While Army depot work in  fiscal year 1987 predominately involved the overhaul of Army end items  (such as tanks, helicopters, and wheeled vehicles), in fiscal year 2002, the  percentage of work for repairing Army secondary items (reparable  components such as engines, transmissions, and rotor blades) was greater  than that for end item repair. Our analysis of the labor hours for  maintenance programs completed in fiscal years 1987 through 2002  showed that the overhaul of Army end items steadily decreased from 68 to  26 percent of the total workload over that period, while the repair of Army  secondary items increased from 4 to 31 percent of the workload total.
In addition, the percentage of work performed for non-Army customers  increased from fiscal year 1987 through fiscal year 2002 from 6 to 26  percent of the total hours for maintenance programs completed in those  years. At the Tobyhanna depot, which now has the largest amount of   non-Army work, Air Force work accounted for only 4 percent of the hours  of all maintenance programs completed at the depot from fiscal year 1987  through fiscal year 1997. However, from fiscal year 1998 through fiscal  year 2002, repair work on Air Force systems was 23 percent of the total  amount of work completed at this depot. At Corpus Christi, labor hours  for Navy work accounted for 9 percent of the hours for all programs  completed from fiscal year 1987 through fiscal year 1995. The hours spent  for Navy work grew to 22 percent of the hours for all programs completed  from fiscal year 1996 through fiscal year 2002. However, since the Navy  withdrew some of its helicopter work from Corpus Christi in fiscal year  2003, that level of Navy work is not likely to continue unless new Navy  workloads are designated for repair at Corpus Christi. At the Letterkenny  depot, labor hours for foreign military sales accounted for 4 percent of the  hours for all programs completed from fiscal year 1987 through fiscal year  1999. For fiscal years 2000 through 2002, foreign military sales work at that  depot increased to 15 percent of the total hours of work completed.
section_title: Workload Projections
paragraphs: Workload projections suggest that in fiscal year 2003, the small upward  trend begun in fiscal year 2001 will continue for another year, but another  period of decline may occur from fiscal year 2004 through fiscal year 2008.  Army component and recapitalization workload is projected to be the  majority of the depots’ work. These projections are an April 2003 estimate  from the Army Workload and Performance System (AWPS), an analytically  based workload-forecasting system that projects future workloads and  coordinates personnel requirements. This projection includes some recent  increases in prior estimates for fiscal year 2003 to reflect revised estimates  for reparable components to support Operation Iraqi Freedom. Officials at  several depots said they are working overtime and have hired some  temporary employees to support this increased requirement, but an official  at one depot said it is not likely to be able to produce the amount of work  currently estimated for fiscal year 2003 in AWPS because it does not have  enough people. Depot officials said they do not know if reconstitution  requirements following Operation Iraqi Freedom will result in increases in  depot workload in fiscal year 2004 and beyond, and AWPS does not reflect  increases in the out-years resulting from Operation Iraqi Freedom.  According to an AMC official, the Army does not yet have a plan for  managing the reconstitution, but one is being developed.
Army officials said and we have confirmed that out-year estimates are not  always reliable predictors of the specific work that will be performed in a  future year. These projections are only as good as the knowledge of the  personnel preparing them about future requirements. As we have reported  in the past, workload estimates for Army maintenance depots vary  substantially over time owing to the reprogramming of operations and  maintenance appropriation funding and unanticipated changes in  customer orders. Workload estimates are subject to much uncertainty and  to frequent fluctuations with changing circumstances. For example, as  previously noted, fiscal year 2003 requirements in AWPS have increased  during the year as Operation Iraqi Freedom’s demands have generated  more work than previously expected. On the other hand, reductions to  future requirements frequently occur. For example, to fund other  priorities, the Army has been considering reducing recapitalization work,  which is forecasted to be about 29 percent of the depots’ future workload.  Furthermore, the impact that reconstitution requirements could have on  the Army depots following Operation Iraqi Freedom is unclear.  Additionally, according to Army officials, AWPS does not receive actual  programs planned for the out-years of all depot customers. Customers  whose actual programs are entered into AWPS vary by subordinate  command. Out-year workload for customers that are not based on actual  programs must be estimated by the subordinate commands on the basis of  past history and discussions with their customers about workload planned  for the depots. Thus, these estimated workloads may not represent future  workloads. Moreover, since work from other customers has become a  much more substantial share of the total Army depot workload, the impact  of these estimates’ accuracy will be more significant.
Finally, future workloads that Army acquisition officials might have  planned for the depots are difficult to identify, and AWPS will not  accurately reflect these workloads unless acquisition officials provide the  subordinate commands with such information. The Army acquisition  community is primarily responsible for establishing future capability at the  depots on the basis of the results of source-of-repair decisions and other  factors such as core requirements. However, as discussed later, the  amount of such work likely to be assigned to the depots is unclear. Army  officials explained that the acquisition community does not enter these  workloads into AWPS and that no central database exists of systems  undergoing source-of-repair decisions to help the subordinate commands  identify planned workloads and adjust AWPS projections accordingly.  For these reasons, depot managers do not consider workload projections  from AWPS reliable beyond 2 years, and they recognize that changes will  occur even in the first 2 years.
As previously discussed, the reliability of out-year projections in AWPS is  affected by a number of factors such as changing requirements, funding  limitations, and the work that may be planned but has not been identified  and included in AWPS. While requirements and funding changes are  expected occurrences, the Army is faced with the possibility that  incomplete projections in AWPS regarding the size of the direct labor  force required in the future can occur. This is because the Army’s current  capability to identify maintenance workloads that are being planned for its  depots is limited. Specifically, officials stated that the Army has no  standard business rules or procedures for identifying the work that the  Army acquisition community and non-Army customers may be planning  for Army depots. They said that, at best, the current process is a hit-or- miss situation, depending on how aggressive the Army commands are in  requesting such customers to identify their forecasted workloads, if it is  done at all. Moreover, an Army official told us that the Army does not have  a mechanism in place to adjust these estimates when it becomes clear that  such forecasts are inaccurate. Improvements in this area could increase  the reliability of future depot workload projections, as well as depot  planners’ ability to manage depot operations efficiently. In its comments  on a draft of this report, DOD officials stated that the lack of workload  projection data for inter-service depot workloads should be addressed  across all the military servicesnot just at Army depots. Consequently the  Department will initiate a study to examine how the identification and  reporting of depot inter-service workload projections across all the  military services can be improved.
section_title: Workload Efficiency and Sufficiency Issues
paragraphs: Army depots have had some efficiency problems, caused by several  factors, including the loss of work to the private sector and field-level  maintenance activities. Initiatives such as facility and equipment  downsizing, depot partnerships, and “lean manufacturing” have been  implemented to address depot inefficiencies. Trends in two key metrics— capacity utilization and employee productivity—-show that progress has  been made in recent years, although further improvements are still  desirable. Additional workloads could play a key role in further improving  the cost-effectiveness of the Army depots, and acquiring work for new  systems is essential for long-term depot viability. Whether new systems  work will be assigned to the depots is unclear, but depot officials believe  that partnerships may offer the best potential for new systems work.  Whether depot-level work that gravitated to field-level activities will return  to the depots is also unclear.
subsections: section_title: Factors Resulting in Depot Efficiency Problems
paragraphs: Depot maintenance operations have not been as efficient as Army depot  managers would like them to be. This is, in part, due to a host of factors,  including the impact of workload reductions, the changing nature of the  work assigned, and workload performance issues such as less-than- expected employee productivity and work slow-downs caused by a lack of  required spare and repair parts or inefficient repair processes. We have  identified several issues that adversely affected depot efficiency and  productivity, including DOD’s policy for greater reliance on the private  sector for depot support of new weapon systems and major upgrades, the  increased reliance on the use of regional repair activities and private- sector contractors for work that otherwise might be done in the depots,  cost and schedule overruns, excess capacity, and difficulties in effectively  using depot personnel. In August 2002, an Army task force identified  problems with depot efficiency and productivity at the Corpus Christi  depot. The task force pointed to the following as key problem areas: the  use of inaccurate data to price maintenance programs, schedule and cost  overruns caused by work performed against wrong standards and beyond  the statement of work, and the use of direct workers to perform indirect  tasks.
section_title: Initiatives to Improve Depot Efficiency and Productivity
paragraphs: Initiatives that have been implemented to improve depot efficiency and  productivity include “rightsizing” at realigned depots, depot partnerships  designed to improve the efficiency and performance of depot operations,  and lean manufacturing initiatives. The 1995 base realignment and closure  process significantly realigned two of the remaining five Army depots.  Significant efforts were made to rightsize the workforce, property, plant,  and equipment on the basis of assigned and projected workloads at the  Letterkenny and Red River depots, which had the benefit of BRAC funding  to support their realignment activities. The other depots have attempted to  improve their efficiency as well.
Various partnering initiatives have been undertaken to improve depot  performance. In fiscal year 2002, the Army had 42 depot maintenance  partnerships, the largest number in any of the military services. One of  the most successful has been the partnership initiative implemented at  Corpus Christi for the T700 engine. Wanting to reduce the repair time and  improve the reliability of the Army’s T700 helicopter engine, the Corpus  Christi Depot entered into a partnership with General Electric to achieve  these improvements. Under the partnership, Corpus Christi provides the  facilities and equipment and repairs the engine. General Electric provides  spare parts as well as technical, engineering, and logistics services.  According to depot officials, this effort has introduced General Electric’s  best practices at the depot, which has resulted in a 26-percent reduction in  engine turnaround time in the T700 engine repair line and a 40-percent  increase in test cell pass rates for the repaired engines. Depot and  contractor officials both attribute improved depot repair times for the  T700 engine to better parts availability and improvements to the depot’s  repair processes, although they also recognize that the related T700  recapitalization effort begun shortly after the formation of the partnership  may also be a factor influencing these improvements. Figure 4 shows the  repair line for the T700 engine.
Other initiatives are also being implemented to improve efficiency and  productivity in Army depot maintenance operations under the umbrella of  lean manufacturing. Most of these initiatives are in the early phases of  implementation, but some progress is being reported. Anniston officials  report that they have identified a more efficient reciprocating-engine  process. Corpus Christi officials reported improvements for other  maintenance processes as a result of their lean-manufacturing initiatives.  Depot managers at Letterkenny set a goal to reduce the repair time for the  Patriot missile launcher and report that they have already reduced the  number of technicians by three and the floor space by 70 percent. Red  River officials reported that process improvements have allowed them to  increase monthly maintenance production for a truck engine from 17 to  40. A Tobyhanna official stated that, because of its process improvements,  unit costs for the Sidewinder missile’s guidance and control system have  decreased substantially. Furthermore, with planned improvements on the  Sidewinder and two other systems, Tobyhanna officials expect major  reductions in overhaul and recapitalization timelines, reduced customer  costs, gains in customer satisfaction, and greater employee satisfaction, as  depot workers take the lead in transforming their work.
section_title: Progress Trends in Two Key Metrics
paragraphs: Trends in two key metrics—-capacity utilization and employee  productivity—-show that progress has been made in recent years,  although improvements are still desirable. DOD measures capacity  utilization by considering the amount of work produced relative to the  work that could potentially be produced on a single shift operation using  the number of personnel on board. Table 2 shows capacity utilization in  each of the five Army depots from fiscal year 1999 through fiscal year  2002.
Compared to a DOD goal of 75 percent utilization, capacity utilization for  the five Army depots has fluctuated from fiscal year 1999 through fiscal  year 2002, but generally has improved. In fiscal year 1999, three of the five  depots were below the goal by an average of 12 percent while two depots  exceeded the goal by an average of 6 percent. In contrast, by fiscal year  2002, all five depots exceeded the goal by an average of 4 percent. At 83  percent utilization, the Corpus Christi depot showed the highest capacity  utilization in fiscal year 2002, and Letterkenny and Red River had  utilization rates of 82 and 79 percent, respectively. The higher-capacity  utilization was largely achieved by decreasing the physical layout or  “footprint” of the maintenance depot. Downsized by decisions of the 1995  BRAC process, Letterkenny and Red River received BRAC funds to  support their realignment activities. While the capacity utilization of these  two depots for fiscal year 2002 was relatively high, they have the smallest  workloads of the five depots.
It is important to remember that DOD’s capacity-utilization computation  somewhat understates the depots’ full potential for producing work. The  capacity-utilization computation assumes operations during an 8-hour  workday and a 5-day workweek. However, all the depots have some  overtime and some shift work and, if needed, could increase the amount of  overtime and shift work.
Another metric—-employee productivity—-also indicates that Army depot  operations are improving. Employee productivity measures the average  number of productive hours worked in a year by depot workers after  leave, holidays, training, and other time away from the job are excluded.  Table 3 shows average employee productivity at each of the five Army  depots from fiscal year 1999 through fiscal 2002.
The Army depot average of 1,600 hours for fiscal year 2002 was  significantly higher than it was a few years ago and is progressing toward  the DOD standard of 1,615 hours. In fiscal year 1999, none of the depots  were at the standard averaging 1,504 hours and ranging from a low of  1,421 hours to a high of 1,599 hours. In fiscal year 2002, the number of  employee productive hours at the Tobyhanna depot was 1,625 and 1,614 at  Red River. The employee productivity of all of the Army depots has  improved since 1999. Depot managers said they were successful in  improving worker productivity by emphasizing to direct workers the need  for reducing the amount of time spent in nonproductive areas.
section_title: Additional Workloads Possible and Essential for Depot Viability
paragraphs: Additional workloads could play a key role in further improving the cost- effectiveness of the Army depots and are essential for the depots’ long- term viability. As the systems currently being repaired in the depots age,  they will be withdrawn from the Army’s inventory and replaced with new  and/or upgraded systems. If repair and overhaul for the new and upgraded  systems go to the private sector, workload in the depots will continue to  diminish. In considering additional workloads for its depots, the Army has  several options: (1) move work that the private sector is performing either  by reassignment at contract renewal time or establishing a partnership  arrangement with the private sector, (2) assign new work from the source- of-repair process the Army uses to identify where the work will be  performed, (3) and move work from field-level activities that now perform  depot tasks. In considering additional workload, an essential issue for the  Army is whether its depots have the capability or whether establishing  capability is affordable to take on work that is being performed by other  sources.
Acquiring new systems work will be the key to the survivability of the  depots in the long term. In recent years, the depots have received very  little new and upgraded systems work. As older systems are withdrawn  from the inventory, the repair work on systems currently assigned to the  depots will continue to decline. Unless new systems work is identified for  the depots, they will become more and more inefficient as their workload  declines. With regard to the potential for additional workloads for the  depots from new systems, Army acquisition officials told us that  establishing new capability at the depots has become more difficult with  the Army’s implementation of performance-based logistics because the  Army is not buying the technical data or the rights to use the data in  establishing repair capability at its depots. This could adversely affect the  Army’s ability to realign existing work from the private sector to  government-owned depots. An internal Army study found that weapon  systems program officials make decisions to outsource the repair of new  and upgraded systems without considering the impact of these decisions  on the requirement to maintain core capability for essential systems in  military depots.
Depot managers believe that partnership arrangements are an effective  means for improving the efficiency and productivity of depot operations  and are the best opportunity to bring additional workloads into the depots.  Among potential partnerships being explored for new workload are the  following: Anniston, for the M1A2 tank service extension program; Corpus  Christi, for the Comanche helicopter; Letterkenny, for the Javelin missile;  and Red River, for the Heavy Expanded Mobility Tactical Truck.
With regard to moving work from field-level activities that now perform  depot tasks, the Army has taken some initiative to get control over this  problem, but the extent that it has dealt with proliferation of depot work  in field-level activities is unclear. The Report of the House Committee on  Armed Services on the Floyd D. Spence National Defense Authorization  Act for Fiscal Year 2001 said that the Army has yet to account accurately  for depot-level maintenance workloads performed by organizations  outside the depot system. That report directed the Army to provide a  report identifying the proliferation of depot-level maintenance in these  activities by February 1, 2001, and directed us to review the Army’s report  and provide the Congress with an analysis, including an assessment of the  Army’s ability to comply with 10 U.S.C. 2466, the requirement that not  more than 50 percent of funds made available for depot-level maintenance  be used to contract for performance by nonfederal personnel. The Army  has not yet reported to the Congress, but Army officials stated that as of  July 3, 2003, the report was being reviewed internally. We will analyze the  report when it is completed.
section_title: Core Capability Issues
paragraphs: Beginning in November 1993, the Army did biennial identification of core  capability requirements and the workloads necessary to sustain those  depot maintenance core capabilities. The most recent core identification,  however, was in December 1999 for fiscal year 2001 and showed that   10.8 million work hours were associated with maintaining core capability  requirements for the five depots. An updated core identification is  overdue, but in January 2003 the Deputy Under Secretary of Defense for  Logistics and Materiel Readiness issued a new core identification  methodology and, at the time of our review, had additional revisions under  way to the methodology. Thus, the Army has not yet computed core  capability requirements based on this new methodology. Furthermore, the  Army does not routinely assess whether the work performed by its five  depots is adequate to sustain their core capabilities; and workloads  performed by the five depots have not been at the level identified by the  1999 core identification as necessary to maintain core capabilities.
The identification of core logistics capability involves a complex process  that has been evolving over the past 10 years. This process is based on a  requirement contained in 10 U.S.C. 2464 to identify and maintain within  government owned and operated facilities a core logistics capability,  including the equipment, personnel, and technical competence required to  maintain weapon systems identified as necessary for national defense  emergencies and contingencies. Specifically, the Secretary of Defense is to  identify the workloads required to maintain core logistics capabilities and  assign to government facilities sufficient workload to ensure cost  efficiency and technical competence in peacetime, while preserving  capabilities necessary to fully support national defense strategic and  contingency plans. To accomplish this requirement, beginning in  November 1993, the Office of the Deputy Secretary of Defense for  Logistics outlined a standard multi-step method for determining core  capability requirements and directed the services to use this method in  computing biennial core capability and associated workload requirements.  In November 1996, the core methodology was revised to include (1) an  assessment of the risk involved in reducing the core capability  requirements as a result of having maintenance capability in the private  sector and (2) the use of a best-value comparison approach for assigning  workload not associated with maintaining a core capability to the public  and private sectors. The core methodology provided a computational  framework for quantifying core depot maintenance capabilities and the  workload needed to sustain these capabilities. It included three general  processes:  1.  The identification of the numbers and types of weapon systems  required to support the Joint Chief of Staff’s wartime-planning  scenarios.  2.  The computation of depot maintenance core capability workload  requirements measured in direct labor hours to support the weapon  systems’ expected wartime operations as identified in the wartime- planning scenarios.  3.  The determination of industrial capabilities (including the associated  personnel, technical skills, facilities, and equipment) that would be  needed to accomplish the direct labor hours identified above that were  generated from the planning scenarios. That determination is adjusted  to translate those capabilities into peacetime workloads needed to  support them. These peacetime workloads represent the projected  workload necessary to support core capability requirements for the  next program year in terms of direct labor hours.
To conclude the process, the services then identify specific repair  workloads and allocate the core work hours needed to accomplish the  maintenance work that will be used to support the core capabilities at the  public depots.
We previously reported that the DOD depot maintenance policy was not  comprehensive and that the policy and implementing procedures and  practices provided little assurance that core maintenance capabilities were  being developed as needed to support future national defense emergencies  and contingencies. Some of the weaknesses were that (1) the existing  policy did not provide a forward look at new weapon systems and  associated future maintenance capability requirements, (2) the existing  policy did not link the core identification process to source-of-repair  policies and procedures for new and upgraded systems, and (3) the  various procedures and practices being used by the services to implement  the existing policy, such as using “like” workloads to sustain core  capabilities, were affecting the ability of the depots to establish core  capabilities. In October 2001, DOD revised the methodology by dividing  the core methodology into two distinct parts to more clearly distinguish  between core capability requirements and the depot maintenance  workloads needed to satisfy those requirements. Detailed core capability  and associated workload computations would be performed on a biennial  basis in conjunction with the planning, programming, and budgeting  system in order to address both the requirements for new systems and  changes to existing systems. Also, core computations would be reviewed  annually to assess the impact of unanticipated budgetary adjustments.  Regarding the new methodology issued in January 2003, DOD officials told  us that some revisions are being made and the methodology has not yet  been finalized. Thus, we have not reviewed the methodology in detail and  cannot be sure whether the new methodology will correct the weaknesses  we identified in the core process.
The Army’s identification of core capabilities and workloads required to  sustain them in December 1999 showed that the five depots had a total  workload requirement of 10.8 million work hours associated with its core  capability requirements. As shown in table 4, work performed by the  depots for the 4-year period, fiscal years 1999 to 2002, was generally below  the amount identified for total core capability requirements.
Depot officials stated that for the core identification process, the depots  identify the skills required by job series to support the core capability.  However, Army officials said that neither the depots nor the Army  routinely assess the extent to which work performed by the depots  compares with the identification of core capability requirements and  associated workloads. Thus, they do not have the information needed to  determine whether the level and nature of the work performed in the  depots is sufficient to ensure cost efficiency and technical competence  and to preserve core capability.
When we discussed identification of core capability and associated  workloads with depot managers, they said that ensuring appropriate  workloads are going to the depots is essential to their being able to  maintain required core skills to support combat readiness. They also  expressed concern that the definition of core capability workload  requirements seems to constantly fluctuate and that maintenance  workloads that once were identified as required for core capabilities were  being transferred to the private sector. For example, depot managers at  the Red River Army Depot pointed out that workload associated with the  Heavy Expanded Mobility Tactical Truck was a significant factor in the  depot’s ability to maintain the necessary core capabilities. However, the  truck workload was lost in October 2001 when the Army decided to stop  recapitalization work at the depot and to use a contractor to perform an  extended service life program for the truck. They said that other systems,  such as the Bradley Fighting Vehicle, are headed in the same direction.  Depot managers also pointed out that the depots are not always assigned  work sufficient to ensure cost efficiency and technical competence and to  preserve surge capability. Additionally, the depots are not capable of  providing some core capabilities. For example, the depots do not have  capability to repair key components of the M1A2 tank, the Apache  helicopter, and the Bradley Fighting Vehicle for which core capability  requirements were identified. More specifically, Anniston does not have  the capability to support unique electronic components for the M1A2 tank,  Corpus Christi does not have the capability to support Apache Longbow  unique components, and Red River does not have the capability to support  electronic components for the Bradley A3 model. Our October 2001 report  identified a number of the same concerns with the fluctuations in core  capability identification and the loss of work required to sustain depot  core capabilities.  DOD’s latest policy on core, which was released in  January 2003, requires the services to develop an assessment of what  specific workload is necessary to achieve its core goals at the DOD,  service, and facility levels. However, the services have not yet been tasked  by DOD to recompute core capability requirements based on the new  policy. Officials said some changes to the revised policy are expected to  occur.
section_title: Strategic Planning Issues for Depots
paragraphs: Although we previously recommended that a strategic plan for DOD- owned depots be developed, neither the Office of the Secretary of Defense  nor the Department of the Army has implemented comprehensive or  strategic plans for defense maintenance to revitalize or protect the future  viability of its depot facilities and equipment and its depot workers. The  Army has taken steps to develop a strategic plan for its depots, but it is not  comprehensive or current and the Army has not yet implemented it. The  Office of the Secretary of Defense has undertaken a depot planning study,  but still has no depot strategic plan.
Our prior reports have demonstrated that a strategic plan is critical to the  future viability of the defense depot system. For example, in our October  2001 report, we pointed out that logistics activities represent a key  management challenge and that depot maintenance is an important  element of those activities. As such, we noted that DOD was at a critical  point with respect to the future of its maintenance programs and that the  future role for the military depots in supporting the department’s future  maintenance programs was unclear. Finally, we pointed out that before  DOD can know the magnitude of the challenge of revitalizing its depot  facilities and equipment and its depot workforce, it must first know what  its future workloads will be; what facility, equipment, and technical  capability improvements will be required to perform that work; and what  personnel changes will be needed to respond to retirements and workload  changes. We recommended, among other things, that the Secretary of  Defense direct the Under Secretary of Defense for Acquisition,  Technology, and Logistics, in conjunction with the military services, to  establish expedited milestones for developing strategic and related  implementation plans for the use of military depots that would identify  desired short- and long-term core capabilities and associated capital  investments and human capital needs. However, although the Department  is conducting a study that could lead to the development of a depot  strategic plan, as of July 2003, DOD still has no strategic plan that provides  required direction to shape the future of the depots if they are expected to  remain viable for the future. We again addressed the issue of the need for  strategic planning in our recent report on strategic workforce planning for  the DOD industrial workforce, noting that DOD has not implemented our  prior recommendations regarding the need for a DOD depot strategic plan.   However, absent a DOD depot plan, the services have laid out a  framework for strategic depot planning in varying degrees, but this is not  comprehensive.
While the Army has taken some actions regarding the development of a  strategic depot plan, its plan is not comprehensive, and implementation of  the plan was suspended. In January 2000, the Army Deputy Chief of Staff  for Logistics published Army Depot Maintenance Enterprise Strategic  Plan, a plan that provided mission and vision statements for the Army  depots and identified five strategic issues for which they began developing  action plans:  1.  Identification and management of all depot maintenance requirements  for Army systems throughout all phases of their life cycles in the  Planning, Programming, and Budget Execution System.  2.  Restructuring the process for determining the source of depot repair to  ensure that appropriate approval authorities are utilized for decisions  to rebuild, overhaul, upgrade, and repair decisions above a certain  threshold (e.g., dollar value).  3.  Ensuring that the Army depot workforce is capable of meeting future  depot maintenance requirements.  4.  Managing materiel/supplies (parts) used by the depots to provide for  more efficient depot operations.  5.  Making Army depots more competitive with private-sector depot  maintenance providers.
Identifying these broad strategic issues, along with some objectives,  measures, and action plans, was a step in the right direction. However, the  Army did not finalize or implement its action plans. Army planners told us  that implementing the strategic plan was put on hold, pending an effort to  reassess depot capabilities and requirements as part of the Army’s effort to  identify the depot capabilities that had proliferated in field-level activities.  The plan did not address depot maintenance that is being performed in  field-level activities. The Army’s assessment of depot proliferation was  supposed to result in a report to the Congress on this subject, but as  previously discussed, the Army has not yet provided this report.  Furthermore, Army officials stated that there has been no update to  modify the strategic plan to address how the Army will manage this  category of depot work.
section_title: Conclusions
paragraphs: Continuing issues about (1) the assignment of reduced workloads to Army  maintenance depots, (2) deficiencies in the process of quantifying both  core depot maintenance capabilities and the workload needed to ensure  cost efficiency and technical competence and to preserve surge capability,  and (3) strategic planning for depots raise significant questions about the  long-term viability of Army depots. We have discussed these issues in the  past, but they remain unresolved. It will be important for the Congress and  the Department of Defense to clarify these issues to ensure the continued  performance of required support resources in the future.
In addition to the issues discussed in the past, we identified another area  where action would improve data reliability for Army depotsthe  development and implementation of procedures for identifying and  reporting depot workload projections from the Army acquisition  community and from non-Army customers. By addressing both the  identification and reporting of initial forecasts as well as subsequent  changes to the forecasts, greater reliability should be achievable for the  Army Workload and Performance System. Furthermore, as DOD has  observed, improved projections of interserviced maintenance work would  benefit all depots, not just those of the Army.
section_title: Recommendations for Executive Action
paragraphs: To improve the reliability of future maintenance workload projections in  all DOD maintenance depots, we recommend that the Secretary of  Defense through the Under Secretary of Defense for Acquisition,  Technology, and Logistics,  require the Army Materiel Command in conjunction with the Army  acquisition community to develop and implement standard  business rules and procedures for identifying and reporting Army  depot workload projections from the Army acquisition community  and   require the DOD depot maintenance community to develop and  implement ways to improve the identification and reporting of  depot inter-service workload projections across all the military  services using standard business rules and procedures.
section_title: Agency Comments and Our Evaluation
paragraphs: In commenting on a draft of this report, the Department partially  concurred with our recommendations to improve the reliability of future  workload projections. Appendix II contains the text of DOD’s comments.
The Department partially concurred with the recommendation in our draft  report that the Army Materiel Command develop standard business rules  and procedures for identifying and reporting Army depot workload  projections. While agreeing that this could be done for work coming from  the Army acquisition community, the response noted that the Department  did not believe that the Army Materiel Command alone could establish  standard business rules and procedures for identifying and reporting Army  depot workload projections from the non-Army customers. However, the  Department agreed with us that a need exists for Army Depots to have  valid workload projections from the Army acquisition community and   non-Army customers and that standard business rules and procedures are  required. Moreover, the Department’s response stated that since the lack  of workload projection data for inter-service depot workloads should be  addressed across all the military services, the Department planned to  initiate a study to examine how the identification and reporting of depot  inter-service workload projections across all the military services can be  improved. Consequently, we modified our recommendation to address the  Department’s comments.
The Department partially concurred with a second recommendation in the  draft report requiring the Army acquisition community and non-Army  customers to report depot workload projections for Army depot work  through the Army Workload and Performance System using the standard  business rules and procedures. The Department stated that it agreed in  concept that Army customers should provide Army depots with workload  projections, but that it currently does not appear feasible for all non-Army  customers to report depot workload projections for Army depots through  the Army Workload and Performance System. Therefore, we dropped the  reference to the Army Workload and Performance System from our  recommendation. The Department stated also that, as with the first  recommendation, it plans to address this recommendation with a study to  examine how the identification and reporting of inter-service workload  projections across the military services can be improved.
The Department also provided some technical comments for our draft  report that were incorporated where appropriate.
We are sending copies of this report to interested congressional  committees; the Secretary of Defense; the Secretary of the Army; and the  Director, Office of Management and Budget. We will make copies available  to others upon request. In addition, the report will be available at no  charge on the GAO Web site at http://www.gao.gov.
If you or your staff have questions regarding this report, please contact me  at (202) 512-8412 or holmanb@gao.gov or Julia Denman, Assistant  Director, at (202) 512-4290 or denmanj@gao.gov. Other major contributors  to this report were Bobby Worrell, Janine Prybyla, Jane Hunt, and Willie  Cheely.
section_title: Appendix I: Scope and Methodology
paragraphs: To answer the specific questions posed by the Ranking Minority Member,  Subcommittee on Military Readiness, House Committee on Armed  Services, we interviewed Army officials and analyzed pertinent  information at Army headquarters in the Washington, D.C., area;  Headquarters, Army Materiel Command in Alexandria, Virginia; and three  subordinate Army commands—the Army Aviation and Missile Command,  Huntsville, Alabama; Communications-Electronics Command, Fort  Monmouth, New Jersey; and the Tank-automotive and Armaments  Command, Warren, Michigan. Additionally, we interviewed depot  managers and reviewed pertinent information at the Army’s five depots:  Anniston Army Depot, Anniston, Alabama; Corpus Christi Army Depot,  Corpus Christi, Texas; Letterkenny Army Depot, Chambersburg,  Pennsylvania; Red River Army Depot, Texarkana, Texas; and Tobyhanna  Army Depot, Tobyhanna, Pennsylvania. We also made extensive use of our  prior work and ongoing work related to Army depot maintenance.
To assess the trends in historical and future workloads assigned to the  Army depots, we analyzed workload information from the Army’s  automated databases. Specifically, for historical workloads, we evaluated  the trend in workload hours for closed maintenance programs from the  Army Headquarters Application System for fiscal years 1987 through 2002.  For trends in future workloads, we used workload hours from the Army  Workload and Performance System for fiscal years 2003 through 2008. For  the reliability of future workload projections, we used our prior work  showing that Army depot workload estimates are subject to frequent  changes because of factors such as fluctuations in requirements and  funding levels. We also questioned Army officials and depot managers  about the reliability of the workload estimates as shown by the Army  Workload and Performance System.
In determining whether the depots have sufficient workload to promote  efficient maintenance operations, we compared metric data that others  and we have previously identified with data on the Army’s current  operations. We examined data on key metrics to determine how well the  depots performed assigned workloads against key metrics and standards  such as depot-level capacity utilization and employee productivity. We  obtained metric data from the Army depots and from Headquarters, Army  Materiel Command. Since Headquarters, Army Materiel Command, could  not provide the data prior to 2001, the data for fiscal years 1999 and 2000  are from the depots. In those instances where the reported data for fiscal  years 2001 and 2002 differed, we used the data reported by Headquarters,  Army Materiel Command, because the headquarters data were reported by  the depots. To identify whether additional workloads are possible, we  relied upon our prior and ongoing work, which shows that the Army had  contracted with the private sector for maintenance workloads that its  depots had previously performed and that upgrades and modifications of  older systems and new weapon systems were a potential source of work  for the depots. We also questioned acquisition and logistics officials at the  subordinate commands with responsibility for workloads for the depots  about workloads that were being considered for the Army depots and the  limitations to bringing these workloads to the depots. To identify whether  initiatives are being implemented to improve efficiency, we examined the  plans and projects that the depots had under the umbrella of lean  manufacturing to improve maintenance operations. In addition, we  reviewed depot reports on the extent to which these initiatives were  improving operations.
To answer whether the Army has identified the depots’ core capability and  provided its depots with workload to use that capability, we reviewed the  Department of Defense and Army guidance for computing core capability  requirements and associated workloads in December 1999 for fiscal year  2001 and compared the results with workloads assigned to the depots  since fiscal year 1999. We also examined the department’s new  methodology issued in January 2003 for computing core capability  requirements and questioned department and Army officials about the  schedule for implementing the new methodology. We also questioned  depot officials about the adequacy of workloads assigned and the extent to  which the work allows the depots to maintain necessary capabilities.
For the question of whether the Army has a long-range plan for the future  viability of an efficient depot system, we relied upon prior work that  shows that neither the department nor the Army had a comprehensive  defense maintenance strategic plan.
We conducted our review from September 2002 through June 2003 in  accordance with generally accepted government auditing standards.
section_title: Appendix II: Comments from the Department of Defense