Navy Force Structure: Sustainable Plan and Comprehensive Assessment Needed to Mitigate Long-Term Risks to Ships Assigned to Overseas Homeports
Published: 2015-05-29T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: Forward presence supports the Navy's goals of ensuring sea control, projecting U.S. power, and providing maritime security. To meet these goals and combatant commanders' growing demand for forward presence, the Navy has doubled the number of ships assigned to overseas homeports since 2006, to a total of 40 by the end of 2015, and plans to increase this number further in the future.
House Report 113-446 included a provision that GAO analyze the Navy's decision-making process for determining when to homeport ships overseas and identify the relative costs and benefits of various approaches. This report addresses (1) the operational benefits, costs, and readiness effects associated with assigning ships to U.S. or overseas homeports and (2) the extent to which the Navy has identified and mitigated risks from homeporting ships overseas. GAO analyzed Navy policies and 5 to 10 years of historical cost, operational tempo, and readiness data and interviewed fleet officials.
section_title: What GAO Found
paragraphs: Homeporting ships overseas considerably increases the forward presence— U.S. naval forces in overseas operating areas—that the Navy's existing fleet provides and has other near-term benefits such as rapid crisis response, but incurs higher operations and support costs when compared to U.S.-homeported ships. GAO found that casualty reports—incidents of degraded or out-of-service equipment—have doubled over the past 5 years and that the material condition of overseas-homeported ships has decreased slightly faster than that of U.S.-homeported ships (see figure below). In addition, the Navy has spent hundreds of millions of dollars on overseas infrastructure and base operating costs since 2009, while moving large numbers of sailors, dependents, and ship repair work overseas. GAO also found that the high pace of operations the Navy uses for overseas-homeported ships limits dedicated training and maintenance periods, which has resulted in difficulty keeping crews fully trained and ships maintained.
The Navy has not identified or mitigated the risks its increasing reliance on overseas homeporting poses to its force over the long term. GAO found that some ships homeported overseas have had consistently deferred maintenance that has resulted in long-term degraded material condition and increased maintenance costs, and could shorten a ship's service life. The Navy began implementing a revised operational schedule in 2014 for U.S.-based ships that lengthens time between deployments, citing the need for a sustainable schedule. However, the Navy has not determined how—or whether—it will apply a more sustainable schedule to all ships homeported overseas. Although the Navy's decision process for moving individual ships overseas identifies actions and resources needed, it does not assess risks that such moves pose to costs, readiness, or expected service lives of ships that the Navy can expect based on its historical experience operating ships from overseas homeports. Without a sustainable operational schedule and a comprehensive risk assessment on overseas homeporting, the Navy lacks information needed to make informed homeporting decisions and it will be difficult for the Navy to identify and mitigate the risks its homeporting decisions pose to its budget, readiness, and ship service lives over the long term.
section_title: What GAO Recommends
paragraphs: GAO recommends that the Navy develop and implement a sustainable operational schedule for all ships homeported overseas and conduct a comprehensive assessment of the risks associated with overseas homeporting. The Department of Defense concurred with GAO's recommendations.

section_title: Letter
paragraphs: The presence of Naval forces outside the United States in overseas  locations, referred to as forward presence, supports the Navy’s goals of  building partnerships, deterring aggression without escalation, defusing  threats, and containing conflict to prevent wider regional disruption. Navy  ships provide forward presence through a combination of three  deployment models: (1) deployments of ships and crews from homeports  in the United States; (2) forward-deployed naval forces where ships are  homeported overseas and the crews and their families reside in the host  country; and (3) rotational crewing of ships, where crews rotate on and off  a ship that is deployed for extended periods from a U.S. homeport. To  meet the increasing demands of combatant commanders for forward  presence in recent years, the Navy has extended deployments; increased  operational tempos; and shortened, eliminated, or deferred training and  maintenance. The Navy has also assigned more surface combatants and  amphibious warfare ships to overseas homeports, has been using  rotational crewing on the littoral combat ship, and is considering various  homeporting options for its new class of destroyers, the DDG 1000.  According to the Navy, homeporting ships overseas is an efficient method  for providing forward presence, with one ship operating continuously  overseas providing the same level of presence as four ships deploying  from homeports in the United States. However, Navy leadership has  acknowledged that, to achieve these operational benefits, it incurs  increased infrastructure costs and operations and sustainment costs.
The House report accompanying a bill for the National Defense  Authorization Act for Fiscal Year 2015 included a provision that we review  and analyze the Navy’s process for deciding to homeport ships overseas  and identify the relative costs and benefits of various approaches. This  report (1) determines the operational benefits, costs, and readiness  effects, if any, associated with assigning ships to U.S. or to overseas  homeports and (2) assesses the extent to which the Navy has identified  and taken steps to mitigate any risks from homeporting ships overseas.
To determine the operational benefits, costs, and readiness effects, if  any, of homeporting ships in the United States and homeporting ships  overseas, we selected surface combatants and amphibious warfare ships  from the following ship classes for inclusion in our review: cruisers,  destroyers, littoral combat ships, mine countermeasures ships, patrol  coastal ships, amphibious assault ships, amphibious transport dock ships,  dock landing ships, and amphibious command ships. We compared the  operational benefits, costs, and readiness effects of the different  homeporting assignments for these ship classes using a variety of  factors—including amount of forward presence provided to combatant  commanders, ship operations and support costs, readiness data, ship  inspection scores, and maintenance execution rates. For these analyses,  we focused on comparisons between cruisers, destroyers, and  amphibious warfare ships (amphibious assault ships, amphibious  transport dock ships, dock landing ships, and amphibious command  ships) homeported in the United States and those homeported overseas  because these have historically been the ship classes most commonly  homeported overseas and, therefore, the Navy has the most robust data  available for them. We selected time frames for each of the data series,  primarily ranging from 5 to 10 years of historical data, after assessing  their availability and reliability to maximize the amount of data available  for us to make meaningful comparisons. We assessed the reliability of  each of the data sources by reviewing Navy documentation and  discussing with Navy officials the structure of its systems, data-collection  processes and procedures, and data-quality controls. We determined that  they were sufficiently reliable for the purposes of reporting the operational  benefits, costs, and readiness effects of homeporting ships in the United  States and overseas. We did not include mine countermeasures ships  and patrol coastal ships in our comparative analysis because these ship  classes have had relatively little recent experience deploying from U.S.  homeports over the past 5 years according to Navy officials and limited  comparative data were available.
To understand the effects of overseas homeporting on infrastructure  investments and base operating costs, we examined Navy  documentation, such as leadership briefings on decisions to move ships  to overseas homeports from 2009 through 2014 where officials stated  additional infrastructure was required. These moves included decisions to  homeport destroyers in Rota, Spain, and patrol coastal and mine  countermeasures ships in Bahrain. We also analyzed cost data from 2009  through 2014 for family housing and operation and maintenance, which  includes these ship moves, as well as military construction at overseas  homeports. We assessed these data by reviewing Navy documentation  and discussing with Navy officials data-collection processes and  procedures and determined that they were reliable for the purposes of  reporting the infrastructure investments and operating costs for overseas- homeported ships. To understand the economic effects of homeporting  ships overseas, we reviewed the projected maintenance workload for  large surface combatants that involved moving maintenance workload to  overseas locations. These workload estimates included the destroyers  moving from U.S. homeports to Rota, Spain (four ships) and Yokosuka,  Japan (two ships) from the Office of the Chief of Naval Operations for the  approximately 7- to 10-year period these ships are expected to be  homeported overseas. We analyzed potential U.S.-based economic  losses resulting from maintenance workload and relocation of sailors and  dependents to overseas locations.
To assess the extent to which the Navy has identified and taken steps to  mitigate any risks from homeporting ships overseas, we analyzed (1) key  Navy and Department of Defense (DOD) guidance and policies for  assigning ships to homeports in the United States and overseas and (2)  the Navy’s required actions for evaluating, planning, and implementing  changes to overseas force structure. We also examined Navy force- structure requirements and the 2014 Navy Strategic Laydown and  Dispersal Plan (strategic laydown plan)—as well as any planned changes  to this laydown—to understand the basing construct for Navy ships. We  reviewed previous Navy reports that studied the effect of high operational  tempo, different deployment approaches, and deferred maintenance on  the overall material condition of surface ships and on a ship’s service  life. We also reviewed the Navy’s plan to implement a revised  operational schedule—referred to as the optimized fleet response plan— and interviewed Navy officials to discuss this plan, its purpose, expected  benefits, and impact on ships’ time allocated to maintenance, training,  deployment, and operational availability. We compared the Navy’s plans  to criteria for risk assessment in federal standards for internal control.  Our scope and methodology is described in detail in appendix III.
subsections: section_title: Background
paragraphs: We conducted this performance audit from June 2014 to May 2015 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.
subsections: section_title: The Navy’s Use of Overseas Homeporting to Meet Increased Demands for Forward Presence
paragraphs: According to the Department of Defense, combatant commanders have  traditionally used forward presence to enhance crisis response, provide  deterrence, gain trust, create allies, and build partner capacity.  Combatant commander demand for forward presence is at historically  high levels and is rising. The Navy reports that it met about 44 percent of  the requests from combatant commanders around the world for Navy  forces to support ongoing operations and theater security cooperation  efforts in its assignment of forces for fiscal year 2015. The Navy has  reported that it would require over 150 more ships to fully source all  combatant commander requests for Navy forces. To meet these  increasing demands for forward presence in recent years, the Navy has  extended deployments; increased operational tempos; and shortened,  eliminated, or deferred training and maintenance.
The Navy also has assigned more surface combatants and amphibious  warfare ships to overseas homeports to meet increasing demands for  presence. Since 2006, the Navy has nearly doubled the percentage of the  fleet assigned to overseas homeports. In 2006, 20 ships were  homeported overseas (7.1 percent of the fleet); by the end of fiscal year  2015, 40 ships are expected to be homeported overseas (14.1 percent of  the fleet). By 2017, with an additional destroyer homeported in Yokosuka,  Japan, 41 ships are expected to be homeported overseas, or 13.9  percent of the projected fleet (see fig.1).
The Navy plans to have surface and amphibious ships homeported in the  following areas of operations by the end of fiscal year 2015 (see fig. 2):
5th Fleet area of operations: Manama, Bahrain (14 ships);
6th Fleet area of operations: Gaeta, Italy, and Rota, Spain (5 ships);
7th Fleet area of operations: Yokosuka and Sasebo, Japan (21 ships).
section_title: The Navy’s Homeporting Process
paragraphs: The Navy assigns its ships to a homeport; this is where the ship is based,  its crewmembers and their families reside, and from where it is primarily  managed and maintained. The Navy assigns a U.S. homeport to all newly  commissioned ships entering its fleet and may request that a ship’s  homeport be moved from the United States to an overseas base to  respond to strategic needs such as the demand for increased forward  presence. For example, the transfer of four destroyers from U.S.  homeports to Rota, Spain, beginning in 2014 was based on a presidential  decision to provide ballistic missile defense in Europe. The process of  moving a ship to an overseas homeport involves changing the overseas  force structure, which can include the physical movement of a military  unit, the introduction or removal of military capability, treaty notification,  host-nation notification, and public announcement of physical overseas  force structure. Overseas force-structure changes require the approval  of the Secretary of Defense and coordination with the U.S. State  Department. According to Navy officials, forward-deployed ships are  typically homeported overseas for a period of 7 to 10 years before being  replaced with a ship of the same class from the United States. See  appendix IV for an expanded discussion of the Navy’s complete  homeporting process.
section_title: Homeporting Ships Overseas Has Operational Benefits but Results in Additional Costs and Adverse Effects on Readiness and Ship Condition
paragraphs: Homeporting ships overseas provides considerable additional time in a  forward area of operations and other benefits ranging from increased  opportunities for collaboration with partners and allies to faster response  time for emerging crises. However, this additional time is available  primarily because training and maintenance periods are shorter than  those provided for ships homeported in the United States. We found that  the Navy incurs higher operations and support costs for ships  homeported overseas than for ships homeported in the United States,  and moving ships overseas requires overseas infrastructure investments  and results in U.S.-based economic losses. Further, the Navy’s high pace  of operations for its overseas-homeported ships impacts crew training  and the material condition of these ships—overseas-homeported ships  have had lower material condition since 2012 and experienced a  worsening trend in overall ship readiness when compared to U.S.- homeported ships.
subsections: section_title: Ships Homeported Overseas Provide Additional Forward Presence and Other Benefits
paragraphs: Operating forward is one of the Chief of Naval Operations’ three tenets for  the Navy, along with putting warfighting first and being ready. According  to Navy officials, maintaining forward presence through overseas  homeporting allows the Navy to continuously perform missions in areas of  strategic importance. The Navy acknowledges that some of the benefits  of overseas homeporting are difficult to quantify but that this deployment  model is integral to furthering U.S. interests and projecting influence  across the globe. Some of these benefits are described here:
Regional partnership building: The Navy participates in numerous  multilateral missions, drills, and training exercises with allies and  partners around the globe to help strengthen relations and enhance  partner capabilities and capacity. Having ships homeported overseas  provides more opportunities for this regional partnership building,  according to Navy officials. For example, the Navy’s 5th Fleet,  headquartered in Bahrain, led the largest international mine  countermeasures exercise to date in the Persian Gulf during the  autumn of 2014. The exercise involved navies from 44 countries  including the four U.S. Navy mine countermeasures ships homeported  in Bahrain. According to Navy officials, ships homeported overseas  can more frequently and readily get under way to conduct joint  missions and exercises with host nation and neighboring navies than  can ships homeported in the United States.
Deterrent effect: Navy leaders cite the benefit of U.S. ships “flying  the flag” in overseas ports. Navy officials told us that the continuous  presence of U.S. ships in overseas homeports provides reassurance  to allies and signals the United States’ commitment to global  engagement, adding that U.S. naval presence provides a deterrent to  existing and potential threats to the United States and its allies. For  example, Navy officials added that the security against aggression  that U.S. ships provide to European allies is of tangible value to these  countries.
Maintenance flexibility: Navy officials responsible for scheduling  maintenance overseas, including those from 5th Fleet, 6th Fleet, and  U.S. Pacific Fleet, cited the flexibility, capacity, and diversity of the  types of maintenance that can be performed on overseas-homeported  ships since they are not subject to certain legal restrictions and  limitations on maintenance that apply to U.S.-homeported ships.  These statutory provisions require U.S.-homeported ships to be  maintained primarily at U.S. shipyards, with only voyage repairs  allowable in overseas shipyards.
Reduced crisis response time: Navy officials state that ships  operating forward can more quickly and effectively respond to crises  and contingencies. Ships homeported overseas can assist when a  surge of force is needed to respond to an emerging crisis, as do U.S.- homeported ships in that area of operations while deployed. For  example, ships homeported in Japan were able to provide timely  humanitarian assistance to the Philippines as part of Operation  Damayan following the destruction wrought by Typhoon Haiyan in  2013 (see fig. 3). Navy officials cite the importance of having forward  presence distributed globally to more effectively conduct missions by  reducing transit time. For example, transit from the United States to  areas like the Persian Gulf or South China Sea can take weeks,  whereas ships homeported in Bahrain or Japan are already present  and can access these areas in a matter of hours or days.
Meeting presence requirements with current force structure:  Navy officials stated that overseas homeporting allows the Navy to  meet rising forward-presence requirements from the combatant  commanders with the available force structure. For example, officials  stated that the Navy would need many more ships deployed from the  United States to provide the same level of presence that overseas- homeported ships are currently providing.
The Navy uses at least three metrics to assess a ship’s ability to provide  forward presence: (1) how long the ship is in the operational area, (2) how  much the ship is available for tasking, and (3) the amount of time the ship  is actually under way. Navy officials cite the importance of measuring  presence and operational availability in concert with deployed days under  way. For example, they emphasized that there are intangible benefits  gained by having a U.S. ship in an overseas port even if it is not  operationally available.
Presence is the number of days a ship spends in an area of  operations—excluding depot maintenance periods—divided by 365.  Ships homeported overseas are always physically in an area of  operations (i.e., in the 4th, 5th, 6th, or 7th Fleet areas of operations);  therefore, the Navy calculates that they provide as much as four times  more presence than U.S.-homeported ships, which must travel long  stretches of ocean before entering one of the overseas areas of  operations and then return to the United States after a multimonth  deployment.
Operational availability is the number of days a ship is available for  operational tasking in a year. Operational availability measures the  amount of time that a ship can get under way and execute a mission  as required. For example, a ship can be considered operationally  available even if it is in maintenance, if it is able to get under way and  execute a mission in a short period of time. The Navy calculates that  ships homeported overseas provide over three times more operational  availability than U.S.-homeported ships.
Deployed underway time is the number of days a ship spends away  from port, referred to as underway days, deployed in the 4th, 5th, 6th,  or 7th Fleet areas of operations. This metric tracks the number of  days that a ship is out of port, at sea, and performing a mission in  these areas of operations. Our analysis of the number of deployed  underway days provided by ships homeported in the United States  and overseas from fiscal years 2003 through 2012 estimated that the  average ship homeported overseas spent about 42 additional  deployed days under way, compared to the average ship that was  homeported in the United States (see fig. 4).
The Navy faces certain challenges associated with homeporting ships  overseas. For example, unforeseen host-nation policy changes can affect  renegotiation of international agreements, which may restrict base usage,  or possibly remove the Navy presence entirely. This occurred in 1991,  when a long-standing agreement between the Philippines and the United  States ended, followed by the closing of Clark Air Base and Subic Bay  Naval Base, which at that time served as the 7th Fleet’s primary logistics  and repair hub and was home to over 12,000 Navy personnel and  dependents. Through status-of-forces agreements, host nations may  negotiate the size and scope of the naval footprint, and seek to place  parameters on how those ships can be employed. These agreements are  periodically renegotiated, and changes can affect Navy and U.S.  policymaker flexibility. Finally, Navy officials explained that ships  homeported overseas have difficulty identifying appropriate training  ranges for certain exercises and noted that utilizing foreign ports presents  unique threat and security challenges compared to U.S. homeports.
section_title: The Navy Reduces Training and Maintenance Periods on Ships Homeported Overseas
paragraphs: Homeporting a ship overseas saves transit time to and from an area of  operations and allows it be in this area longer. However, our analysis  shows that the primary reason for the greater number of deployed  underway days provided by overseas-homeported ships results from the  Navy’s decision to truncate training and maintenance periods on these  ships in order to maximize their operational availability. Ships homeported  overseas do not operate within the traditional fleet response plan cycles  that apply to U.S.-based ships. Since the ships are in permanent  deployment status during their time homeported overseas, they do not  have designated ramp-up and ramp-down maintenance and training  periods built into their operational schedules. Because the Navy expects  these ships to be operationally available for the maximum amount of time,  their intermediate and depot-level maintenance is instead executed  through more frequent, shorter maintenance periods, or deferred until  after the ship returns to a U.S. homeport, according to Navy officials.  These officials explained that U.S.-homeported ships typically operate  under the Navy’s fleet response plan, which, by contrast, provides for  designated maintenance and training periods that prepare ships for  deployment to areas of operations. These ships deploy for a notional  period of 6 months (which in the past several years has frequently been  extended to 8 to 10 months) and then return to their U.S. homeports to  undergo postdeployment depot maintenance and leave and training  periods for the crew.
Our analysis of the operational cycles of ships homeported in the United  States and those homeported in Yokosuka, Japan, and Rota, Spain,  found that, based on their notional operational cycles alone, Navy ships  homeported overseas provide more deployed time than ships  homeported in the United States primarily because the Navy reduces  their training and maintenance periods (see fig. 5). For example, our  analysis of the Navy’s plans for U.S.-based cruisers and destroyers  shows that the Navy plans for them to spend 41 percent of their time  deployed or available for deployment and 60 percent of their time in  dedicated training and maintenance periods. In contrast, the Navy plans  for its Japan-based cruisers and destroyers to spend 67 percent of their  time deployed, 33 percent of their time in maintenance, and do not  include a dedicated training period.
section_title: Overseas-Homeported Ships Incur Additional Costs and Adverse Effects on Readiness and Ship Condition Higher Operations and Support Costs
paragraphs: The operational benefits the Navy describes that result from homeporting  ships overseas also result in costs to the Navy and DOD more broadly.  Our analysis of Navy operations and support cost data—personnel,  operations, and sustainment costs from fiscal years 2004 through 2013  for surface and amphibious ships—found that annual per ship operations  and support costs for all ships homeported overseas are about 15  percent, or approximately $9 million, higher than for ships homeported in  the United States, with some variance by ship class. For example,  destroyers homeported overseas incur about 17 percent higher average  annual operations and support costs per ship, which would mean about  $98 million per year in additional costs for the 12 destroyers that are  expected to be homeported overseas by the end of fiscal year 2015 (see  table 1).
We completed statistical analyses of the differences in the cost  components that make up overall operations and support costs— operations costs, sustainment costs, and personnel costs. Specifically,  we conducted a multivariate statistical analysis to analyze how ships that  were and were not homeported overseas compared to each other on  various outcomes. Our analysis showed that there are statistically  meaningful associations between higher operational tempo while a ship is  homeported overseas and additional operations and support costs. See  appendix V for an expanded discussion of these differences and our  methodology for analyzing them. Specifically, our analysis allowed us to  estimate the following:
Operations costs: The Navy spends an estimated $3.2 million more  on average for each additional 50 deployed days under way (across  all ships we analyzed). Ships that were homeported overseas for 2  consecutive years incurred $18.7 million more in operations costs, on  average, compared to ships that were homeported in the United  States over the same period.
Sustainment costs: Each additional 50 deployed days under way in a  given year was associated with an estimated $0.7 million more in  sustainment spending the following year (across all ships we  analyzed). We also found that the Navy spent about $5.8 million more  on sustainment in the year after the average ship returned to the  United States after being homeported overseas than the average  U.S.-homeported ship that was never homeported overseas (these  costs would be incurred outside of those presented in table 1). This is  consistent with the Navy’s practice of conducting more sustainment  spending and depot maintenance when a ship returns from an  overseas homeport to a U.S. homeport.
Personnel costs: Overseas-homeported ships incurred an estimated  $1.3 million more per year in personnel costs, on average, than ships  homeported in the United States due to higher housing allowances,  cost of living adjustments, and permanent change of station costs.
To better understand differences in personnel costs, we analyzed specific  personnel costs associated with homeporting ships overseas, such as  overseas housing allowances and cost of living adjustments. We found  that when we factored overseas housing allowances and cost of living  adjustments, the total compensation for sailors at overseas locations is  greater than the compensation they would have received at homeports in  the United States. These additional costs, as well as the generally  higher costs of moving and housing sailors and their families at overseas  locations, contribute to the higher overall operations and support costs for  overseas-homeported ships presented in table 1. Moreover, these  differences will likely be larger than they currently are once four  destroyers are moved from Norfolk, Virginia (three ships) and Mayport,  Florida (one ship) to Rota, Spain, by the end of 2015. For example, the  Navy estimates that the increased housing allowances and cost of living  adjustments for Rota-based sailors will be approximately $18 million per  year, or an 89 percent increase in compensation costs based on the  previous homeports of Norfolk, Virginia, and Mayport, Florida.
Further, Navy 5th and 7th Fleet officials explained that permanent change  of station costs are also higher for personnel stationed overseas. For  example, the costs of shipping household goods to Bahrain or Japan are  higher than the costs for a comparable move between locations in the  United States. Additionally, due to hardship conditions in Bahrain, sailors  there rotate more frequently than sailors homeported in the United States  and other overseas locations. Further, unaccompanied sailors in Bahrain  have the option to move their families anywhere in the United States for  the duration of their 1-year tour, potentially doubling the number of moves  associated with Bahrain-based assignments.
subsections: section_title: Infrastructure Investments and Base Operating Costs
paragraphs: In addition to operations and support costs, the Navy seeks to provide  consistent shore installation services and support, which for ships  homeported overseas can require shore support investments. While we  recognize that U.S.-homeported ships require infrastructure and base- operating investments in the United States, we were unable to  systematically compare the infrastructure and base operating costs of  homeporting a ship in the United States with homeporting a ship overseas  as we did with operations and support costs due to a lack of available  data. Specifically, the Navy does not track infrastructure cost data on an  individual ship basis to allow for an accurate comparison as U.S. and  overseas bases support homeported as well as other transiting ships.  However, we found that the costs for operating and maintaining facilities  at four of the overseas homeports in our review totaled nearly $1.2 billion  over the past 5 fiscal years (see table 2).
Navy Installations Command officials stated that it is usually more  expensive to operate installations overseas due to higher port-services  fees and utilities costs. These officials added that when a ship is moved  overseas from a U.S. homeport, the U.S. homeport may experience a  lower operating cost with fewer ships, but in many cases savings do not  materialize. For example, if childcare and recreational facilities on U.S.  bases support the entire installation population, these facilities may not  show a decrease in costs if they continue to provide the same level of  services before and after ships are moved overseas. Navy installations  officials told us that they do not track such potential cost changes at U.S.  locations associated with moving ships overseas since infrastructure cost  data are not organized on an individual ship basis.
In general, we found that where required support infrastructure is  unavailable, the Navy has funded extensive overseas military  construction projects to support decisions to homeport ships overseas.  Major construction projects to upgrade, expand, or build new facilities and  infrastructure at overseas homeports—primarily to support ships  homeported there—totaled over $470 million in fiscal years 2009 through  2013. In addition, the Navy plans to spend more than $274 million at  these locations over the next 4 years. For example, in Bahrain, since  2009 construction totaling nearly $483 million is planned or has been  previously obligated and has been funded solely by the United States  without host-nation contributions, according to Navy officials.
Recent Navy decisions to move ships from U.S. homeports to overseas  homeports provides insight into the infrastructure investments and base  operating costs overseas homeporting requires. For example,  infrastructure investments and base operating costs needed to support  the recent move of three destroyers from Norfolk, Virginia, and one from  Mayport, Florida, to Rota, Spain, required several infrastructure  investments in order to provide the level of support these ships had when  they were in U.S. homeports. While Naval Station Rota had some  preexisting infrastructure that would support the destroyers, new  investments and expansions are planned, such as office space renovations, and warehouse storage facilities.
In addition, the Navy estimates that the shore support requirements for  the four destroyers homeported in Rota, Spain, will result in  approximately 50 new civilian employees, 25 local national contractors  assigned to various support positions, and 35 additional uniformed  military personnel.
Similar infrastructure investments and base operating costs have  occurred in Bahrain as a result of the Navy decision to relocate patrol  coastal and mine countermeasures ships from the United States to  Bahrain in 2014. These decisions required investments related to sailor  and dependent support facilities and other spending related to supporting  ship maintenance and management. For example, upgrades and repairs for a dilapidated quay, additional on-base housing for single sailors, and new ship maintenance facilities.
In addition to Navy-funded military construction projects, other DOD  entities have planned or obligated funds as a result of Navy decisions to  homeport ships overseas. For example, in Rota, Spain, the Department of  Defense Education Activity plans to upgrade and build new school  facilities to support the additional dependent students of sailors who will  be relocated to Spain with the four destroyers. These upgrades and new  facilities are projected to cost DOD approximately $18 million, in addition  to recurring annual operations and maintenance costs. DOD school  facilities did not support the dependents of sailors aboard these  destroyers when they were homeported in Norfolk, Virginia, and Mayport,  Florida.
section_title: U.S.-Based Economic Losses
paragraphs: The decision to relocate ships from the United States to overseas  homeport locations also results in economic losses in the United States.
Navy and Joint Staff guidance direct the Navy to assess the operational  and resource implications of potential homeporting changes and do not  require the Navy to consider U.S.-based economic losses when making  homeporting decisions. Navy officials stated that they recognize there  are economic implications to moving ships overseas; however, they  emphasized that the Navy’s decision process focuses on meeting  operational requirements and the associated resource needs, and does  not estimate the U.S.-based economic impacts of moving ships overseas.  We analyzed recent homeporting decisions—to relocate three destroyers  from Norfolk, Virginia, to Rota, Spain; one destroyer from Mayport,  Florida, to Rota, Spain; and two destroyers from San Diego, California, to  Yokosuka, Japan, from 2014 through 2017—in order to estimate some of  the potential U.S.-based economic losses resulting from these moves.  We found that these decisions will result in the removal of approximately  1,800 sailors and 2,400 dependents from these local economies.  Previous decisions of similar size and scope have prompted Navy officials  to state that such relocations will result in significant losses to local  economies, and the Congressional Research Service has reported that  similar losses in numbers of crew and dependents have resulted in  thousands of net job losses and significant declines in local economic  activity.
Conversely, when announcing the plan in October 2011 to homeport four  U.S. Navy destroyers in Rota, the Prime Minister of Spain announced that  (1) this initiative would have a positive socioeconomic impact on Spain,  particularly in the Bay of Cadiz area near Rota; (2) homeporting four ships  in Rota will require investing in the Rota naval base’s infrastructure and  contracting for services, thus generating approximately a thousand new  jobs, both directly and indirectly; and (3) the effect on Spain’s defense  industry will also be positive, since the United States will be bringing  additional maintenance workload to Spanish shipyards. Navy 6th Fleet  and U.S. Pacific Fleet officials also stated that overseas homeporting  provides a benefit to host-nation contractors and economies by increasing  the amount and complexity of maintenance required by U.S. Navy ships  while they are homeported overseas.
Foreign shipyards gain additional maintenance workload when overseas- homeported ships are maintained abroad. This results in fewer ship  maintenance labor hours being worked in the United States, affecting  U.S.-based economic activity in general and economic activity at  shipyards in particular. For example, we analyzed the projected workload  transfer associated with recent decisions to relocate four destroyers to  Rota, Spain, and two additional destroyers to Yokosuka, Japan, and  found that these decisions will result in an estimated decline in the United  States of about 170 full-time-equivalent maintenance workers and $23  million per year in reduced maintenance expenditures, based on the  expected annual amount of maintenance to be performed in Spain and  Japan.
section_title: Impacts on Crew Training
paragraphs: We found that high operational tempo for ships homeported overseas  limits crew training when compared to ships homeported in the United  States. Navy officials told us that U.S.-based crews are completely  qualified and certified prior to deploying from their U.S. homeports, with  few exceptions. In contrast, the high operational tempo of ships  homeported overseas has resulted in a “train on the margins” approach.  According to Navy officials, “training on the margins” means that there is  little to no dedicated training time set aside for the ships, so that crews  train while under way or in the limited time between underway periods.  Officials told us that the training periods for destroyers based in Spain  overlap with maintenance periods and that the high operational tempo of  these ships means that training has to be planned and coordinated with  precision to help ensure that crews are properly trained. In Japan, there  are no dedicated training periods built into these ships’ operational  schedules. As a result, these crews do not have all needed training and  certifications. Over the course of this review, we found that between 9  percent and 17 percent of the warfare certifications for crews homeported  in Japan had expired. Over three-quarters of the expired certifications in  January 2015, including air warfare and electronic warfare, had been  expired for 5 months or more. Navy officials told us that while these  sailors may be technically proficient in duties that they regularly perform  as part of routine missions while deployed overseas, they may not be  adequately trained to perform other duties as required. For example, fleet  officials told us that some expired certifications—like  visit/board/search/seizure—are ancillary, while others—like air warfare— are more critical to the overseas missions conducted by these ships.
section_title: Degraded Ship Condition
paragraphs: Our analysis also found the material condition of overseas-homeported  ships has been lower than U.S.-homeported ships since 2012 and has  worsened at a slightly faster rate over the past 5 years. The Navy uses  casualty reports to provide information on the material condition of ships  to determine current readiness. For example, casualty report data  provide information on individual pieces of equipment or systems that are  degraded or out of service, the lack of which will affect a ship’s ability to  support required mission areas. We analyzed monthly casualty report  data from January 2009 through July 2014 to estimate trends for  overseas- and U.S.-homeported ships separately. We found a  statistically significant increase in casualty reports for both overseas- homeported ships and U.S.-homeported ships during this period,  indicating declining material condition across the fleet. Furthermore, we  found that the number of casualty reports is increasing at a slightly faster  rate for overseas-homeported ships compared to U.S.-homeported ships  (about 1 additional casualty report a year). For example, while overseas- homeported ships had lower daily average numbers of casualty reports  per ship from 2009 through 2012, over the past 2 years overseas- homeported ships have had more casualties than U.S.-homeported ships,  indicating that these ships may have lower material condition when  compared to U.S.-homeported ships and a worsening trend in overall ship  readiness (see fig. 6).
Our analysis showed that casualty reports have nearly doubled for both  overseas-homeported ships and U.S.-homeported ships over the past 5  years. To further analyze these observed differences over time, we  conducted a multivariate statistical analysis that held constant certain  factors that varied across ships and over time (see app. VI). Based on  this analysis, we estimated that overseas-homeported ships had, on  average, about 25 (+/-11.6) casualty reports and U.S.-homeported ships  had about 20 (+/-1.7). However, these numbers of casualty reports for  U.S.- and overseas-homeported ships are not statistically distinguishable  from one another. The casualty reports over the past 5 years comprise  mostly category 2 casualty reports. We found that category-2 casualties— those that indicate that a deficiency exists in mission-essential equipment  that causes a minor degradation in a ship’s primary mission or a major  degradation or total loss of a secondary mission—are much more  prevalent than more-serious category 3 and 4 casualties. For example,  in 2014, we found that the average number of casualty reports for all  ships was about 27, and category 3 and 4 reports accounted for about 1.0  of these. Navy officials acknowledged the increasing amount of casualty  reports on Navy ships and a worsening trend in material ship condition.  They stated that casualties require unscheduled maintenance and have a  negative impact on fleet operations since there is an associated capability  or capacity loss. Additionally, officials noted that two factors may have  contributed to this increase, including (1) a cultural shift in the Navy  emphasizing the timely identification and reporting of casualties and (2)  adoption of an automated system for reporting casualties beginning in  2010, which may have made it easier to report casualties.
In addition, the ships homeported overseas get lower scores when  inspected than U.S.-homeported ships. In addition to analyzing the  reports of equipment casualties reported by the ships themselves, we  also reviewed surface and amphibious ships’ inspection reports  conducted in fiscal years 2007 through 2014. The Navy uses material  inspection reports from the Board of Inspection and Survey (INSURV),  the Navy’s ship-inspection entity, to determine the condition of ships.  Ships undergo INSURV inspections about once every 6 years. The data  gathered include inspection results for structural components, individual  pieces of equipment, and broad systems, as well as assessments of a  ship’s warfighting capabilities. The Navy uses INSURV data to make life- cycle decisions on whether to retain or decommission Navy ships.  INSURV assigns ships an overall inspection score—the INSURV Figure  of Merit—which is a single-number representation of the ship’s overall  material condition and represents a ranking of this condition relative to  other ships. These scores are based on inspection of a ship’s functional  areas (e.g., propulsion, information systems, weapons) and performance  on various operational demonstrations (e.g., steering, full power ahead,  gunnery firing). We found that ships homeported overseas have lower  overall Figure of Merit scores and are rated lower in 62 percent of the  functional areas and demonstrations. For example, ships homeported  overseas had lower scores in functional areas, such as information  systems and operations, and demonstrations, such as steering and  anchoring. For a detailed presentation of the differences between Figure  of Merit, functional area, and demonstration scores for ships homeported  in the United States and overseas, see appendix VII.
section_title: The Navy Has Not Identified Costs and Risks Associated with the Increased Operational Tempo for Ships Homeported Overseas
paragraphs: The Navy has not identified or mitigated the risks its increasing reliance  on overseas homeporting poses to its force over the long term. We found  that, due to the high pace of operations the Navy uses for overseas- homeported ships, some of these ships have had consistently deferred  maintenance that has resulted in long-term degraded material condition  and increased maintenance costs, and could shorten the ships’ service  lives. The Navy is implementing a revised operational schedule for U.S.- based ships that is intended to lengthen time between deployments, citing  the need for a sustainable schedule. However, the Navy has not  determined how—or whether—it will apply a more sustainable schedule  to all ships homeported overseas. Additionally, although the Navy’s  decision processes for moving individual ships overseas identifies actions  and resources needed, the Navy does not assess risks such moves pose  to costs, readiness, or expected service life of ships that it can expect  based on its historical experience of increased operational tempo for  ships homeported overseas.
subsections: section_title: Deferred Maintenance on Ships Homeported Overseas Has Degraded Ship Condition, Increased Costs, and Will Likely Reduce Ship Service Life
paragraphs: We found that some ships homeported overseas had consistently  deferred maintenance, which causes long-term degraded material  condition and increases depot maintenance costs, and could shorten  these ships’ service lives. Overseas-homeported ships are maintained  differently than those homeported in the United States, which has led to  maintenance deferrals and higher maintenance costs. Maintenance  officials told us that the focus for ships homeported overseas is on  mission readiness, so overseas-homeported ships place priority on the  maintenance of combat systems, for example, while systems with the  potential to reduce ship service life—such as fuel and ballast tanks that  require extended in-port periods to properly maintain—are subject to  maintenance deferrals in order to allow the ship to sustain a high  operational tempo. These officials added that if such systems are left  unmaintained, corrosion of these tanks and other lower-priority ship  components can fester to a critical point where more costly replacement  or overhaul is ultimately required. Deferring this maintenance may yield  benefits like greater operational availability in the short term, but it may  lead to higher depot-level maintenance costs or service-life implications in  the longer term. This is consistent with what we found in September 2012  that deferring maintenance can affect ship readiness and increase the  costs of later repairs. For example, we found that the Navy had calculated  that deferring maintenance on ballast tanks to the next major  maintenance period will increase costs approximately 2.6 times.
The systematic deferral of maintenance that occurs on some overseas- homeported ships can also lead to situations where it becomes cost- prohibitive to keep a ship in service, which could result in retiring a ship  before it reaches its expected service life. To better understand the extent  of deferred maintenance on surface and amphibious ships, we analyzed  the average ratio of executed to required labor days for maintenance on  ships homeported overseas and in the United States. We found that,  while cruisers and destroyers homeported overseas have their required  maintenance executed at a higher rate than their U.S.-homeported  counterparts, the amphibious ships homeported overseas have  maintenance executed at a rate that is both much lower than what is  required and much lower than what is executed on U.S.-homeported  amphibious ships. Navy officials said that the results of our analysis are  consistent with the historical high operational tempo and utilization of  amphibious ships while they are homeported overseas.
A July 2014 Navy report to Congress stated that high operational tempo  causes unplanned wear on equipment, which can reduce the expected  service life of ships. Propulsion, electrical generation, and combat  systems (e.g., radars and sonars) are used more extensively when a ship  is under way, and rough sea states can induce more stress on a ship and  its systems. The report adds that recovering this service life requires  longer and more costly maintenance periods, which strain the  maintenance base and compress time available for operations and  training. Other Navy reports, such as the February 2010 Admiral Balisle  surface ship readiness report, highlight the negative effects of high  operational tempo, namely the reduction in expected service life for given  ship classes, and a July 2011 Center for Naval Analyses study found that  increases in operational tempo require increases in depot-level  maintenance.
Moreover, the Navy Surface Maintenance Engineering Planning Program,  which oversees maintenance requirements for surface and amphibious  ships and monitors life-cycle repairs, has found that the current  maintenance strategy for amphibious ships homeported overseas will  jeopardize their attainment of expected service lives. Specifically, the  program found that the primary shortfall of the current strategy is that it  does not include scheduled dry-docking periods necessary to conduct  large scale tank and void maintenance while homeported in Sasebo,  Japan. This, along with other contributing factors such as the ships’ high  operational tempo, has led to overall degraded material condition of  amphibious ships homeported there. For example, Navy officials stated  that maintenance on the USS Essex, an amphibious assault ship, had  been systematically deferred while the ship was homeported in Japan  from June 2000 through February 2012, causing the ship to require the  costliest depot maintenance work in surface Navy history when it returned  to the United States (see fig. 7). During this depot maintenance period,  the Essex required over twice the amount of maintenance work the Navy  expected to perform. According to the Navy Surface Maintenance  Engineering Planning Program documentation, the Navy used 364,280  labor days on the Essex compared to the 177,206 labor days that were  planned for this depot availability.
Given the Navy’s and our prior findings on the detrimental effect of high  operational tempo and maintenance deferrals on ship service life— particularly with respect to the Navy’s fleet of amphibious warfare ships— we worked with the Congressional Budget Office to determine the impact  of potential decreases in the service lives of overseas-homeported ships  on the amphibious fleet inventory. The Congressional Budget Office  completes an annual assessment of the Navy’s 30-year shipbuilding plan  and uses an internal model to show the annual inventories of selected  categories of ships under the Navy’s plan and how they align with the  Navy’s goals for those categories of ships. We asked the Congressional  Budget Office to use its model to deduct 6 years from the service lives of  the Amphibious Ready Group (one amphibious assault ship, two dock  landing ships, and one amphibious transport dock ship) homeported in  Sasebo, Japan, in order to illustrate the effects of these potential losses in  service life on the amphibious fleet inventory. We deducted 6 years of  service life based on discussions with Navy fleet and headquarters  officials with the goal of choosing an appropriate time frame to illustrate  the potential effects of reducing ship surface lives. For example, the  upper time-frame limit we considered was based on the Navy’s prior  proposal to retire an amphibious ship homeported overseas 16.5 years  prior to the end of its expected service life. Navy officials agreed that 6  years is a reasonable time frame for illustrative purposes. We recognize  that this is one potential outcome if the Navy chooses not to make the  significant investments in depot maintenance that would be required to  mitigate the effects on the service lives of ships returning from overseas  homeports. According to the Navy, a minimum force of 33 amphibious  ships represents the limit of acceptable risk in meeting amphibious  assault force requirements. Figure 8 shows the results of the  Congressional Budget Office analysis and that, if the overseas- homeported amphibious ships do not achieve their expected service lives,  the Navy would not meet its goal for amphibious ship inventory beginning  in 2035, and would worsen the gap projected by the Navy.
section_title: The Navy Is Taking Steps to Address High Operational Tempo for U.S.-Homeported Ships but Has Not Determined Whether Those Steps Will Apply to All Ships Homeported Overseas
paragraphs: The Navy has taken steps to mitigate the risks of high operational tempo  on U.S.-homeported ships by developing the optimized fleet response  plan, which seeks to instill predictable operational schedules conducive to  ensuring ships are able to adequately address their training and  maintenance requirements. However, the Navy has not determined  how—or whether—it will apply the optimized fleet response plan to all  ships homeported overseas. The Navy recognizes that the current high  operational tempo and long deployments of its U.S.-homeported ships are  unsustainable over the long term, placing strain on sailors and their  families, and constraining the ability to complete the required  maintenance that is necessary for ships to reach their expected service  lives. For example, the Navy lengthened deployments in direct response  to world events, such as operations in Iraq and Afghanistan over the past  decade and the crisis in Syria in 2013.
In November 2014, the Navy issued a new policy establishing  responsibility for the execution of the optimized fleet response plan,  noting in the policy that changes in the global landscape have  demonstrated the need for an optimized process to ensure continuous  availability of manned, maintained, equipped, and trained Navy forces  capable of surging forward to respond to combatant commander forward- presence requests while also maintaining long-term sustainability of the  force. The Navy’s optimized fleet response plan seeks to provide a more  sustainable force-generation model for Navy ships, as it reduces  deployment lengths and injects more predictability for maintenance and  training into ship schedules. According to the policy, this framework  establishes a readiness-generation cycle that operationally and  administratively aligns forces while aligning and stabilizing manning,  maintenance and modernization, logistics, inspections and evaluations,  and training. According to Navy officials, adherence to this new force- generation model is necessary in order to protect the long-term readiness  and sustainability of the force. As a result, it is implementing, beginning in  2014, a revised operational schedule, referred to as the optimized fleet  response plan, which is based on a 36-month cycle, with 7-month  deployments for U.S.-homeported ships and designated periods for crew  training and ship maintenance (see fig. 9).
While the Navy has recognized the challenges the high pace of  operations poses to the U.S.-based fleet and has begun implementing the  optimized fleet response plan for carrier strike groups deployed from  U.S. homeports, according to Pacific Fleet and Fleet Forces Command  officials, it has not determined how—or whether—it will apply the  optimized fleet response plan or a similar sustainable operational  schedule to all ships homeported overseas. As discussed earlier, we  found that the high pace of operations the Navy uses for overseas- homeported ships limits their dedicated training and maintenance periods,  which has resulted in difficulty keeping crews fully trained and ships  maintained. In addition, we found that casualty reports for both U.S.- and  overseas-homeported ships have doubled over the past 5 years, with the  material condition of overseas-homeported ships having decreased  slightly faster than U.S.-homeported ships. Navy officials told us they are  considering changes to the operational schedules of overseas- homeported ships but, as of February 2015, have not finalized and  implemented any formal changes. In March 2015, Fleet Forces Command  approved an optimized fleet response plan for the four destroyers  homeported in Rota, Spain, to help resolve potential training and  maintenance concerns. This schedule, however, applies to only 4 of the  40 surface and amphibious ships the Navy plans to homeport overseas  by the end of fiscal year 2015. Further, Navy officials told us that ships  homeported overseas are expected to continue their high levels of  utilization and expressed concerns about the service’s ability to adhere to  a more disciplined operational schedule in light of ever-increasing  demands for naval forces from the combatant commanders. Navy officials  also cited instances when requests for forces from combatant  commanders, and other emergent needs, have resulted in DOD-directed  extensions of deployments and activations of ships that were not  scheduled for deployment. Without an operational schedule that balances  presence demands and long-term sustainability for ships homeported  overseas, the Navy risks continuing the pattern of deferred ship  maintenance that leads to higher maintenance costs over the long term  and threatens achievement of full ship service lives.
section_title: The Navy Has Not Assessed Long-Term Operations and Support Costs or Risks to Ship Condition and Service Life Posed by Overseas Homeporting
paragraphs: The Navy has not assessed the costs and risks its increasing reliance on  overseas homeporting poses to its force over the long term. Office of the  Chief of Naval Operations Instruction 3111.17 details the Navy’s multistep  process for assessing potential homeport decisions; this process  produces the annual Strategic Laydown and Dispersal Plan (strategic  laydown plan) which projects ship homeports 10 years into the future.  During development of the plan, the Navy draws on policy, planning,  programming, budget, and strategic documents, such as the Navy force- structure assessment and the 30-year shipbuilding plan, to recommend  assigning ships to specific homeports. The strategic laydown process  involves a range of stakeholders, including representatives from the Navy  staff, Fleet Forces Command, Pacific Fleet, Naval component  commanders, and Navy Installations Command. These stakeholders  evaluate potential homeporting decisions across a range of criteria,  including enhancing the overall operational availability and efficiency of  Navy forces, aligning capability with combatant commanders’ needs, and  maximizing the use of existing infrastructure.
However, officials explained that the strategic laydown process primarily  focuses on short-term requirements, such as the need for pier space,  housing, and maintenance facilities, and related near-term resource  needs. We found that the Navy does not assess the long-term effect on  operations and support costs or the risks posed to readiness and  expected ship service life in light of historical execution trends and high  operational tempo of ships that are homeported overseas. Additionally,  senior Navy officials explained that they would benefit from a more  thorough understanding of the risks and operational implications  associated with their increasing reliance on overseas homeporting to  meet combatant commander presence demands. Further exacerbating  the strain on its fleet, the Navy reported in July 2014 that it intends to  increase the number of ships homeported overseas to respond to  increasing combatant commander demands for forward naval presence.  Federal standards for internal control state that decision makers should  comprehensively identify risks associated with achieving program  objectives, analyze them to determine their potential effect, and decide  how to manage the risk and identify mitigating actions. According to the  standards, this is an ongoing process, since operating conditions  continually change.
Without a comprehensive assessment that identifies and assesses long- term costs, readiness, and force-structure effects on the Navy’s surface  and amphibious fleet from its increasing reliance on overseas  homeporting, the Navy lacks information needed to make any necessary  adjustments to its overseas force structure or informed homeporting  decisions in the future. Having such an assessment would help decision  makers to identify and mitigate risks posed by increased long-term  operations and support costs; deferred maintenance and truncated  training periods; and degraded material condition of the ships, increased  maintenance requirements, and reduced ship service life.
section_title: Conclusions
paragraphs: Today’s fleet of surface combatants and amphibious warfare ships  provides core capabilities that enable the Navy to fulfill a wide array of  missions—all through forward presence. With combatant commanders’  demand for forward presence at historically high levels and growing, the  Navy has chosen to make several near-term decisions, including  extending deployments and assigning more surface and amphibious  ships to overseas homeports, to meet presence demands with its existing  force structure. It is also in the process of considering various  homeporting options for its new class of destroyers, the DDG 1000. While  homeporting ships overseas provides considerable additional naval  presence in a forward area of operations and other near-term benefits— when compared with homeporting ships in the United States—it increases  costs and decreases crew and ship readiness in the near term and  degrades the material condition of the ships over the long term, possibly  threatening their ability to reach their intended service lives, particularly in  the amphibious fleet. To address concerns, the Navy has developed the  optimized fleet response plan, citing the need for a schedule that is  sustainable over the long term, with more predictability for maintenance  and training and improved quality of life for sailors. The Navy is  implementing this revised operational schedule for U.S.-based ships and  approved in March 2015 a revised schedule for the four destroyers  homeported in Rota, Spain; however, it has not determined how—or  whether—it will apply a more sustainable schedule to its 36 surface and  amphibious ships homeported overseas outside of Rota, Spain. The Navy  also has not fully identified and mitigated risks to its force structure  associated with its increasing reliance on overseas homeporting. The  Navy’s process for determining where to homeport ships focuses on the  short-term resource needs of these decisions, but it does not assess  long-term costs or risks to readiness and ship service life that can result  from the high operational tempo of ships homeported overseas. If the  Navy does not have an operational schedule that balances presence  demands and long-term sustainability for ships homeported overseas and  has not conducted a comprehensive assessment of the risks that  overseas homeporting poses to its surface and amphibious ship force  structure, it risks incurring higher operations, support, and infrastructure  costs, reducing ship service lives, and potentially exacerbating strains on  its fleet and shipbuilding budget over the long term. Further, if the Navy  does not include such risk assessments when making future force- structure decisions, it risks returning to a more costly and less sustainable  operational schedule as it adjusts its presence overseas.
section_title: Recommendations for Executive Action
paragraphs: To balance combatant commanders’ demands for forward presence with  the Navy’s needs to sustain a ready force over the long term and identify  and mitigate risks consistent with Federal Standards for Internal Control,  we recommend that the Secretary of Defense direct the Secretary of the  Navy to take the following two actions:  to fully implement its optimized fleet response plan, develop and  implement a sustainable operational schedule for all ships  homeported overseas; and develop a comprehensive assessment of the long-term costs and  risks to the Navy’s surface and amphibious fleet associated with its  increasing reliance on overseas homeporting to meet presence  requirements, make any necessary adjustments to its overseas  presence based on this assessment, and reassess these risks when  making future overseas homeporting decisions and developing future  strategic laydown plans.
section_title: Agency Comments and Our Evaluation
paragraphs: In written comments on a draft of this report, DOD concurred with our two  recommendations. In its comments, DOD stated that it concurred with the  overall findings of the report and noted that the decision to accept risks,  such as deferred maintenance and increased consumption of service life,  was based on the operational decision to provide increased presence to  meet combatant commander requirements. DOD’s comments are  summarized below and reprinted in their entirety in appendix VIII. DOD  also provided technical comments, which we have incorporated as  appropriate.
DOD concurred with our recommendation to develop and implement a  sustainable operational schedule for ships homeported overseas. In its  comments, DOD stated that Fleet Forces Command in March 2015  approved an optimized fleet response plan for the four destroyers  homeported in Rota, Spain. We modified the report to note that the Navy  had approved a revised operational schedule for 4 of the 40 surface and  amphibious ships the Navy plans to homeport overseas by the end of  fiscal year 2015. DOD stated that the formal review of optimized fleet  response plans for the remaining ships homeported overseas will be  scheduled for a future date.
DOD also concurred with our recommendation to develop a  comprehensive assessment of the long-term costs and risks to the Navy’s  surface and amphibious fleet associated with its increasing reliance on  overseas homeporting. DOD stated that the Navy will conduct an  assessment of the long-term costs and risk of overseas homeporting and  incorporate that into future homeporting decision processes.
We are sending copies of this report to the appropriate congressional  committees, the Secretary of Defense, and the Secretary of the Navy. 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) 512-3489 or at pendletonj@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 IX.
section_title: Appendix I: The Navy’s Use of Rotational Crewing
paragraphs: The Navy has used rotational crewing—the practice of using more than  one crew to operate a single ship—for over 40 years on its ballistic- missile submarines, but did not begin using this crewing concept in the  surface fleet until the mid-1990s and has limited its use to a small number  of ships and ship types. Specifically:
Mine countermeasures ships began using rotational crewing in the  1990s in Japan and the Persian Gulf, and patrol coastal ships began  using rotational crewing in 2003 in the Persian Gulf. These ship  classes discontinued the use of rotational crewing in 2013 with fleet  managers stating that having permanent crews led to improved  material condition of the ships.
The Navy is using rotational crewing on its new class of surface ship,  the littoral combat ship. In March 2013, the Navy deployed its first  littoral combat ship—USS Freedom—to Singapore for 10 months for  the first-ever overseas-based operational deployment of the ship  class. The USS Freedom Blue and Gold crews executed a crew  turnover midway through the deployment in the port of Sembawang in  Singapore (see fig. 10). The program is rotating three crews between  every two ships, one of which will be operating forward, beginning  with the deployment of USS Fort Worth to Singapore in November  2014. The Navy plans to rotationally crew littoral combat ships in  Bahrain by 2018 in addition to Singapore.
Rotational crewing experiments have been conducted on Navy  destroyers in the Pacific Fleet in 2002 and the Atlantic Fleet in 2005.
Rotational crewing has not been used on the Navy’s cruisers,  amphibious warfare ships, and aircraft carriers.
Table 3 summarizes the Navy’s use of rotational crewing over the past 50  years, to include specific ship types.
section_title: Appendix II: Overview of Navy Ships Used in Our Comparative Analyses
section_title: Appendix III: Scope and Methodology
paragraphs: To determine the operational benefits, costs, and readiness effects, if  any, of homeporting ships in the United States and overseas, we selected  surface combatants and amphibious warfare ships from the following ship  classes for inclusion in our review: guided-missile cruisers (CG 47 class),  guided-missile destroyers (DDG 51 class), littoral combat ships (LCS  class), mine countermeasures ships (MCM 1 class), patrol coastal ships  (PC 1 class), amphibious assault ships (LHA 1 and LHD 1 classes),  amphibious transport dock ships (LPD 4 and LPD 17 classes), dock  landing ships (LSD 41 and LSD 49 classes), and amphibious command  ships (LCC 19 class). These ships represent over half of the Navy fleet  and provide a variety of capabilities, sizes, missions, and histories of  overseas homeporting. We compared the operational benefits, costs, and  readiness effects of the different homeporting assignments for these ship  classes using a variety of factors—including operational tempo, ship  operations and support costs, casualty reports, readiness inspection  scores, and maintenance execution rates. Specifically, Navy officials  provided the following data from authoritative Navy sources:
Navy Visibility and Management of Operating and Support Costs— operations and support costs per ship in constant fiscal year 2014  dollars, fiscal years 2004 through 2013;
Navy Energy Usage Reporting System—deployed underway days per  ship, fiscal years 2003 through 2012;
Commander, Navy Installations Command—family housing, operation  and maintenance, and military construction costs by overseas  homeport location, fiscal years 2009 through 2018 (programmed);
Fleet Forces Command—daily numbers of casualty reports per ship,  January 2009 through July 2014;
Board of Inspection and Survey—material inspection data per ship,  fiscal years 2007 through 2014; and
Office of the Chief of Naval Operations—maintenance execution  rates, life of each ship.
We selected the time frames for each of the data series above after  assessing their availability and reliability to maximize the amount of data  available for us to make meaningful comparisons. We assessed the  reliability of each of the data sources. The Navy provided information  based on our questions regarding data reliability, including information on  an overview of the data, data-collection processes and procedures, data  quality controls, and overall perceptions of data quality. The Navy  provided documentation of how the systems are structured and what  written procedures are in place to help ensure that the appropriate  information is collected and properly categorized. Additionally, we  interviewed Navy officials to obtain further clarification on data reliability,  discuss how the data were collected and reported, and explain how we  planned to use the data. After assessing the data, we determined that  they were sufficiently reliable for the purposes of reporting the operational  benefits, costs, and readiness effects of homeporting ships in the United  States and overseas.
For our comparative analyses, we focused on comparisons between  cruisers, destroyers, and amphibious warfare ships (amphibious assault  ships, amphibious transport dock ships, dock landing ships, and  amphibious command ships) homeported in the United States and those  homeported overseas because these historically have been the ship  classes most commonly homeported overseas and, therefore, the Navy  has the most robust data available for them. We did not include mine  countermeasures ships and patrol coastal ships in our comparative  analysis because these ship classes have had relatively little recent  experience deploying from U.S. homeports over the past 5 years,  according to Navy officials, and limited comparative data were available.  To understand the effects of overseas homeporting on infrastructure  investments and base operating costs, we examined Navy  documentation, such as leadership briefings on several recent decisions  to move ships to overseas homeports from 2009 through 2014 where  officials stated additional infrastructure was required. These moves  included decisions to homeport destroyers in Rota, Spain, and patrol  coastal and mine countermeasures ships in Bahrain. We also analyzed  cost data from 2009 through 2014, which includes these ship moves, for  family housing, operation and maintenance, and military construction at  overseas homeports. We assessed these data by reviewing Navy  documentation and discussing with Navy officials data-collection  processes and procedures and determined that they were reliable for the  purposes of reporting the infrastructure investments and operating costs  for overseas-homeported ships. We also obtained and analyzed Navy  policies and procedures for determining surface force readiness and ship  operational cycles.
We also analyzed the economic effects of homeporting ships overseas;  specifically, the decreases in maintenance labor hours in the United  States that results from maintenance work being performed in foreign  shipyards while Navy ships are homeported overseas. To do so, we  obtained the projected maintenance workload for the large surface  combatants—destroyers moving from U.S. homeports to Rota, Spain  (four ships) and Yokosuka, Japan (two ships)—from the Office of the  Chief of Naval Operations for the approximately 7- to 10-year period  these ships are expected to be homeported overseas. Rota, Spain, and  Yokosuka, Japan, represent the only overseas homeports that the Navy  plans to relocate ships to in the next several years. We converted this  number of maintenance labor hours into full-time equivalents. For this  analysis, we assumed 2,080 hours of work per full-time equivalent,  recognizing that ship repair industry workers receive vacation and  holidays but also work high levels of overtime, according to Navy officials.  We also applied the fiscal year 2014 labor rates associated with  shipyards in each port that the destroyers were leaving in the United  States—Norfolk, Virginia; Mayport, Florida; and San Diego, California—to  determine the annual economic losses in U.S. shipyards in terms of  maintenance expenditures and full-time equivalents. We calculated  maintenance losses based on revenue transfers from labor and did not  include material cost-related transfers because Navy officials explained  that some portion of the material could be purchased in the United States.
We interviewed officials from the Naval Sea Systems Command;  Commander, Naval Surface Force, U.S. Pacific Fleet; Commander, Naval  Surface Force, U.S. Atlantic Fleet; Fleet Forces Command; U.S. Pacific  Fleet; 5th Fleet; 6th Fleet; and 7th Fleet to discuss these data, our  analyses, and their observations on the costs, readiness effects, and  operational benefits of homeporting ships overseas.
To assess the extent to which the Navy has identified and taken steps to  mitigate any risks from homeporting ships overseas, we analyzed (1) key  Navy and Department of Defense (DOD) guidance and policies for  assigning ships to homeports in the United States and overseas and (2)  the Navy’s required actions for evaluating, planning, and implementing  changes to overseas force structure. We interviewed Navy and State  Department officials to discuss these documents and determine whether  decision-making processes are in place and are being followed and what  factors, data, and lessons learned the Navy considers in making these  decisions. We also examined Navy force-structure requirements and the  2014 Navy Strategic Laydown and Dispersal Plan to understand the  basing construct for Navy ships, as well as any planned changes to the  laydown. We also analyzed previous Navy reports that studied the effect  of high operational tempo, different deployment approaches, and deferred  maintenance on the overall material condition of surface ships and on a  ship’s service life.
To illustrate the effect of potential decreases in ship service life on the  amphibious fleet inventory, we worked with the Congressional Budget  Office, which completes an annual assessment of the Navy’s 30-year  shipbuilding plan and uses an internal model to show the annual  inventories of selected categories of ships under the Navy’s plan and how  they align with the Navy’s goals for those categories of ships. The  Congressional Budget Office published results of this model in December  2014 (see the upper panel of fig. 8). We asked the Congressional Budget  Office to use the model to deduct 6 years from the service lives of the  Amphibious Ready Group (one amphibious assault ship, two dock landing  ships, and one amphibious transport dock ship) homeported in Sasebo,  Japan, in order to determine the effects of these potential losses in  service life on the amphibious fleet inventory. The Congressional Budget  Office used its model to conduct this analysis and provided us with the  outputs found in the lower panel of figure 8. We summarized the results,  and Congressional Budget Office officials concurred that our  representation accurately depicts the predicted effects of reduced service  life on the amphibious fleet inventory. We deducted 6 years of service life  based on our discussions with Navy fleet and headquarters officials  regarding what constituted a reasonable reduction to a ship’s service life.  For example, the upper time-frame limit we considered was based on the  Navy’s prior proposal to retire an amphibious ship homeported overseas  16.5 years prior to the end of its expected service life. We recognize that  this is one potential outcome if the Navy chose not to make the significant  investments in depot maintenance required to mitigate effects to ship  service life for ships returning from overseas homeports. We chose the  Sasebo-based ships because this is the primary homeport for amphibious  ships located outside of the United States. Finally, we also reviewed the  Navy’s plan to implement a revised operational schedule—referred to as  the optimized fleet response plan—and interviewed Navy officials to  discuss this plan, its purpose, expected benefits, and impact on ships’  time allocated to maintenance, training, deployment, and operational  availability. We compared the Navy’s plans to criteria for risk assessment  in federal standards for internal control.
We interviewed officials, and where appropriate obtained documentation,  at the following locations:
Office of the Secretary of Defense
Policy
Cost Assessment and Program Evaluation  Joint Staff
Office of the Chief of Naval Operations
Global Force Management
Strategy and Plans
Logistics
U.S. Fleet Forces Command
U.S. Pacific Fleet
Commander, Naval Surface Force, U.S. Pacific Fleet
Commander, Naval Surface Force, U.S. Atlantic Fleet
U.S. 5th Fleet
U.S. 6th Fleet
U.S. 7th Fleet
Commander, Navy Installations Command
Navy Region
Europe, Africa, Southwest Asia, Detachment Bahrain
Naval Sea Systems Command
Navy Surface Warfare Center, Corona
Surface Maintenance Engineering Planning Program
Board of Inspection and Survey
Commander, Naval Regional Maintenance Center
U.S. State Department
Congressional Budget Office
RAND Corporation  We conducted this performance audit from June 2014 to May 2015 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 IV: Overview of Navy’s Homeporting Process
paragraphs: The Navy’s process for assigning and changing ship homeports is  illustrated in figure 11 below, with particular emphasis on moving a ship’s  homeport from the United States to an overseas homeport. The Navy has  historically assigned new ships entering its fleet a U.S. homeport. Based  on strategic needs and priorities, it may change a ship’s homeport from  the United States to one overseas. By fiscal year 2017, the Navy plans to  have 41 ships homeported overseas.
The Navy’s Strategic Laydown and Dispersal Plan (strategic laydown  plan) is intended to provide strategic rationale and guidance for  subsequent, required actions to approve and implement a homeport  change. The Navy’s recommendations for homeporting are based on 13  criteria, ranging from compliance with environmental laws to a  consideration of planned military construction projects. The Navy updates  its strategic laydown plan annually and briefs the results of its plan to  Congress each year.
From the strategic laydown plan, the lead fleet commander (either the  United States Fleet Forces Commander or the United States Pacific Fleet  Commander) provides a requirements letter to his or her respective  command to initiate the early planning process for a homeport change.  This includes the vetting of near-term needs to support the homeport  change (i.e., what will be required in terms of manpower, logistics,  budgeting, etc.) prior to recommending a new homeport by means of an  Organization Change Request—the Navy’s official means for changing  homeport designation.
The fleet commander then submits its Organization Change Request to  the Chief of Naval Operations, who must approve it before final approval  from the Secretary of the Navy. The Office of the Secretary of the Navy  then submits the homeport change proposal in the form of an Overseas  Force Structure Change to the Joint Staff and Office of the Secretary of  Defense. According to Office of the Secretary of Defense officials, the  Office of the Secretary of Defense must ensure resourcing requirements  associated with the proposed Overseas Force Structure Change are  clearly articulated and identify whether funding has been budgeted or  programmed. The Joint Staff reviews the proposal to ensure it has a  number of required elements, including cost estimates for the homeport  change, prior coordination with the State Department on potential host- nation sensitivities, and an assessment of the impact on personnel and  their families.
The combatant command that would be homeporting the ship in its area  of operations must also conduct an assessment of political-military  considerations, force structure, and infrastructure and short-term resource  implications of the requested Overseas Force Structure Change to inform  the Joint Staff and Office of the Secretary of Defense of the relative  values, benefits, and costs of the proposal.
The Joint Staff and Office of the Secretary of Defense review the final  proposal and coordinate with the State Department prior to submitting the  Overseas Force Structure Change for ultimate Secretary of Defense  review and approval. Following approval by the Secretary of Defense, the  State Department notifies and works with the host nation on timing and  the official announcement of the homeport change, and the Department  of Defense generates military orders to move the ship from a U.S.  homeport to one overseas.
section_title: Appendix V: Statistical Analysis of Deployed Days Under Way and Costs for Overseas- and U.S.-Homeported Ships
paragraphs: To compare costs and deployed days under way for ships that were  homeported overseas and in the United States, we conducted  multivariate statistical analyses that held constant certain other factors  that also might have explained any differences in these outcomes  between the two groups of ships. Appendix III describes the data we  analyzed in more detail, and table 4 below provides the mean outcomes  we analyzed by fiscal year and type of homeport. Data were available for  varying periods across ships and variables, as specified in the tables of  results below. We limited our analysis to amphibious ships, cruisers, and  destroyers, due to smaller amounts of data available for other ship  classes when deployed overseas versus in the United States. Across all  fiscal years, deployed days under way and costs are higher, on average,  for ships homeported overseas than ships homeported in the United  States. The use of overseas homeporting has increased over time, from 6  ships in fiscal year 2003 to 17 ships in fiscal year 2013.
In this appendix, we describe the statistical methods we used and the  results of our analysis for each outcome. Our use of statistical methods  provides limited assurance that our results reflect the influence of  overseas homeporting, rather than other related factors. This improves  upon simple comparisons of the raw data, as in table 4. However, we did  not design the analysis to account for all relevant factors, and therefore  our results are not conclusive causal estimates.
subsections: section_title: Deployed Days Under Way
paragraphs: Operational tempo is potentially a primary mechanism by which overseas  homeporting may affect costs. Navy officials told us that ships generally  are under way for longer periods when homeported overseas. Higher  operational tempo increases the proportion of time spent in operations  and training compared to time spent in depot maintenance. This, in turn,  may increase operational costs and reduce opportunities for sustainment  spending.
We analyzed this scenario by comparing ships’ deployed days under way  in a given year from fiscal year 2003 and 2012 to their deployed days  under way in the prior year, separately for overseas- and U.S.- homeported ships. This allowed us to examine how the Navy rotates  ships in and out of periods of higher maintenance or operations, as well  as whether this rotation varied according to whether ships were  homeported overseas or in the United States.
We fit the following statistical models to our data, in order to more  formally analyze these associations:  Daysit  =  δ Overseasit + μ + τ + eit  (Model  1.1)
Daysit  =  β Daysi(t-1) + μ + τ + eit  (Model  1.2)
Daysit  =  β1 Daysi(t-1) + β2 Daysi(t-1) * Overseasi(t-1) + δ  Overseasi(t-1) + μ + τ + eit  (Model  1.3)
Daysit  =  β1 Daysi(t-1) + β2 Daysi(t-1) * Overseasi(t-1) + δ  Overseasi(t-1) +  (Model  1.4) α1 Mandaysi(t-1) + α2 Mandaysi(t-2) + μ + τ + eit  For ship i and fiscal year t, Days measured the number of deployed days  under way, Overseas indicated being homeported overseas, Mandays  measured the ratio of executed to required mandays, μ and τ were  vectors of ship and fiscal year fixed effects, respectively, and e was  random error.
Our estimation process applied the “within transformation,” which  expressed the observations for each ship as deviations from its over-time  mean. This eliminated the need to explicitly estimate ship fixed effects, μ,  while still estimating the difference between overseas and U.S.- homeported ships, δ, consistent with common statistical practice for this  type of model. The fixed effects held constant all ship characteristics that  did not change over time, such as class and year commissioned. The  fiscal year fixed effects in τ held constant all changes over time observed  among all ships, such as labor and material prices, trends in military  operations, and policy changes that applied uniformly across ships.
In model 1.4, we included additional controls for the percentage of  required mandays that were executed, measured concurrently and prior  to when we measured homeport type. Navy officials said that they  considered a ship’s maintenance history when deciding whether and  when to homeport a ship overseas. Controlling for prior executed  maintenance allowed us to compare outcomes among ships having  similar maintenance histories. An explicit covariate was necessary,  because the ratio could vary within ships over time and therefore was not  absorbed by ship or year fixed effects. Table 5 provides estimates of the  models’ key parameters, which we derived using least-squares methods  with asymptotic robustness corrections for potentially heteroskedastic and  nonindependent errors within ships.
Based on model 1.1, we estimated that a ship homeported overseas in  the current year spent about 42.1 additional deployed days under way,  compared to the average ship that was not homeported overseas, with a  95 percent confidence interval of  implying a difference  distinguishable from zero at the 0.05 significance level. Specifically, we  estimated that ships homeported overseas were deployed for 110.7 days  , on average, compared to 68.6 days  for U.S.- homeported ships. This is a moderately large difference, given that the  middle 50 percent of ships in our analysis ranged from 0 to 136 deployed  days under way and the median ship was under way for 66 days (across  all years in our data).
We found that ships tended to be under way for fewer days in the current  year if they were under way for more days in the prior year. For each  additional 50 days that the average ship was under way in the prior year,  we estimated that the ship was under way for an average of 21.5 [17.7,  25.3] fewer days in the current year (based on model 1.2). This pattern is  consistent with the Navy’s practice of rotating ships in and out of  operations and depot maintenance.
However, we found that overseas-homeported ships appeared to have a  different pattern of rotation. Model 1.3 implied that the average U.S.- homeported ship could expect to spend about 23.6 fewer days [20.0.  27.1] under way this year for each additional 50 days it was under way in  the prior year. In contrast, for the average overseas-homeported ship,  there was no statistically distinguishable relationship between days under  way in the prior and current year. In other words, we could not detect a  systematic pattern of rotating ships between periods of operations and  maintenance for overseas-homeported ships, though this result may  reflect our inability to detect such an effect with a modest amount of data.  The results remained similar when holding constant the proportion of  required mandays executed.
section_title: Sustainment Costs
paragraphs: We used a similar approach to compare sustainment costs between  overseas- and U.S.-homeported ships. As discussed above, overseas  homeporting is associated with more deployed days under way, and more  deployed days under way can reduce opportunities for intensive  maintenance. Consequently, we assessed whether sustainment spending  in a current year decreased with more deployed days under way in that  year, and whether it increased with more deployed days under way in the  prior year. Such a pattern would be consistent with the Navy’s practice of  rotating ships in and out of maintenance periods. In addition, we  assessed how sustainment spending varied, depending on the use of  overseas homeporting in the current and prior year.
We carried out this analysis by fitting the following statistical models:  Sustainit  =  β1 Daysit + β2 Daysi(t-1) + μ + τ + eit  (Model  2.1)
Sustainit  =  δ1 Overseasit + δ2 Overseasi(t-1) + δ3  Overseasit * Overseasi(t-1) +   (Model  2.2) μ + τ + eit  Sustainit  =  δ1 Overseasit + δ2 Overseasi(t-1) + δ3  Overseasit * Overseasi(t-1) +   (Model  2.3) α Mandaysi(t-2) + μ + τ + eit  Model 2.1 expressed sustainment spending in the current year, Sustainit,  as a function of deployed days under way in that year and in the prior  year, Daysit and Daysi(t-1). We included fixed effects for ships and fiscal  years, μ and τ, for the same reasons and using the same methods as in  our models of deployed days under way. Model 2.2 included indicators for  all possible combinations of homeport type in the current and prior fiscal  year, denoted Overseasit and Overseasi(t-1), with ships that were  homeported overseas in neither year serving as the omitted reference  group. Since homeport type is causally prior to deployed days under way,  we did not control for both variables simultaneously, in order to avoid  posttreatment control bias. Lastly, model 2.3 included a control for the  ratio of executed to required mandays for the same reasons as in our  models of deployed days under way. We again measured this ratio in the  fiscal year prior to the earliest measurement of homeport type (a 2-year  lag). Table 6 provides estimates of these models’ parameters, using the  same estimation methods as we used to fit models of deployed days  underway.
Our results were consistent with a similar pattern of rotating in and out of  operational and maintenance periods when analyzing sustainment costs.  Based on model 2.1, we estimated that for each additional 50 days that  the average ship spent under way in the current year, the Navy could  expect to spend about $1.5 million  less on sustainment in that  year (50 days multiplied by an estimated marginal effect of -$30,600).  Days under way are periods when ships cannot enter depot maintenance,  which would prevent the Navy from spending large amounts on  sustainment. Accordingly, we estimated that an additional 50 days under  way in the prior year was associated with $0.7 million  more  spending on sustainment in the current year. The data suggest that the  Navy performs maintenance in roughly 2-year cycles. Ships rotate in and  out of higher operational tempo, and the Navy concentrates sustainment  spending on specific periods.
Given this pattern, overseas homeporting should be associated with more  sustainment spending in the year when the ship returns to U.S.- homeported status and has more opportunities for depot maintenance.  Accordingly, based on model 2.2, we found that Navy spent about $5.8  million  more on sustainment in the year after the average ship  returned to a U.S. homeport, compared to the average ship that was  never homeported overseas. (This difference is distinguishable from zero  at the 0.11 level of significance, however.) The results remained similar  when holding constant the proportion of required mandays executed.
section_title: Operational Costs
paragraphs: The Navy’s pattern of rotating ships in and out of maintenance periods  suggests that overseas homeporting should have the opposite  associations with operational costs as it did with sustainment costs. More  deployed days under way in a current year should be associated with  higher operational costs in that year. However, operational costs may be  lower in the following year, when ships may spend more time in  maintenance. Since overseas deployments are associated with more  deployed days under way, they may have analogous associations with  operating costs.
We assessed this scenario by estimating identical statistical models as  those we fit to the data on sustainment costs, except that we substituted  operational costs as the outcome variable. All other model assumptions  remained the same. Table 7 provides estimates of these models’  parameters.
Our analysis of operational costs found results consistent with those on  deployed days under way and sustainment costs. As expected, higher  operational tempo in the current year was associated with more  operational spending in that year, with the Navy spending an additional  $3.2 million , on average, for each additional 50 days under way  based on model 3.1. The same 50-day change in deployed days under  way in the prior year was associated with a $0.5 million   decrease in operational spending in the current year. This pattern is the  opposite of what we observed with sustainment spending and is  consistent with rotating ships in and out of maintenance periods.
Model 3.2 suggests that homeporting ships overseas across 2  consecutive years was associated with higher operational spending.  Ships that were homeported overseas for 2 consecutive years had $18.7  million  more in operational costs, on average, compared to  ships that were not homeported overseas during the same period. The  average ship experienced a $12.6 million  decline in operational  spending during the first year it returned to U.S. homeport status,  compared to the average ship that was not homeported overseas.  Curiously, ships in the first year of being homeported overseas, after  being homeported in the United States during the prior year, had no  different operational costs on average than ships that remained  homeported in the United States in both years. The results remained  similar when holding constant the proportion of required mandays  executed, although the standard error of the estimated difference  between overseas- and U.S.-homeported ships in the current year was  somewhat larger.
section_title: Personnel Costs
paragraphs: Personnel costs are more likely to have a straightforward association with  overseas homeporting. Unlike sustainment and operational costs, which  are somewhat inversely related and linked to operational tempo,  personnel costs are not as directly tied to cycles of operations and  maintenance. As we discuss in the report, overseas homeporting can  involve additional costs related to relocating sailors and paying higher  living allowances and cost of living salary adjustments than the Navy  would have paid to sailors homeported in the United States. These costs  are more directly related to the use of overseas homeports, rather than  being indirectly related through operational tempo. As a result, we can  more directly compare personnel costs between ships that were  homeported overseas and in the United States, without accounting for  operational tempo.
To confirm our assumption that operational tempo should not be as  strongly associated with personnel costs, particularly from the prior year,  we first estimated the following model:  =  β1 Daysit + β2 Daysi(t-1) + μ + τ + eit  (Model 4.1)
The model expressed personnel costs as a function of deployed days  under way in the current and prior years. The model included ship and  year fixed effects and was fit using the same methods as in the models  above. The first column of table 8 provides estimates of the model’s  parameters.
Our analysis from model 4.1 found that an additional 50 days under way  in the current year was associated with an average of $0.16 million [0.08,  0.25] additional personnel spending in the same year—a small difference,  compared to the analogous $1.5 million and $3.2 million increases for  sustainment and operational costs. The prior year’s days under way were  not meaningfully associated with the current year’s personnel spending.
As a result, we estimated the difference in personnel costs between  overseas- and U.S.-homeported ships measured in the current year,  omitting the interactions with deployed days under way and the 1-year lag  used in the models above. Our models took the following form:  Personnelit  =  δ Overseasit + μ + τ + eit   (Model 4.2)
Personnelit  =  δ Overseasit + α Mandaysi(t-1) + μ + τ + eit   (Model 4.3)
Parameter estimates for models 4.2 and 4.3 appear in table 8. Based on  model 4.2, we estimated that ships homeported overseas had about $1.3  million  higher personnel costs, on average, than ships that were  homeported in the United States. The results remained similar when  holding constant the proportion of required mandays executed.
section_title: Summary and Limitations of the Results
paragraphs: Our statistical analysis described the associations among homeport type,  deployed days under way, and various types of cost, holding constant  factors such as ship type, age, and common trends in military operations  and price levels. In addition, we estimated the statistical precision of  these associations. Our analysis found that overseas homeporting was  associated with higher operational tempo, in the form of more deployed  days under way, as well as higher sustainment, operational, and  personnel costs. Despite its ability to account for certain alternative  explanations and quantify uncertainty, our analysis has several limitations  that affect the interpretation and use of its findings.
We did not design our analysis to credibly isolate the causal relationship  between homeport type and the outcomes of interest. Rather, we applied  statistical methods to account for specific factors in the data available, in  order to rule out a limited number of alternative explanations for the  observed differences.
The variation in homeport type over time within ships allowed us to use  ship and fiscal year fixed effects, which can be powerful methods to  control for many unobserved, stable factors without explicitly measuring  them. Nevertheless, the validity of our findings is limited by the lack of  available data on other factors that could vary over time within ships.  These factors could be systematically associated with homeport type and  the outcomes of interest, such as variation over time in the type of  operations conducted by overseas- versus U.S.-homeported ships. Our  results are biased to the extent that these factors exist.
Lastly, the modest amount of data available limits the precision of our  estimates. Although we were able to estimate statistically meaningful  differences between homeport types in some cases, as described above,  a maximum of 11 fiscal years and 1,111 ship-year observations gave us  limited data with which to estimate the relationships of interest. As the  Navy continues to accumulate data over time, the precision of these  estimates should increase accordingly. Our results are preliminary and  should be interpreted cautiously, consistent with estimated sampling  variances, until they are replicated with additional data.
section_title: Appendix VI: Statistical Analysis of Average Daily Casualty Reports among Overseas- and U.S.-Homeported Ships
paragraphs: The Navy uses casualty reports (CASREP) to provide information on the  material condition of ships to determine current readiness. CASREPs  reflect equipment malfunctions that impact affect a ship’s ability to support  required mission areas and suggest a deficiency in mission-essential  equipment. To compare the average number of daily CASREPs for ships  that were homeported overseas and in the United States, we conducted  two analyses. First, we conducted a time-series regression analysis to  estimate the trends for ships that were homeported overseas and in the  United States. Next, we conducted a multivariate statistical analysis that  estimated the difference in the average number of daily CASREPs  between the two types of ships while holding constant certain other  factors that might have explained the difference.
We analyzed Navy CASREP data for destroyer, amphibious, and cruiser  ship types from January 2009 through July 2014. We included all  category 2, 3, and 4 CASREPs in our analysis. For each ship and month,  we determined whether a ship was homeported overseas or in the United  States and computed separate monthly averages for each type of  homeport. Across all months in our data the average number of daily  CASREPs per ship was lower for ships homeported overseas than for  those homeported in the United States (20.3 vs. 21.9). Table 9 provides  the average daily number of CASREPS per ship by month and type of  homeport.
In this appendix, we describe the statistical methods we used and the  results of our analysis for the average daily number of CASREPs per  ship. Our use of statistical methods provides limited assurance that our  results reflect the influence of overseas homeporting, rather than other  related factors. This improves upon simple comparisons of the raw data,  as in table 9. However, we did not design the analysis to account for all  relevant factors, and therefore our results are not conclusive causal  estimates.
First, we fit time-series regression models with autoregressive errors (AR  lag of 1) to the monthly data from ships homeported overseas and in the  United States to account for the positive autocorrelation. We used these  models to estimate the trend for all ships and for each deployment status  separately. The purpose of this analysis of the CASREP data was to  analyze changes in the daily averages from month to month to describe  the trends from January 2009 through July 2014. Table 10 provides  estimates of the model’s key parameters.
Based on these models, we estimated that there is a significant upward  trend for both overseas- and U.S.-homeported ships. The trend for ships  homeported overseas is increasing at a slightly and statistically significant  higher rate than ships homeported in the United States (about 1  additional report per year). Specifically, the estimated trend for the  average daily number of casualty reports per ship is increasing at a rate  of about 3.7 per year (0.3062*12 months) for overseas-homeported ships  and about 2.4 per year (0.2014*12 months) for U.S.-homeported ships.
Next, we fit the following statistical model to our data:  Casrepsit = δ Overseasit + μ + τ + eit  For ship i and month t, Casreps measured the number of deployed days  underway, Overseas indicated being homeported overseas, μ + τ were  vectors of ship and monthly fixed effects, respectively, and e was random  error.
The fixed effects held constant all ship characteristics that did not change  over time, such as class, and year commissioned. The monthly fixed  effects in τ held constant all changes over time observed among all ships.  Table 11 provides estimates of the model’s key parameters, which we  derived using least squared methods with asymptotic robustness  correction for potentially nonindependent errors with ships and for  heteroskedasticity.
Based on the model, we did not identify a statistically significant  association between higher numbers of casualty reports and a ship being  homeported overseas. However, we estimated that ships homeported  overseas had, on average, about 25 casualty reports (+/-11.6) and ships  homeported in the United States had about 20 casualty reports (+/-1.7).  The differences between these estimates are not statistically significant at  the 95 percent confidence level.
subsections: section_title: Summary and Limitations of the Results
paragraphs: Our statistical analysis described the associations among homeport type,  the average number of daily CASREPs per ship holding constant factors  such as ship type, age, and common trends in military operations. In  addition, we estimated the statistical precision of these associations. Our  analysis did not identify a statistically significant association between  overseas homeporting and a higher number of daily CASREPs. Despite  its ability to account for certain alternative explanations and quantify  uncertainty, our analysis has certain limitations that affect the  interpretation and use of its findings.
The variation in homeport type over time within ships allowed us to use  ship and fiscal year fixed effects, which can be powerful methods to  control for many unobserved factors without explicitly measuring them.  Nevertheless, the validity of our findings is limited by the lack of available  data on other factors that could vary over time within ships. Our results  are biased to the extent that these factors exist. Our results are  preliminary and should be interpreted cautiously, consistent with  estimated sampling variances, until they are replicated with additional  data.
section_title: Appendix VII: Differences between Material Readiness Inspection Scores for Ships Homeported in the United States and Overseas
paragraphs: Figures 12–14 provide a detailed presentation of the differences between  Board of Inspection and Survey (INSURV) Figure of Merit, functional  area, and demonstration scores for the most recent material inspections  from fiscal years 2007 through 2014 for ships homeported in the United  States and overseas. INSURV assigns ships an overall inspection score,  as well as scores in functional areas and demonstrations:
Figure of Merit score: INSURV assigns ships an overall inspection  score—the INSURV Figure of Merit—which is a single-number  representation of the ship’s overall material condition and represents  a ranking of this condition relative to other ships.
Functional area scores: These scores are based on inspection of a  ship’s systems (e.g., propulsion, information systems, weapons).
Demonstration scores: These scores are based on inspection of a  ship’s performance on various operational demonstrations (e.g.,  steering, full power ahead, gunnery firing).
We compared cruisers, destroyers, and amphibious ships; we excluded  mine countermeasures ships and patrol coastal ships since these ship  classes have had limited recent experience deploying from U.S.  homeports according to Navy officials. Because of the relatively small  number of ships that were inspected during this period and, in particular,  the small sample of ships homeported overseas, we did not conduct a  statistical analysis of these data using the methods we used to analyze  costs and ship conditions. Instead, we calculated simple descriptive  statistics to characterize differences between ships homeported overseas  and in the United States.
Figure 12 shows that the average INSURV Figure of Merit scores for  overseas-homeported cruisers, destroyers, and amphibious ships are  lower than those of U.S.-homeported ships.
Figure 13 shows that overseas-homeported cruisers, destroyers, and  amphibious ships are lower in 11 of 19 functional area scores compared  to U.S.-homeported ships.
Figure 14 shows that overseas-homeported cruisers, destroyers, and  amphibious ships are lower in 7 of 10 demonstration scores compared to  U.S.-homeported ships.
section_title: Appendix VIII: Comments from the Department of Defense
section_title: Appendix IX: GAO Contact and Staff Acknowledgments
subsections: section_title: GAO Contact
section_title: Staff Acknowledgments
paragraphs: In addition to the contact named above, Suzanne Wren, Assistant  Director; Jim Ashley; Steven Banovac; Joanne Landesman; Amie Lesser;  Carol Petersen; Michael Silver; Grant Sutton; Jeff Tessin; Chris Watson;  and Michael Willems made key contributions to this report.