Depot Maintenance: Improvements to DOD's Biennial Core Report Could Better Inform Oversight and Funding Decisions
Published: 2016-11-28T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: DOD uses both military depots and contractors to maintain many complex weapon systems and equipment. Recognizing the key role of the depots and the risk of overreliance on contractors, Section 2464 of Title 10 of the U.S. Code requires DOD to maintain a core maintenance capability—a government-owned and operated combination of personnel, facilities, equipment, processes, and technology. Section 2464 requires DOD to provide a Biennial Core Report to Congress that includes information for the next fiscal year on three elements of depot workload.
Section 2464 included a provision that GAO review DOD's Biennial Core Reports for compliance and completeness. In reviewing DOD's 2016 Biennial Core Report, GAO assessed the extent to which (1) the report complies with the three elements of the statute and provides complete information and (2) any changes to Section 2464 could enhance transparency. GAO reviewed relevant legislation, DOD guidance, and the 2016 Biennial Core Report.
section_title: What GAO Found
paragraphs: The Department of Defense's (DOD) 2016 Biennial Core Report to Congress complied with two of the three reporting elements required by Section 2464—core capability requirements and planned workload. It partially complied with the third element—a detailed explanation or rationale for shortfalls and accompanying mitigation plans—because DOD did not include rationales and mitigation plans for all identified shortfalls. In a prior report, GAO recommended that DOD improve its Core Report by including detailed explanations for each identified shortfall. DOD concurred with this recommendation and stated that it was taking steps to implement it. Including rationales and mitigation plans in future core reports will provide Congress visibility into whether the armed services' plans address the causes of the core shortfalls.
Regarding completeness—including accurate data and supporting information from the armed services—the armed services are not calculating their shortfalls consistently. For example, the Army and Air Force calculate their own shortfalls, while the Navy and Marine Corps' shortfalls are calculated by DOD. The armed services are not calculating their shortfalls consistently because DOD does not provide guidance on, among other things, how to calculate the shortfalls. Therefore, DOD cannot be sure that the armed services are calculating their shortfalls accurately to support the information in the Core Report.
While DOD generally reports on the elements required by Section 2464, additional information currently not required by the statute could help improve the transparency of the report so that it would better inform oversight and funding decisions. This would include information on issues such as workload shortfalls, mitigation plans, work breakdown structure categories, and whether the core requirements reported in previous core reports have been executed. To require such information in the report, Congress would need to amend the statute.
section_title: What GAO Recommends
paragraphs: Congress should consider requiring DOD to include additional information in future reports that could better inform oversight. GAO recommends that DOD update its guidance to clarify, among other things, how to calculate workload shortfalls. DOD concurred with the recommendation, but expressed concerns with Congress requiring it to include additional information in the report. GAO continues to believe that its matter for Congressional consideration is valid, as discussed in this report.

section_title: Letter
paragraphs: The Department of Defense (DOD) maintains many complex weapon  systems (such as aircraft and ships) and equipment (such as generators  and radars) that require regular and emergency maintenance to continue  being available for DOD to meet national security goals. To sustain these  systems and equipment the department uses a combination of military  depots—public-sector facilities that are government-owned and  government-operated—and private-sector contractors. Depots have a key  role in sustaining complex weapon systems and equipment both in  peacetime and during a mobilization, contingency, or other emergency.  DOD must ensure that it has what is referred to as the “capability” to  perform needed repair work by maintaining a combination of skilled  personnel, facilities and equipment, processes, and technology for each  category of maintenance work being done.
Recognizing the important role of the depots in supporting U.S. forces  and the risk of overreliance on private contractors for vital military needs,  Congress enacted legislation in 1984 that exempts certain core  maintenance activities identified by the Secretary of Defense from being  contracted out. The statute was later codified at Section 2464 of Title 10  of the United States Code and has been amended several times. Among  other things, Section 2464 requires DOD to maintain a “core depot-level  maintenance and repair capability”—a maintenance and repair capability  that is government-owned and -operated—to provide a ready and  controlled source of technical competence and resources to ensure  effective and timely response to mobilizations, contingencies, or other  emergencies. Additionally, DOD must assign these government-owned  and -operated facilities (the depots) sufficient workload to ensure that the  department can maintain cost efficiency and technical competence during  peacetime while preserving the ability to respond to a mobilization,  contingency, or emergency.
The armed services are required by DOD policy to use a computational  methodology to identify their core capability requirements and their  planned workload to support this core maintenance capability. The armed  services must submit biennially to the Secretary of Defense a report that  shows the results of this analysis and any identified shortfalls between the  requirements and planned workload.
The National Defense Authorization Act for Fiscal Year 2012 amended  Section 2464 to require DOD, among other things, to submit a biennial  report to Congress no later than April 1 of each even-numbered year.  The statute states that DOD is required to identify the following three  elements for each armed service for the subsequent fiscal year:
The core depot-level maintenance and repair capability requirements  and sustaining workloads, organized by work breakdown structure,  expressed in direct labor hours;
The corresponding workloads necessary to sustain core depot-level  maintenance and repair capability requirements, expressed in direct  labor hours and cost; and  In any case where core depot-level maintenance and repair capability  requirements exceed or are expected to exceed sustaining workloads,  a detailed rationale for any and all shortfalls and a plan either to  correct or mitigate the effects of the shortfalls.
In this report, we characterize the above three elements of DOD’s  reporting requirement as (1) core capability requirements—this refers to  the workload required to sustain core maintenance capability; (2) planned  workload; and (3) in any case where the required workload exceeds the  planned workload where there are shortfalls, a detailed rationale or  explanation of why planned workload is insufficient and a plan to correct  or mitigate the effects of the shortfall.
In our prior reviews of DOD’s 2012 and 2014 Biennial Core Reports, we  found that DOD had complied with two of the three required reporting  elements of Section 2464 by including information on core capability  requirements and the planned workload available to meet these  requirements. We also found that the report partially complied with the  third reporting element. Specifically, DOD’s reports included information  on shortfalls, as well as plans to mitigate the effects of all shortfalls where  requirements exceeded planned workload. However, the report did not  include required information on the rationale for some of these  shortfalls—reasons why the armed services did not have the workload to  meet core requirements. We also found that the 2014 Core Report  contained data errors for the first two elements. In our 2013 report, we  recommended that DOD improve its Biennial Core Report (Core Report)  by including detailed explanations of why the armed services did not have  the workload to meet core maintenance requirements for each identified  shortfall. In our 2014 report, we recommended that DOD implement  improvements to ensure that future Core Reports will be more accurate  and complete. DOD concurred with both recommendations and stated  that it would take steps to implement them. For a listing of relevant past  GAO work, see the Related GAO Products list at the end of this report.
The statute includes a provision for us to analyze DOD’s Core Report  after it is submitted to Congress, for compliance with Section 2464,  assess the completeness of the report, and provide findings and  recommendations to DOD. Also, House Report 114-02 accompanying the  National Defense Authorization Act for Fiscal Year 2016 includes a  provision for us to identify potential changes to 10 USC 2464(d) that could  enhance the transparency of the Core Report. DOD submitted its third  Core Report to Congress on June 10, 2016 and included the Missile  Defense Agency (MDA) as one of the reporting agencies, along with the  armed services. In this report, we (1) assess the extent to which the  Biennial Core Report complies with the three reporting elements required  by Section 2464 and is complete and (2) identify potential changes to  Section 2464 that could enhance transparency in the Biennial Core  Report. We briefed your staff on August 4, 2016, as required, on our  preliminary observations on DOD’s compliance in addressing each  element in Section 2464(d). This report provides the final results of our  analyses.
To assess the extent to which DOD’s Core Report complies with Section  2464, we analyzed the text of the report, compared the text of the report  with the elements required by the statute, and obtained information on the  process by which DOD identified its core capability requirements and the  workload needed to sustain its core maintenance capability for fiscal year  2017. When the report explicitly included all parts of the required  reporting element, we determined that DOD “complied” with the element.  When the report did not explicitly include any part of the element, we  determined that DOD “did not comply.” If the report included some  aspects of an element, but not all, then we determined that DOD “partially  complied.” In those cases where we had determined that the report did  not include some aspects of a required element, we discussed our  preliminary analyses with the Office of the Secretary of Defense (OSD)  and armed service officials to seek additional information. To assess the  report’s completeness, we obtained and analyzed fiscal year 2017 data,  including core capability requirements and sustaining workload expressed  in direct labor hours and cost, and other information such as workload  shortfall explanations that OSD required the armed service headquarters  to submit in support of the report. In order to determine if these data and  information were complete, we performed a number of data check steps  to identify inconsistencies or errors and discussed our analyses with OSD  and armed service officials, which also led us to conclude that the data  were sufficiently reliable for the purposes of this report. We assessed the  accuracy and completeness of the information in DOD’s 2016 Biennial  Core Report using criteria outlined in Standards for Internal Control in the  Federal Government, for example, that management should design  control activities so that all transactions are completely and accurately  recorded.
To identify potential changes to Section 2464 that could increase  transparency, we reviewed DOD’s guidance, Section 2464, and criteria  outlined in Standards for Internal Control in the Federal Government, for  example, that management should design control activities to achieve  objectives and respond to risks, to determine what additional information  OSD could report to Congress. We also interviewed OSD’s and the  reporting agencies’ officials to identify any additional information that  could be included in the Core Report.
We conducted this performance audit from June 2016 to November 2016  in accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives. We discuss our scope and  methodology in more detail in appendix III.
subsections: section_title: Background
subsections: section_title: Determining Core Capability Requirements
paragraphs: DOD Instruction 4151.20 requires the armed services to apply a process  to determine their core capability requirements—that is, to identify what  core capabilities are required and what workload would be necessary to  enable them to sustain these core capabilities at the depots. DOD  Instruction 4151.20 describes a series of mathematical computations and  adjustments that the armed services are required to use to compute their  core capability requirements and to identify the workload that needs to be  planned to support these requirements. Also, the instruction requires that  the armed services identify the weapon systems required to execute the  Joint Chiefs of Staff contingency scenarios, which represent plans for  responding to conflicts that may occur in the future. After systems are  identified, the armed services compute annual depot maintenance  capability requirements for peacetime, in direct labor hours, to represent  the amount of time they will regularly take to execute required  maintenance. An armed service may determine that repair capabilities for  certain systems maintained at the depots are so similar that they share  common base repair processes that can effectively satisfy the repair  requirements of other systems.
During this process of identifying the systems for which they will be  required to maintain repair capabilities, DOD Instruction 4151.20 requires  that the armed services organize and aggregate their capability data by  categories of equipment and technologies known as work breakdown  structure categories. The work breakdown structure category is a  grouping of work associated with DOD’s weapon systems and equipment.  DOD uses these categories to organize data on its various core capability  requirements and workloads to manage and report on its core  capabilities. There are 11 categories at the top level—”first level”—of the  work breakdown structure. A first-level category summarizes information  for an entire type of system or equipment. Table 1 shows the 11 first-level  categories of the work breakdown structure.
A first-level category can be broken down into second-level  subcategories, which are the major elements that make up the system or  equipment in the first-level category. For example, the first-level category  for Aircraft can be broken down into the second-level subcategories for  Airframes, Aircraft Components, and Aircraft Engines, which are major  elements that make up an aircraft. The second-level subcategories can  be further broken down into third-level subcategories, which are  subordinate elements that make up the major elements in the second- level categories. For example, the second-level subcategory for Airframes  is further divided into the third-level subcategories—different types of  airframes, such as Rotary, Fighter/Attack, or Bomber. The subcategories  can be further broken down to the lowest-level element of the system.  Lower-level categories are subcategories of the eleven first-level work  breakdown structure categories. DOD refers to these levels as “levels of  indenture.” The work breakdown structure can be expressed at any level  of detail down to the lowest-level part, such as a bolt. Table 2 shows an  example of the top three levels of the work breakdown structure for  Aircraft.
The instruction requires the armed services to identify their core capability  requirements and the amount of available planned workload within the  work breakdown structure categories and subcategories.
section_title: Reporting Core Maintenance Capability
paragraphs: DOD Instruction 4151.20 requires each DOD Component that performs  depot maintenance to report biennially to OSD its core capability  requirements and planned workload, in accordance with a tasking  memorandum issued for each reporting cycle. The instruction includes a  worksheet called the “core submission worksheet” that the components  are to complete and submit to OSD. The worksheet calls for information  to be organized by the work breakdown structure to various subcategory  levels, mostly at the second level of subcategories. Appendix III provides  a table listing these categories and subcategories.
On October 5, 2015, OSD issued the tasking memorandum for the 2016  Biennial Core Report, which directs the armed services and the Missile  Defense Agency to use DOD Instruction 4151.20 as basic guidance and  includes further guidance on how to meet the requirement under Section  2464 to report this information to Congress. The memorandum augments  the core submission worksheet by adding another column for the  estimated costs of performing the planned workload at the first-level of  work categories. The instruction and tasking memorandum also require  the armed services to provide additional information when reporting  shortfalls in planned workloads. If an armed service does not have  sufficient workload to sustain the required level of capability that has been  identified, a shortfall exists; in other words, the military depots have not  been assigned sufficient depot maintenance workload to enable them to  sustain their identified core capabilities. For example, an armed service  may have identified 10,000 direct labor hours of core capability  requirements for ground vehicles but have only 4,000 hours of anticipated  depot maintenance work for ground vehicles. This armed service will  have a workload shortfall of 6,000 hours. The instruction requires that the  armed services report on shortfalls by providing a description of those  shortfalls and a plan to address them to accompany the core submission  worksheet, but it does not require that the shortfalls be calculated in the  core submission worksheet.
section_title: Missile Defense Agency Included as a Reporting Agency in DOD’s 2016 Biennial Core Report
paragraphs: The Missile Defense Agency (MDA) was created in 2002 to develop a  variety of systems, known as elements—including sensors, interceptors,  command and control, battle management, and communications—to  enable the warfighter to destroy enemy missiles before they can reach  their targets. The ultimate goal is to integrate these various elements to  function as a single system: the Ballistic Missile Defense System (BMDS).  Once BMDS capabilities are developed that are useful to the warfighter,  the management and some funding responsibility for the operation and  sustainment of the capability is to be transferred to a lead service within  the armed services.
In 2003, MDA recommended and DOD approved the transfer of one  system element, Patriot Advanced Capability–3 (PAC–3) program, to the  Army. The PAC-3 was transferred to the Army because MDA had  completed the initial development of this element and the Army, as the  lead service, would now be responsible for managing the production,  operation and sustainment of the PAC-3. According to MDA officials, to  date, no other elements of the BMDS have transferred to the armed  services. These officials also stated that MDA is responsible for the  management, funding, production, operation, and sustainment of these  elements and has been providing maintenance through contractor  logistics support.
For its 2016 Core Report, DOD included MDA as a reporting agency  because, according to OSD, the BMDS developed by MDA is used to  respond to contingency operations and has been identified as a core  capability. To support the data in the Core Report, MDA provided  information on three of the five elements of the BMDS in its core  submission worksheet:  1.  Aegis Ballistic Missile Defense – includes ship- and land-based  ballistic missile defense capabilities using a radar, command and  control, and Standard Missile-3 interceptors. The Navy was  designated as the lead service in 2006.  2.  Army Navy/Transportable Radar Surveillance – forward-based,  land-based radar to provide additional advance warning of ballistic  missile launches. The Army was designated as the lead service in  2006.  3.  Terminal High Altitude Area Defense – a mobile, ground-based  system to defend against short- and medium-range threats using a  battery that consists of interceptors, launchers, a radar, and fire  control and communication systems. The Army was designated as the  lead service in 2006.
According to MDA officials, they included these three system elements in  their core submission worksheet because these elements are in use by  the warfighter. MDA did not include the following two system elements in  its core submission worksheet:  4.  Command and Control, Battle Management and Communications  – a globally deployed system of hardware—workstations, servers, and  network equipment—and software that links and integrates individual  elements, allowing users to plan ballistic missile defense operations,  see the battle develop, and manage networked sensors. MDA  developed this system in 2002.  5.  Ground-Based Midcourse Defense – defends against intermediate-  and intercontinental-range ballistic missiles by using ground-based  interceptors that consist of a booster and a kill vehicle, plus a ground  system that includes launch, communications, and fire control  capabilities. The Army was designated as the lead service in 2006.
According to MDA officials, they did not include these two system  elements in their core submission worksheet because these elements are  considered developmental programs and are not yet considered safe and  suitable for use by the warfighter.
section_title: DOD Complied with Two of the Three Required Reporting Elements and Partially Complied with the Third, and the Report Was Not Complete Due to Some Inaccurate Data
paragraphs: DOD’s 2016 Core Report to Congress complied with two of the three  required reporting elements of Section 2464—core capability  requirements and planned workload. It partially complied with the third  element, because it included information on shortfalls and mitigation  plans, but it did not provide detailed explanations of all shortfalls and  mitigation plans, as shown in table 3 below. Additionally, DOD included  MDA as a reporting agency in its 2016 Core Report but did not report  accurate information for it. Lastly, reporting agencies did not always  provide accurate data for the Core Report because they do not have clear  guidance on issues such as how to report additional depot workload  performed that has not been identified as a core requirement, accurately  capture inter-service workload, calculate shortfalls, and estimate cost of  planned workload.
subsections: section_title: The Report Included Information on Core Capability and Planned Workloads
paragraphs: DOD’s 2016 Core Report complied with the first two elements in Section  2464—to provide information on core capability requirements and  planned workload. As requested by OSD to support the Core Report, the  armed services provided data on their core capability requirements,  organized by lower-level elements of the eleven first-level categories of  the work breakdown structure. The report included the required  information on core capability requirements—expressed in direct labor  hours—at the first-level category of the work breakdown structure, for  each of the armed services. As reported in DOD’s 2016 Core Report,  DOD’s total core capability requirements are about 58.5 million direct  labor hours, as shown in table 4.
As requested by OSD to support the Core Report, the armed services  also provided data on their planned workloads—the amount of available  work used to maintain the required capability, organized by lower-level  elements of the eleven first-level categories of the work breakdown  structure. In the report, OSD included information on the amount of  planned workload that is available to maintain the required capability at  the first-level categories of the work breakdown structure, expressed in  direct labor hours, and the estimated cost of these workloads for each of  the armed services. As shown in table 5, DOD reported a total planned  workload of about 93 million direct labor hours at an estimated cost of  about $12 billion.
section_title: The Report Included Information on Shortfalls but Did Not Include Mitigation Plans and Detailed Explanations for Some Shortfalls
paragraphs: In the 2016 Core Report, DOD included information on shortfalls;  however, DOD did not include mitigation plans and detailed explanations  for some of the identified shortfalls. The Air Force identified shortfalls  under 1 of the 11 first-level work breakdown structure categories totaling  almost 340,000 direct labor hours, as shown in table 6. However, in its  Core Report, DOD did not include any shortfalls for the Army, Navy, and  Marine Corps at the first-level work breakdown structure categories.
OSD provided shortfall data in the Core Report consistent with how it  reported its core requirements and planned workloads. OSD aggregated  the workload shortfalls under the first-level work breakdown structure  categories for each armed service in its 2016 Core Report.
DOD partially complied with the third reporting element in Section 2464— to provide rationales and mitigation plans for identified shortfalls. The  Core Report included (1) rationales and mitigation plans for all of the  shortfalls at the lower-level categories identified by the Marine Corps, (2)  rationales for shortfalls at the lower-level categories identified by the Army  but not mitigation plans to address all of these shortfalls, and (3)  rationales and mitigation plans for some but not all of the shortfalls at the  first- and lower-level categories identified by the Air Force. The Core  Report did not include rationales or mitigation plans for the Navy,  because the Navy did not identify any shortfalls at the first- or lower-level  categories. Specifically, the Army identified shortfalls in the lower-level  category of Bradley Fighting Vehicle. According to the Army, these  shortfalls were due to declining depot repair requirements; however, the  Core Report did not provide a mitigation strategy for this identified  shortfall. In another example, the Air Force identified shortfalls in the  lower-level categories of aircraft airframes, aircraft components, aircraft  engines, and missile components, but it did not provide a rationale or a  mitigation plan for these shortfalls. Section 2464 requires the armed  services to provide a detailed rationale for any and all shortfalls and a  plan to either correct or mitigate the shortfall. In the Core Report, DOD did  not include shortfall rationales and mitigation plans for all of the shortfalls  identified by the reporting agencies in the lower-level categories.  According to OSD officials, skills, facilities, and equipment are  transferrable from one system to another within a work breakdown  structure category and could mitigate shortfalls within that same work  breakdown structure category. However, DOD did not consistently include  in the Core Report these similar capabilities that were used to mitigate the  shortfalls. Including this information in the Core Report would provide  Congress visibility into whether the armed services’ plans would address  the causes of the shortfalls. In February 2013, we recommended that  DOD improve its Core Report by including detailed explanations of why  the armed services did not have the workload to meet core maintenance  requirements for each identified shortfall.  DOD concurred with this  recommendation and stated that it would take steps to implement it but  did not implement it fully for its 2016 Core report.
section_title: DOD’s Report Was Not Complete Because Some Data Were Inaccurate
paragraphs: DOD included MDA as a reporting agency in its 2016 Core Report but did  not report accurate information for the associated reporting elements.  Additionally, the Core Report and reporting agencies’ core submission  worksheets included some inaccurate data, such as data on workload  performed—which has not been identified as a core requirement—inter- service workload, shortfall calculations, and estimated cost of planned  workload.
subsections: section_title: DOD Included MDA as a Reporting Agency in its 2016 Core Report but Did Not Always Report Accurate Information
paragraphs: While DOD was not required to include information from MDA as part of  the Core Report, MDA’s information was included in the 2016 Core  Report. According to OSD, MDA was included because the BMDS  developed by MDA is used to respond to contingency operations and has  been identified as a core capability. For its 2016 Core Report, DOD  reported on MDA’s (1) core requirements, (2) planned workloads, and (3)  shortfall rationale and mitigation plan. Specifically, DOD included  information from MDA on two of the three reporting elements but did not  include the third element, as shown in table 7 below.
In assessing the completeness of the Core Report, we determined that  the report included the core requirements information, planned workload  and estimated cost, and workload shortfall for MDA, as shown in table 8.
However, MDA’s core submission worksheet and the Core Report  contained some inaccurate data for the core capability requirement. For  example, in the Communication/Electronic Equipment category, DOD  reported 39,624 direct labor hours of core requirement, but MDA  submitted 0 direct labor hours of core requirement on its core submission  worksheet.
As reported in the Core Report, MDA had a total planned workload of 799  direct labor hours and an estimated cost of about $69,000,000. According  to MDA officials, this workload is being performed by the Navy Surface  Warfare Center; however, Navy officials stated that the Navy is not  identifying this workload on its core submission worksheet. Additionally,  MDA’s core submission worksheet and the Core Report contained data  inaccuracies in some of the work breakdown categories. For example, in  the Sea Ships category, DOD reported 0 direct labor hours of planned  workload, but MDA submitted 2,139 direct labor hours of planned  workload on its core submission worksheet. In another example, MDA  reported the estimated cost of planned workload in several categories but  did not report any planned workload in those categories. According to  MDA officials, they could not accurately calculate planned workload  because MDA does not have any depots.
Further, in the Core Report, DOD identified shortfalls for MDA in each of  the categories where MDA reported a core capability requirement.  However, according to MDA officials, they could not accurately calculate  shortfalls because MDA does not have any depots. For example, in the  Ordnance, Weapons, & Missiles category, DOD reported 2,125 direct  labor hours of workload shortfalls, but our analysis of MDA’s core  submission worksheet shows a calculation of 0 direct labor hours of  workload shortfalls. According to MDA officials, DOD Instruction 4151.20  requires it to identify workload performed in depots, and MDA does not  have any depots. MDA did not complete the core submission worksheet  according to DOD Instruction 4151.20, and DOD did not consistently  include the data in the Core Report as it was provided by MDA in its core  submission worksheet. As a result, the data on MDA in the Core Report  contained inaccurate information.
Lastly, MDA did not include a detailed rationale for the shortfalls it  identified or a plan to correct or mitigate the effects of these shortfalls.  MDA’s narrative in the Core Report provided the current status of the  BMDS and reported that it used the military departments for operations  and support and would continue to coordinate with OSD to conduct  comprehensive depot maintenance assessments to meet all reporting  requirements. MDA officials told us that they did not provide a detailed  rationale for the shortfalls it identified or a plan to correct or mitigate the  effects of these shortfalls because they do not own any depots to perform  core workload and thus do not have any shortfalls.
OSD provided MDA with DOD Instruction 4151.20 and the tasking  memorandum to assist it with completing the core submission worksheets  to comply with the reporting requirements. Additionally, according to MDA  officials, they received a briefing to assist them in completing their initial  core submission worksheet. According to OSD officials, some of the  inaccurate data in the Core Report was due to errors in transferring the  data from the core submission worksheet to the final Core Report, and  other errors were due to MDA not completing the core submission  worksheet according to the instructions provided by OSD because,  according to MDA officials, they do not have any depots. However,  according to OSD, MDA is responsible for the life-cycle support of the  BMDS and currently conducts maintenance through contractors.  Therefore, OSD included MDA in the Core Report because the BMDS  system has been identified to support a core capability. If DOD decides to  continue to include MDA as one of the reporting agencies in future Core  Reports, DOD should ensure that the associated data are complete and  accurate. We previously recommended that DOD implement  improvements to ensure that future Core Reports will be more accurate  and complete. DOD concurred with this recommendation and stated  that it would take steps to implement it but did not fully do so for its 2016  Core Report.
section_title: Core Report Included Other Inaccuracies due to Lack of Clear Guidance
paragraphs: DOD’s Core Report and the core submission worksheets provided to  OSD to support the Core Report included some inaccurate data. For  example, in the Core Report, OSD reported planned workload for the  Marine Corps in the Sea Ships category without reporting a core  requirement or an estimated cost associated with this workload, as shown  in table 9. This additional information caused an anomaly in the Marine  Corps’ data in the Core Report.
OSD and Marine Corps officials explained that this additional work is  conducted by the Marine Corps for the Navy and Coast Guard; however,  it is not a core requirement for the Marine Corps. Additionally, according  to Marine Corps officials, they did not provide an Estimated Cost of  Planned Workload for this work because the work is not considered core.  According to OSD officials, these data should not be included in the Core  Report. However, in its review of the Core Report, OSD did not correct  this error. DOD Instruction 4151.20 requires the armed services to  calculate and report all planned workload that supports core capability  requirements and any additional workload performed at depots. The  Marine Corps’ data contained this anomaly in the Sea Ships category  because DOD Instruction 4151.20 does not provide clear guidance on  how reporting agencies should report additional depot workload they  performed that has not been identified as a core requirement.
The reporting agencies expressed concerns about the inter-service  workload data requested on the core submission worksheets because, as  we found, some of the services do not categorize their inter-service  workload in the same work breakdown structure category as the service  for which they are performing the workload or which is performing  workload for them. According to Air Force officials, one service’s inter- service transfer-in (workload being performed by another service) may  not match another service’s inter-service transfer-out (workload given to  another service to perform), because the services are not coordinating  verification that each service is accounting for inter-service workload in  the correct work breakdown structure category. Additionally, MDA is  reporting workload being performed by the Navy on MDA systems.  However, according to Navy officials, the Navy is not performing any work  on MDA systems that are identified as core. DOD Instruction 4151.20  requires the reporting agencies to report inter-service workload as part of  their core submission worksheet; however, the instruction does not  require the reporting agencies to coordinate on how they are capturing  their inter-service workload. The reporting agencies may not be  accurately capturing inter-service workload because DOD has not  provided any guidance on how they should coordinate to categorize their  workload in the same work breakdown structure category.
Further, the reporting agencies are not calculating or displaying their  workload shortfalls consistently. For example, the Army and Air Force  calculate and display their shortfalls on the core submission worksheet,  while the Navy and Marine Corps’ shortfalls are calculated by DOD and  not displayed on the core submission worksheet. The Navy and Marine  Corps did not calculate or display any shortfalls on their core submission  worksheets because, according to Navy and Marine Corps officials, DOD  Instruction 4151.20 does not require them to do so. In another example,  MDA reported shortfalls in each of the categories where it identified a  core capability requirement. However, as we previously mentioned,  according to MDA officials, they could not accurately calculate shortfalls  because MDA does not have any depots. Also, MDA did not display its  shortfalls on the core submission worksheet because DOD Instruction  4151.20 does not require it to do so. The reporting agencies are not  calculating or displaying their shortfalls consistently because DOD does  not provide the reporting agencies guidance on how to calculate or  display their shortfalls.
Additionally, the reporting agencies are not consistently calculating the  estimated cost of planned workload as reported in the Core Report. For  example, the armed services use the Financial Management Regulation  as a basis for calculating their estimated cost of planned workload.  Specifically, Air Force officials stated that they calculated the estimated  cost of planned workload using rates from the Financial Management  Regulation and multiplied those rates by the rate per hour of the repair  group category or specific work type. In another example, MDA officials  stated that they use the Financial Management Regulation; however, its  calculation included private sector maintenance workload and costs for  the core planned workload. However, the Core Report should include cost  information only for workload performed at military depots, and not  workload performed by the private-sector. MDA officials told us that OSD  guidance does not explain how to calculate the estimated cost for core  planned workloads. OSD provided supplemental guidance as part of its  memorandum to the reporting agencies; however, the memorandum  stated that the estimated costs of performing the core planned workloads  only needed to be identified at the top level of the work breakdown  structure. Further, the DOD Instruction 4151.20 template for the core  submission worksheet does not include guidance on how to calculate the  cost. In the Core Report, MDA’s reported estimated cost of planned  workload may not be accurate, because DOD does not provide guidance  to the reporting agencies on how to calculate the estimated cost of  performing the planned workloads. However, according to OSD and the  armed services, they do not use the estimated cost of planned workload  to make budgetary decisions.
According to the Standards for Internal Control in the Federal  Government, management should design control activities to achieve  objectives and respond to risks and they should implement control  activities through policies. For example, management should design  control activities so that all transactions are completely and accurately  recorded. Additionally, management should periodically review policies,  procedures, and related control activities for continued relevance and  effectiveness in achieving the entity’s objectives. An OSD official told us  that OSD answered questions the reporting agencies had as they were  assembling their information. Further, OSD explained that its internal  controls processes include reviewing each reporting agency’s information  submission for factors such as whether it is consistent with DOD policy  and the statute. OSD and reporting agency officials stated that before  DOD’s final 2016 report was issued, the reporting agencies had the  opportunity to review and make any necessary corrections to the report.  However, according to an OSD official, when reporting agencies do not  comply with DOD instructions—introducing inaccurate information into  DOD’s reporting—there is no additional guidance to hold the reporting  agencies accountable.
The instruction does not provide guidance on how to report additional  information to support the Core report, partly because DOD Instruction  4151.20 was issued in 2007, before the biennial reporting requirement in  Section 2464 was enacted in 2011. Since DOD Instruction 4151.20 was  issued before Section 2464 was enacted, the Instruction does not  completely align with the reporting requirements of the law. DOD  Instruction 5025.01 provides that instructions published before March 25,  2012 should be updated or cancelled within 10 years of their publication  date. Because the instruction has not been aligned with the  requirements in Section 2464, reporting agencies do not have the clear  guidance they need to ensure that they are submitting data that is  accurate and complete.
section_title: Additional Information Could Increase the Transparency of the Biennial Core Report
paragraphs: While DOD generally reports on the required elements set forth in Section  2464(d), there is additional information on core capabilities that DOD  could provide to better inform congressional oversight and funding  decisions. Such information could include workload shortfalls at lower- level categories; executed workload in similar categories that could be  used to mitigate shortfalls; progress on implementing mitigation plans;  data reported at the first-level category of the work breakdown structure,  except for when shortfalls are identified; explanations for first-level  categories of the work breakdown structure(i.e., Special Interest Items  and Other); and whether the core requirements reported in the previous  Biennial Core Report have been executed.
subsections: section_title: Additional Information on Workload Shortfalls, Mitigation Plans, and Work Breakdown Structure Categories Could Provide More Transparency in the Core Report
subsections: section_title: DOD Could Provide Additional Information on Workload Shortfalls
paragraphs: As stated previously, DOD reported workload shortfalls for the first-level  categories of the work breakdown structure in its Core Report. DOD also  provided rationales and mitigations plans for some shortfalls that were  identified by the reporting agencies at the first- and lower-level categories.  However, DOD did not break out workload shortfalls at the lower-level  categories of the work breakdown structure in its Core Report. Based on  our analysis of service data provided to OSD, we determined that the  Navy did not have workload shortfalls at any of the lower-level categories  of the work breakdown structure. However, we determined that the Army,  Marine Corps, and Air Force did have workload shortfalls for some of the  lower-level categories of the work breakdown structure for which they  provided information to OSD. Specifically, the Army submitted information  to OSD on shortfalls in lower-level categories totaling approximately  200,000 direct labor hours. These shortfalls are in various second and  third-level subcategories under the top categories of Aircraft, Ground  Vehicles, Support Equipment, and Communication/Electronic Equipment,  as shown in table 10. For example, the Army identified about 29,000  direct labor hours of core shortfalls under generators—a subset of the  Support Equipment category.
The Marine Corps identified shortfalls of about 35,000 direct labor hours  at lower-level categories within Ordnance, Weapons, and Missiles;  Ground Vehicles; and Support Equipment, as shown in table 11. For  example, the Marine Corps identified about 18,000 direct labor hours of  core shortfalls under Conventional Weapons—a subset of the Ordnance,  Weapons, and Missiles category.
For the Air Force, the report reflects total workload shortfalls of  approximately 340,000 direct labors hours at the first-level category of  Communication/Electronic Equipment. However, the Air Force also  provided information to OSD on additional shortfalls of about 816,000  direct labor hours for lower-level categories in Aircraft;  Communication/Electronic Equipment; Ordnance, Weapons, and  Missiles; and Other, as shown in table 12. For example, the Air Force  identified about 236,000 direct labor hours of shortfalls in missile  components—a subset of Ordnance, Weapons, and Missiles.
According to Standards for Internal Control in the Federal Government,  management should design control activities to achieve objectives and  respond to risks. For example, in determining the level of precision for a  control activity, management should consider the level of aggregation. A  control activity that is performed at a more granular level generally is  more precise than one performed at a higher level.
For the report, OSD aggregated the information on lower-level shortfalls  provided by the services to the first-level categories of the work  breakdown structure. OSD officials told us that they chose to report at the  first-level categories of the work breakdown structure because they  believe that extra planned workload in some lower-level categories could  make up for shortfalls in the other categories of the work breakdown  structure. They noted that skills, facilities, and equipment are  transferrable from one system to another within a work breakdown  structure category, and that aggregation at higher levels gives a more  accurate picture of shortfalls. Therefore, according to officials, they  decided not to include these lower-level shortfalls in the report. OSD did  not consistently include in the Core Report these similar capabilities that  were used to mitigate the shortfalls. OSD officials told us that the data at  the first-level category are all the information necessary for oversight.  However, DOD obtains these data at the lower-level categories as part of  each reporting agencies’ core submission worksheet, and it could readily  provide this additional information as part of the Core Report. Reporting  the information at the lower-level categories would provide Congress with  greater visibility over the core workload shortfalls.
As stated previously, DOD did not consistently include in the Core Report  similar capabilities that were used to mitigate the shortfalls. Also, in  analyzing data from the reporting agencies on workload executed at the  depots, we found that the Army and Navy had workload shortfalls in  lower-level categories. For example, the Army did not execute sufficient  workload to sustain its core capability requirements in Combat Vehicles, a  lower-level category of Ground Vehicles. Additionally, the Navy did not  execute sufficient workload to sustain its core capability requirements in  Surface Combatants/Others, a lower-level category of Sea Ships. As  noted above, Standards for Internal Control in the Federal Government  states that management should consider the level of aggregation. A  control activity that is performed at a more granular level generally is  more precise than one performed at a higher level. Additionally,  management should establish and operate activities to monitor the  internal control system and evaluate the results. According to Army and  Navy officials, they believe that extra executed workload in the first-level  categories (i.e., Ground Vehicles and Sea Ships) could make up for the  shortfalls in the lower-level categories (i.e., Combat Vehicles and Surface  Combatants/Others). It could benefit Congress to have information in the  Core Report on how DOD executed workload in similar capabilities to  mitigate shortfalls at lower-level categories.
section_title: DOD Could Provide Additional Information on Mitigation Plans
paragraphs: While DOD provides in its Core Report mitigation plans to correct the  shortfalls it identified, it does not provide information on how prior  mitigation plans were implemented to correct shortfalls or an update on  the progress of the plans to mitigate shortfalls. For example, in the 2012  Core Report, the Army reported shortfalls in the Ground Vehicles and  Support Equipment categories. The Army stated that, as part of its  mitigation plan, it would use similar capabilities to correct the shortfalls it  identified in both categories. However, the Army did not provide an  update in the 2014 or 2016 Core Reports on whether the similar  capabilities it used corrected the shortfalls in the Ground Vehicles and  Support Equipment categories. In another example, the Marine Corps  reported shortfalls in the 2014 Core Report in the category of  Communications/Electronic Equipment. The Marine Corps stated that, as  part of its mitigation plan, it would establish the capabilities to correct this  shortfall within two years and until then would use other sources to  mitigate this shortfall. However, the Marine Corps did not provide an  update on its mitigation plan in the 2016 Core Report. Similarly, the Air  Force reported shortfalls in the 2012, 2014, and 2016 Core Reports in the  category of Communications/Electronic Equipment. As part of its  mitigation plan to correct this shortfall, the Air Force reported in the 2012,  2014, and 2016 Core Reports that it needed to establish capabilities by  2016. However, the 2014 and 2016 reports did not provide an update on  the progress made to establish these capabilities.
As required in Section 2464, in its core reports, DOD provides mitigation  plans laying out how the reporting agencies will correct or mitigate  workload shortfalls; however, the statute does not require DOD to provide  information on how prior mitigation plans were implemented to correct  shortfalls or an update on the progress of the plans. According to  Standards for Internal Control in the Federal Government, management  should establish and operate activities to monitor the internal control  system and evaluate the results. As part of its subsequent Core Reports,  Congress could require DOD to provide information on how prior  mitigation plans were implemented to correct shortfalls or to provide an  update on the progress of the plans. Such granular information would  increase visibility for congressional oversight and help increase the  transparency of the Core Report.
section_title: DOD Could Provide Additional Information on Work Breakdown Structure Categories
paragraphs: Section 2464 does not specify at which level of the work breakdown  structure the Core Report information should be reported, only that the  information should be organized by work breakdown structure and  expressed in direct labor hours. As DOD has done in its previous Core  Reports, it could continue providing core data at the first-level category of  the work breakdown structure. However, for future core reports, when  shortfalls are identified, it could also provide these data at the lower-level  categories.
Further, DOD could provide additional information in the Core Report that  explains what items are included in two categories of the work breakdown  structure: “Special Interest Items” and “Other.” DOD does not specify in  the Core Report what types of items are included in these categories.  Since the 2012 Core Report, no reporting agency has reported in the  “Special Interest Items” category. According to the reporting agencies’  officials, they are unsure of what is included in that category and no  guidance has been provided on what should be included in it. On the  other hand, since the 2012 Core Report, some of the reporting agencies,  including the Army, Navy, Air Force, and MDA have reported in the  “Other” category. According to reporting agencies’ officials, some of the  weapon systems or equipment included in the “Other” category are rail  equipment, Marine Air System Remote Firing Device, Laser Range  Finder, shelter components, vehicle components, and storage.  Additionally, MDA used the “Other” category to report on the Terminal  High Altitude Aerial Defense system, since it did not fit into any of the  other categories. As previously stated, according to Standards for Internal  Control in the Federal Government, management should consider the  level of aggregation. A control activity that is performed at a more  granular level generally is more precise than one performed at a higher  level. However, DOD is not including this additional information, because  the statute does not require it. Information about what is included in these  two categories could increase visibility to Congress by increasing  transparency in the Core Report.
section_title: DOD Could Provide Information on Whether the Reporting Agencies Are Meeting Core Capability Requirements
paragraphs: DOD could provide information to Congress on whether the reporting  agencies are meeting their core capability requirements. Service officials  told us that they are using different mechanisms to assess workload  executed at the depots, which provide insight on whether they are  sustaining their capability to meet their requirements, but that this  information is not being reported to OSD or Congress. For example, the
Army is able to compare executed core workload against the core  requirements it reported. The Army uses a reporting tool that tracks  the executed core workload against the core requirements for fiscal  year 2015, and the report generated with this tool enables it to identify  whether the Army is meeting its core capability requirements.
Navy is able to compare some executed core workload against the  core requirements reported in the Core Report. For example, Navy  officials provided data on the number of hours executed at shipyards  that enabled comparison of executed core workload on sea ships  against core requirements identified in the Core Report. The Navy  also provided executed workload data for fiscal year 2015 at the Fleet  Readiness Centers. According to Navy officials at the Fleet Readiness  Centers, they are able to distinguish core executed workloads for first- level categories, such as an aircraft, but unable to do so for  components. According to officials, they have sufficient workload data  to make management decisions to determine whether they are  meeting their core capability requirements.
Marine Corps officials told us that they do not maintain executed core  workload to compare to the core requirements reported in the Core  Report. However, according to Marine Corps officials, the Marine  Corps’ system should enable it to track how the executed workload  compares with the reported core requirements.
Air Force officials told us that they are not able to compare executed  core workload to the core requirements reported in the Core Report.
According to Air Force officials, Air Force systems would not enable a  direct comparison, because the work categories tracked by these  systems do not align with the work breakdown structure categories in  the Core Report. However, Air Force officials stated that they could  make general comparisons between executed workload and the Air  Force’s core requirements.
The reporting agencies are not consistently comparing or reporting  whether workload intended to sustain a core capability has been  executed, because DOD Instruction 4151.20 does not require them to do  so. Moreover, while Section 2464 requires DOD to assign sufficient depot  maintenance workload to sustain a core capability, it does not require  DOD to determine whether the assigned workload has been executed. As  we have previously stated, according to Standards for Internal Control in  the Federal Government, management should establish and operate  activities to monitor the internal control system and evaluate the results.  Some of the reporting agencies did not execute sufficient workload to  sustain their core capability requirements, and DOD does not provide  Congress information on whether a core capability has been sustained.  As a result, Congress does not have the information it needs to make  well-informed oversight and funding decisions, because it does not know  to what extent the reporting agencies possess the core logistics  capabilities specified in Section 2464.
section_title: Conclusions
paragraphs: Section 2464 requires DOD to maintain a core maintenance capability  that is government-owned and government-operated, assign sufficient  workload to support this capability, and report information on this  capability to Congress, among other things. DOD’s third Biennial Core  Report to Congress complies with most of the required reporting elements  but does not provide detailed or complete explanations for all of the  identified workload shortfalls, nor does it provide mitigation plans to  address these shortfalls. DOD’s 2016 Biennial Core Report includes  incomplete information on additional depot workload performed that has  not been identified as a core requirement, inter-service workload,  shortfalls, and the estimated cost of planned workload. This information is  incomplete because DOD Instruction 4151.20 is not completely aligned  with the requirements in Section 2464 and therefore does not provide  clear guidance. Detailed rationales for why the reporting agencies do not  have the workload to meet core maintenance requirements and their  explanations for how they plan to mitigate the shortfalls would provide  information that Congress currently does not have about how the  reporting agencies’ actions would correct the shortfalls. Additionally, DOD  monitors information on whether the reporting agencies are meeting core  capability requirements that also could be included in the Biennial Core  Reports to increase their transparency. This additional information  includes workload shortfalls at lower-level categories; executed workload  in similar categories that could be used to mitigate shortfalls; progress on  implementing mitigation plans; data reported at the first-level category of  the work breakdown structure, except for when shortfalls are identified;  explanations for first-level categories (i.e., Special Interest Items and  Other) of the work breakdown structure; and whether the core  requirements reported in the previous Biennial Core Report have been  executed. According to DOD officials, some of these data and information  have not been included in the Core Report because they are not required  by Section 2464. Such information, if required, has the potential to  improve DOD’s Biennial Core Report to Congress so that it will better  inform oversight and funding decisions.
section_title: Matter for Congressional Consideration
paragraphs: To increase the transparency of future Biennial Core Reports, Congress  should consider amending 10 USC 2464 to require DOD to include  information such as (1) workload shortfalls at lower-level categories; (2)  executed workload in similar categories that could be used to mitigate  shortfalls; (3) progress on implementing mitigation plans; (4) data  reported at the first-level category of the work breakdown structure,  except for when shortfalls are identified; (5) explanations for first-level  categories (i.e., Special Interest Items and Other) of the work breakdown  structure; and (6) whether the core requirements reported in the previous  Biennial Core Report have been executed.
section_title: Recommendation for Executive Action
paragraphs: To ensure that DOD’s biennial core reporting procedures align with the  reporting requirements in Section 2464 and each reporting agency  provides accurate and complete information, we recommend that the  Secretary of Defense direct the Under Secretary of Defense for  Acquisition, Technology and Logistics to update DOD’s guidance—in  particular DOD Instruction 4151.20—to require future Biennial Core  Reports to include instructions to the reporting agencies on how to (1)  report additional depot workload performed that has not been identified as  a core requirement, (2) accurately capture inter-service workload, (3)  calculate shortfalls, and (4) estimate the cost of planned workload.
section_title: Agency Comments and Our Evaluation
paragraphs: We provided a draft of this report to DOD for comment. In its written  comments, reproduced in appendix VII, DOD concurred with our  recommendation and stated that the department will update its instruction  to reflect clear guidance on reporting non-core sustaining workloads and  accurately capturing inter-service workloads, among other things.  Additionally, the department will add a column to the core submission  worksheet to include workload shortfalls. The department also provided  technical comments, which we incorporated as appropriate.
However, DOD expressed concerns regarding the matter for  Congressional consideration, in which we asked Congress to consider  amending 10 U.S.C.§2464 to increase the transparency of future Biennial  Core Reports by requiring DOD to include information such as (1)  workload shortfalls at lower-level categories; (2) executed workload in  similar categories that could be used to mitigate shortfalls; (3) progress  on implementing mitigation plans; (4) data reported at the first-level  category of the work breakdown structure, except for when shortfalls are  identified; (5) explanations for first-level categories (i.e., Special Interest  Items and Other) of the work breakdown structure; and (6) whether the  core requirements reported in the previous Biennial Core Report have  been executed. In its response, DOD stated that satisfying these  additional reporting requirements would be expensive and labor intensive,  for what it believes would be little or no apparent return.
We believe that providing this additional information to improve the  transparency of future core reports would not be expensive and labor  intensive. This is because DOD already collects some of this information  to support the Core Report—but does not report it to Congress. For  example, DOD collects workload shortfall data at the lower-level  categories, workload executed  in similar categories that could be used to  mitigate shortfalls, workload data at the first-level category of the work  breakdown structure, explanations for the first-level category of “Other”,  and information on whether the core requirements reported in the  previous Biennial Core Report have been executed. DOD could readily  provide this additional information as part of the Core Report. The  inclusion of this information has the potential to improve DOD’s Biennial  Core Report to Congress so that it will better inform oversight and funding  decisions.
While there is some information that DOD does not already collect, we  believe it would also not be expensive or labor intensive to provide to  Congress. For example, DOD already provides mitigation plans to correct  identified shortfalls and as part of this reporting, it could provide an  update on how prior mitigation plans were implemented to correct  shortfalls or an update on the progress of the plans. Also, the reporting  agencies already provide explanations on what is included in the “Other”  category as part of the core submission worksheet, and could do the  same for the “Special Interest Items” category. This information could be  beneficial to Congress since it could increase the transparency of the  Core Report.
Regarding DOD’s assessment that there would be little or no apparent  return from satisfying these additional report requirements, 10 U.S.C. §  2464 requires DOD to assign sufficient depot maintenance workload to  sustain a core capability. Information on whether the core requirements  reported in the previous Biennial Core Report have been executed would  provide information on whether the reporting agencies actually executed  their planned workload and therefore possess the core logistics  capabilities specified in Section 2464. Requiring DOD to include the  recommended information in the Core Report would provide Congress  with additional information to make better-informed oversight and funding  decisions with respect to DOD’s depot maintenance efforts.  Therefore,  we continue to believe that our matter for Congressional consideration is  valid.
We are sending copies of this report to the appropriate congressional  committees; the Secretary of Defense; the Assistant Secretary of Defense  for Logistics and Materiel Readiness; the Secretaries of the Army, Navy,  and Air Force and the Commandant of the Marine Corps; the Director,  Missile Defense Agency; and other interested parties. In addition, the  report is available at no charge on the GAO website at  http://www.gao.gov.
If you or your staff have any questions about this report, please contact  me at (202) 512-5257 or merrittz@gao.gov. Contact points for our Offices  of Congressional Relations and Public Affairs may be found on the last  page of this report. GAO staff who made key contributions to this report  are listed in appendix VIII.
section_title: Appendix I: Timeline of 10 U.S.C. §2464 and Related GAO Reports
paragraphs: Congress enacted Core Logistics Capability Requirements in 1984  through Public Law No. 98-525 § 307. Section 2464 of Title 10 of the  United Sates Code was amended many times between the late 1980s  and the early 2000s; however, these amendments did not change the  basic character of the core capability requirements. Rather, the  amendments focused on changing definitions or basic processes. In  2011, Congress added a requirement for DOD to provide a biennial core  report. Key changes to the law are illustrated in figure 1 below.
section_title: Appendix II: GAO Recommendation Follow- up
paragraphs: During the review of DOD’s 2016 Biennial Core Report, we followed up  on two recommendations from our prior reports. As outlined in table 13  below, based on our review, we determined that DOD has partially  addressed both of these recommendations but needs to take additional  steps to fully address both recommendations.
section_title: Appendix III: Scope and Methodology
paragraphs: To determine the extent to which DOD’s 2016 Biennial Core Report  complies with Section 2464(d), we analyzed the text of the report and  obtained supporting information on the process by which DOD identified  its core capability requirements and the workload needed to support its  core maintenance capability for fiscal year 2017. Two GAO analysts  independently reviewed DOD’s report to determine the extent to which it  addressed each element required by the mandate. All initial  disagreements between the two GAO analysts were discussed and  resolved through consensus. For the armed services, when the report  explicitly included all parts of the required element provided by each  service, we determined that DOD had “complied” with the element. When  the report did not explicitly include any part of the element from any of the  services, we determined that DOD “did not comply” with the element. If  the report included some aspects of an element, but not all, for one or  more of the services, then we determined that DOD “partially complied”  with the element. For the Missile Defense Agency (MDA), when the  report explicitly included all parts of the required element provided by  MDA, we determined that DOD “included” the element. When the report  did not explicitly include any part of the element provided by MDA, we  determined that DOD “did not include” the element. If the report included  some aspects of an element provided by MDA, but not all, then we  determined that DOD “partially included” the element. We compared the  types of information and data provided by each of the armed services and  MDA to the data that the Office of the Secretary of Defense (OSD)  included in its final 2016 Biennial Core Report, to assess consistency. We  also discussed our preliminary analyses with OSD and with armed  services and MDA officials to seek additional information.
To assess the report’s completeness, we obtained and analyzed fiscal  year 2017 data—including core capability requirements and planned  workload expressed in direct labor hours—and costs and other  information, such as workload shortfall explanations, that OSD required  the reporting agencies to provide in support of the report. We compared  the reporting agencies’ submissions to the reporting template in DOD  Instruction 4151.20, in order to determine the extent to which the  reporting agencies submitted the information required by DOD’s  instruction, and we identified any inconsistencies or errors. We conducted  data-reliability assessments on the data that were provided by the  reporting agencies to OSD to support their submissions for the Biennial  Core Report in order to determine if these data and information were  complete. We performed a number of steps to compare and reconcile the  data that OSD included in the final Biennial Core Report. These steps  included (1) ensuring that each reporting agency consistently reported the  direct labor hours identified as the total adjusted requirements and the  workload needed to sustain depot maintenance core capability  requirements; (2) reconciling the information in the report against each  reporting agencies’ submission for accuracy; (3) comparing and  contrasting DOD’s 2016 report against its 2012 and 2014 Biennial Core  Reports to determine whether there were noticeable changes in the data  for specific categories; and (4) evaluating each reporting agencies’  submission to verify that the information reported for each work  breakdown structure category and associated subcategory level was  computed correctly and contained data for those requirements and the  armed service’s corresponding workload. In addition, we interviewed OSD  and reporting agencies’ officials and discussed our analyses, which led us  to conclude that the data were sufficiently reliable for the purposes of this  report. We also met with OSD and reporting agency officials responsible  for overseeing the data collection and preparing the data submissions, to  obtain clarification and understanding of the content of the submissions.  We assessed the accuracy and completeness of the information in DOD’s  2016 Biennial Core Report with criteria outlined in Standards for Internal  Control in the Federal Government and DOD Instruction 4151.20.
To identify potential changes to 10 U.S.C.§2464(d) that could increase  the transparency of future Biennial Core Reports, we reviewed DOD’s  guidance, 10 U.S.C.§2464(d), and Standards for Internal Control in the  Federal Government to determine what additional information OSD could  provide in its report and what changes could be made to improve the  report. Lastly, we interviewed OSD and officials from the reporting  agencies who were responsible for the core submission to identify any  additional information that could be included in the Core Report and what  changes could be made to improve the law or DOD’s guidance.
We conducted this performance audit from June 2016 to November 2016  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: Core Capability Determination Process
paragraphs: DOD Instruction 4151.20 prescribes a “core capability determination  process”—procedures to identify required core depot maintenance  capabilities and “sustaining workloads”—the workloads required to  sustain these capabilities. The instruction describes a methodology for  DOD components to compute their core capability requirements and to  identify the associated workloads needed to sustain these required  capabilities. The process is illustrated in figure 2.
section_title: Appendix V: Category Levels from DOD’s Depot Maintenance Core Capability Worksheet
section_title: Appendix VI: Variations in DOD’s 2012, 2014, and 2016 Biennial Core Reports
paragraphs: Each armed service reported variations in its core capability  requirements, planned workload, estimated cost of planned workload, and  workload shortfalls, as reported in the fiscal years 2012, 2014, and 2016  Core Reports, as shown in figures 3, 4 and 5. These variations occurred  in different work breakdown structure categories for each armed service.
subsections: section_title: Workload Shortfalls
paragraphs: Shortfalls exist when the core capability requirement exceeds or is  expected to exceed planned workload. At the first-level category of the  work breakdown structure, for example, the
Army reported shortfalls in fiscal year 2012 in the categories of  Ground Vehicles (869,547 direct labor hours) and Support Equipment  (112,462 direct labor hours). No shortfalls were reported in fiscal  years 2014 and 2016.
Navy reported no shortfalls for fiscal years 2012, 2014, or 2016.
Marine Corps identified shortfalls in fiscal year 2014 in the category  of Communication/ Electronic Equipment (144,535 direct labor hours).  No shortfalls were reported in fiscal years 2012 or 2016.
Air Force reported shortfalls in fiscal years 2012 (260,698 direct labor  hours), 2014 (388,063 direct labor hours), and 2016 (339,556 direct  labor hours) in the category of Communication/Electronic Equipment.  According to Air Force officials, the decrease in the  Communication/Electronic Equipment shortfall was a result of some  airplane models retiring and therefore no longer requiring  maintenance and repair. Additionally, the Air Force reported a shortfall  in fiscal year 2012 (143,280 direct labor hours) in the category of  Ordnance, Weapons, & Missile but did not report this shortfall in fiscal  years 2014 or 2016.
section_title: Appendix VII: Comments from the Department of Defense
section_title: Appendix VIII: GAO Contact and Staff Acknowledgments
subsections: section_title: GAO Contact
paragraphs: Zina Merritt, (202) 512-5257 or merrittz@gao.gov.
section_title: Staff Acknowledgments
paragraphs: In addition to the contact named above, Carleen Bennett, Assistant  Director; Clarine Allen; Chaneé Gaskin; Ashley Houston; Joanne  Landesman; Amie Lesser; Jim Melton; Alexandra Rouse; Michael Silver;  and Sabrina Streagle made key contributions to this report.
section_title: Related GAO Products
paragraphs: Depot Maintenance: Accurate and Complete Data Needed to Meet DOD’s  Core Capability Requirements. GAO-14-777. Washington, D.C.:  September 18, 2014.
Depot Maintenance: Additional Information Needed to Meet DOD’s Core  Capability Reporting Requirements. GAO-13-194. Washington, D.C.:  February 11, 2013.
Defense Logistics: DOD Input Needed on Implementing Depot  Maintenance Study Recommendations. GAO-11-568R. Washington,  D.C.: June 30, 2011.
Depot Maintenance: Actions Needed to Identify and Establish Core  Capability at Military Depots. GAO-09-83. Washington, D.C.: May 14,  2009.