Depot Maintenance: Public-Private Partnerships Have Increased, but Long-Term Growth and Results Are Uncertain
Published: 2003-04-10T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: For several years, the Department of Defense (DOD) and the Congress have encouraged the defense logistics support community to pursue partnerships with the private sector to combine the best commercial processes and practices with DOD's extensive maintenance capabilities. In January 2002, DOD issued policy encouraging the use of public-private depot maintenance partnerships to improve the efficiency and viability of its depots. GAO reviewed these partnerships and assessed the extent that DOD is participating in these partnerships, the characteristics needed to achieve effective partnerships and where DOD is in its ability to measure success, and the management challenges to DOD's planned expansion of partnerships.
section_title: What GAO Found
paragraphs: While the number of public-private partnerships that DOD is participating in has increased from 19 to 93 from fiscal year 1998 through fiscal year 2002, the existing partnerships represented only 2 percent of DOD's fiscal year 2002 $19 billion depot maintenance program. Even with the small amount of expenditures and workload associated with partnerships, some partnerships that GAO reviewed either improved some aspects of repair performance or showed potential for doing so. On the other hand, 19 partnerships have generated no work thus far. DOD and contractor officials have identified 14 characteristics that they believe over time will contribute to a partnership's success in achieving DOD's objective of improved depot efficiency and viability. However, DOD has a limited ability to measure the overall success of its partnering efforts because it has not yet developed measurable goals for the expected outcomes of the effort and the metrics that it has developed sometimes will not provide the data needed to fully assess the partnerships. Without initially establishing clear, measurable goals to define success in improving the efficiency and viability of its depots and metrics that provide the relevant data for the measurement, DOD has limited objective means to assess whether the partnerships are working as intended. Furthermore, DOD faces challenges in its efforts to expand its use of public-private partnerships. For example, opportunities available for DOD to expand its use of these partnerships may be limited by external factors that the services cannot replicate or create at will, such as one-time business opportunities. Also, while DOD is expecting private sector funding to support the establishment of capability for depot partnerships for new systems, the amount of private-sector investment to date is only $6.9 million, and the extent to which the private-sector will make additional investments is uncertain.

section_title: Letter
paragraphs: For the past several years, the Department of Defense (DOD) and the  Congress have encouraged the defense logistics support community to  pursue partnerships with the private sector. These public-private  partnerships are arrangements through which the combined resources,  risks, and rewards of a public agency and a private company are intended  to provide greater efficiency, better access to capital, and improved  compliance with a range of government regulations. In January 2002, DOD  issued policy encouraging the use of such public-private partnerships in  order to combine the best commercial processes and practices with DOD’s  extensive depot maintenance capabilities with the objective of improving  the efficiency and viability of DOD’s depots. DOD also expects these  improvements to depot operations to ultimately improve support for  war fighters.
Your subcommittee has supported the use of public-private depot  maintenance partnerships with its support of enabling legislation and  interest in DOD’s use of such partnerships. This report addresses  the following questions: (1) to what extent is DOD participating in  public-private partnerships for depot maintenance; (2) what are the  characteristics that need to be present to achieve effective partnerships,  and where is DOD in its ability to measure success; and (3) what factors  could affect DOD’s planned expansion of public-private partnerships?
As part of our work, we reviewed 90 of the 93 partnerships DOD identified  as ongoing during fiscal year 2002. We also visited 14 of DOD’s 20 major  maintenance depots where these partnerships are ongoing. A more  complete discussion of our scope and methodology is included in  appendix I. A listing of the services’ partnerships we reviewed with  relevant information about each is included in appendix II. We conducted  our review from February 2002 through February 2003 in accordance with  generally accepted government auditing standards.
subsections: section_title: Background
paragraphs: DOD spends about $19 billion annually on depot maintenance, which  includes repairing, rebuilding, and overhauling weapon systems such as  ships, tanks, and aircraft. DOD estimates that approximately 53 percent of  its fiscal year 2002 depot-level workload will be performed in DOD-owned  facilities, and that the remainder will be performed by the private sector,  mostly in private-sector facilities. DOD has 20 major depots: 9 in the Navy  (3 aviation depots, 4 shipyards, and 2 warfare centers), 5 in the Army, 4 in  the Air Force (3 air logistics centers and 1 aircraft storage center), and 2 in  the Marine Corps. The private sector operates numerous facilities where  depot-level maintenance is performed on military and private (or  nonmilitary) equipment and systems. Some of these facilities are  manufacturing facilities where maintenance work is also performed, while  others are used only for maintenance.
For many years, debate has occurred between the Congress and various  administrations over who should perform depot work and where it should  be performed. Central to this debate has been the interplay between DOD’s  efforts to rely more on the private sector for depot maintenance and title 10  provisions that (1) limit private-sector workloads to 50 percent of available  funding in a fiscal year, (2) require the government to maintain certain  core capabilities in military depots, and (3) require public-private  competitions for certain workloads. The public-private partnership  concept for improving government operations provides a cooperative  approach for resolving this debate.
This principle recognizes that historically it has primarily been when a government entity  goes through a public-private competition that the government creates a “most efficient  organization” (MEO). Since such efforts can lead to significant savings and improved  performance, they should not be limited to public-private competitions. Instead, the federal  government needs to provide incentives for its employees, its managers, and its contractors  to constantly seek to improve the economy, efficiency, and effectiveness of the delivery of  government services through a variety of means, including competition, public-private  partnerships, and enhanced worker-management cooperation.
In early 1998, we reviewed DOD’s use of public-private depot maintenance  partnering arrangements and concluded that contractors had become more  interested in sharing repair and maintenance workloads with depots and  depots were willing to enter into partnering arrangements with the private  sector in an effort to reduce overhead costs and retain core capabilities.  We also reported that the Army had 13 partnerships ongoing at four of its  depots, the oldest of which was initiated in fiscal year 1994. While we did  not report any partnerships for the Air Force, Navy, or Marine Corps at the  time of our review, by the end of 1998, the Air Force had three partnerships  ongoing, the Navy had two, and the Marine Corps had one.
Historically, DOD has used public-private partnering arrangements for  depot maintenance, such as work-share agreements and facility-use  partnerships, under various legal authorities—although these  arrangements generally were not referred to as “partnerships.” Partnering  with the private sector to (1) help sustain core depot maintenance  capabilities, (2) use underutilized public facilities, and (3) leverage private- sector investment in these military facilities is a relatively new concept that  the department is pursuing on the basis of congressional direction under  10 USC 2474. The objectives of public-private partnerships under section  2474 are to  maximize capacity use at depots,  reduce or eliminate the depots’ ownership costs in areas such as  operations and maintenance and environmental remediation,  reduce the cost of products made or maintained at depots,  leverage private-sector investments in plant and equipment and promote  commercial business ventures at depots, and  foster cooperation between the military and private industry.
In response to section 2474, DOD issued policy governing the formation of  public-private partnerships and incorporated the concept of these  partnerships into its current departmentwide logistics reengineering  initiative.
In January 2002, the Deputy Under Secretary of Defense (Logistics and  Materiel Readiness) issued a policy memorandum on public-private depot  maintenance partnerships. The memorandum outlined policy, provided a  definition and directed the services to pursue partnerships to strengthen  DOD’s depot maintenance operations and, ultimately, to improve support  to war fighters. The DOD policy focuses on using partnerships to improve  the efficiency and viability of its depots. The policy memorandum noted  that partnering can contribute to more effective DOD maintenance  operations, to the introduction of innovative processes and technologies,  and to the economical sustainment of depot capabilities. The department  defines a public-private partnership as “an agreement between an organic   depot maintenance activity and one or more private industry or  other entities to perform work or utilize facilities and equipment.”  According to DOD policy, depot maintenance public-private partnering  arrangements generally include (but are not restricted to) one or more of  the following forms:  Use of public-sector facilities, equipment, and employees to perform  work or produce goods for the private sector.
Private-sector use of public-sector equipment and facilities to perform  work for the public sector.
Work-share agreements, using both public- and private-sector facilities  and/or employees.
DOD included public-private partnerships in its June 2002 logistics  reengineering initiative to meet war fighters’ sustainment needs and  operational requirements of the National Defense Strategy. The initiative  states that public-private partnerships should help address the many  challenges facing military depots, which include facilities and equipment  that have become severely degraded because of limitations in funds for  recapitalization and an aging workforce that has shrunk by 51 percent in  the past 10 years. The department’s desired goal, according to this  initiative, is a dramatic increase in public-private depot maintenance  partnerships. The initiative reinforces the department’s effort to improve  the efficiency and viability of its depots, stating that partnerships will result  in creating greater private-sector investment in facilities and equipment,  better facility utilization, reduced costs of ownership, workforce  integration, more efficient business processes, greater credibility, and a  more collegial working relationship with the Congress.
DOD’s public-private partnership policy is intended to help the services  implement the department’s performance-based logistics initiative for its  weapon systems sustainment policy and still comply with title 10  provisions constraining the outsourcing of depot maintenance workload.  The 2001 Quadrennial Defense Review mandated the implementation of  performance-based logistics in order to improve readiness for major  weapon systems and commodities. DOD’s resulting performance-based  logistics initiative seeks to achieve these improvements by using  predetermined performance or readiness goals in evaluating a weapon  system’s logistics support provider. While performance-based logistics  does not require the use of a contractor as the logistics provider, according  to DOD officials, all of the performance-based arrangements thus far have  used a contractor as the logistics provider, and they expect that this trend  will continue. DOD officials anticipate that as the department implements  more performance-based logistics arrangements with contractors as  integrators, the contractors will have to partner with military depots for the  services to comply with title 10 requirements, thus increasing the use of  public-private partnering.
section_title: Growing Number of Partnerships Involve a Relatively Small Portion of Depot Workload
paragraphs: DOD’s public-private partnerships for depot maintenance increased from  19 to 93 from fiscal year 1998 through fiscal year 2002 and involved  2.2 percent of DOD’s total depot maintenance program expenditures in  fiscal year 2002. The Army had the largest number—42 partnerships in  fiscal year 2002. The partnerships at the depots we visited typically  accounted for a small portion of each depot’s total workload—0.01 to  2.5 percent—or generally did not increase the workload to be performed at  the depots. Two partnership arrangements resulted in large growth in  workload at individual depots although service officials do not consider  one of them as a typical increase because it was due to the closure of  another depot. Furthermore, about one-fifth of the partnerships have not  yet produced any workload for the depots, although future workload is  expected in many of these cases. However, even with the small amount of  new workload generated and the partnerships’ newness, some partnerships  provided promising results or good potential.
subsections: section_title: Services Expanding Use of Partnerships
paragraphs: The department’s emphasis on the use of public-private partnerships for  depot maintenance has resulted in increases in their use—from 19 in  fiscal year 1998 to 93 in fiscal year 2002, an overall 4-fold increase. The  partnerships were formed for a variety of reasons, such as the contractors  seeking a depot’s unique capabilities. According to depot officials, a key  underlying factor for the increased use of partnerships has been the  legislative requirement to use at least 50 percent of available funding for  depot maintenance work in DOD depots. Simultaneously, long-term  logistics support contracts with the private sector are being pursued as the  preferred DOD support arrangement.
While the department has experienced an increase in the use of  partnerships, just over one-half of these were initiated during the last  2 fiscal years. In 1998 we reported that the Army had 13 ongoing  partnerships, a number that expanded to 42 during fiscal year 2002—a  3-fold increase. The Navy’s use of partnerships increased from 2 in 1998  to 31 in fiscal year 2002—a 15-fold increase. Similarly, the Air Force’s use of  partnerships increased from 3 in fiscal year 1998 to 19 in fiscal year 2002— a 6-fold increase. The Marine Corps’ usage has remained constant with one  partnership in fiscal year 1998 and the same one in fiscal year 2002.  Overall, partnership growth in the department represents a 4-fold increase  from fiscal year 1998 to fiscal year 2002. Figure 1 shows the number of total  partnerships by individual military service for fiscal years 1998 and 2002.
These partnerships were formed for a variety of reasons and used differing  approaches on the basis of the circumstances surrounding the specific  partnering effort. For example, in a number of cases, the contractor sought  out the depot for its unique capabilities or for its advantageous labor rates.  In other cases partnerships formed to meet title 10 requirements to  maintain military depot capabilities for key weapon systems. Depot  officials stated that a key underlying factor driving the use of partnerships  has been the legislative requirement for at least 50 percent of available  funds to be used for depot maintenance work in DOD depots. At the same  time long-term logistics support contracts with the private sector are being  pursued as the preferred DOD support arrangement. The lease of  underutilized depot facilities to a contractor and the sale of depot repair  services to a contractor are examples of the approaches used to form  partnerships. (See appendix II for summary data regarding the reasons  cited and approaches used for the 90 partnerships we reviewed.)
section_title: Partnerships Account for a Small Portion of DOD’s Depot Maintenance Expenditure and of Depots’ Workload
paragraphs: While DOD has not established goals for the depot maintenance  expenditures or workload it expects to be involved in public-private  partnerships, currently, partnerships represent a small part of DOD’s  overall in-house depot maintenance expenditures and workload. Some  partnerships had not yet resulted in work to be performed at their depot,  but depot officials anticipate some in the future.
Maintenance performed in fiscal year 2002 by the depots under  partnerships accounted for only $435 million—or 2.2 percent—of the  $19.4 billion dollars that DOD reported spending on depot maintenance  in that year. Within the services, the amount of depot maintenance  expenditures involved in public-private partnerships varies from about  3.0 percent in the Army and 3.8 percent in the Air Force to about  0.5 percent for the Navy and Marine Corps combined.
Furthermore, in fiscal year 2002, the total of all depots’ partnership  workload was 4.6 percent of DOD’s total military depot workload.  However, as indicated by figure 2, the partnerships’ workload at the  14 service depots we visited varied widely from 0.01 percent to nearly  26.0 percent.
Partnerships at 9 of the 14 depots we visited—which have 59 partnerships  in total—involved workload that ranged from 0.01 to 2.53 percent of the  depot’s total workload. In addition, while partnership activity at the other  5 depots we visited—which have 31 partnerships in total—ranged from  7.5 to 26.0 percent of the depots’ workload, the partnerships themselves  were not always the reason why this workload was placed at the depots.  According to depot officials, with two exceptions, the placement of most of  the partnership workload at these depots was based on program managers’  decisions that occurred prior to the formation of the associated  partnership. The program managers’ decisions were based on reasons such  as maintaining repair capability in military depots, using the most  cost-effective maintenance source, or sustaining the viability of the  industrial base.
The two instances where partnerships resulted in significant new  workloads for a depot were the Army’s Abrams Integrated Management  XXI partnership—which accounts for about half of the Anniston workload  shown in figure 2—and the Air Force’s Propulsion Business Area  partnership-—which accounts for most of the Oklahoma City workload  shown in figure 2. The propulsion workload at the Oklahoma City depot  resulted from the closure of a major Air Force depot, and according to  DOD officials, this workload volume does not represent the typical  workload that a depot can expect as a result of a partnership.
In addition, as of December 2002, 19—or 21 percent—of the 90  partnerships we reviewed had generated no workload for the depot. For  example, seven partnerships at Tobyhanna Army Depot created from fiscal  year 1999 and through fiscal year 2001 for the depot to repair electronic  equipment for a contractor have not resulted in workload at the depot,  although workload was expected. Other partnering efforts, such as the  Air Force’s Flexible Acquisition and Sustainment Tool partnership and the  Army’s H-60 Helicopter Engineering Logistical Services and Supplies  partnership, are too new to have generated workload, but the depots  anticipate that workload will be forthcoming.
section_title: Experience Is Limited at This Time, but Some Partnerships Show Promise for Achieving Positive Results
paragraphs: While the small amount of workload and expenditures attributed to  partnerships and the newness of many of the partnerships limited the  availability of data to assess DOD partnerships’ impact on the efficiency  and viability of depots, some partnerships provide promising results or  good potential for improving some aspects of repair performance. Of the  90 partnerships we reviewed, 28 either improved some aspects of repair  performance or showed potential for doing so. Improvements from these  partnerships included better parts availability, reduced repair time,  reduced backorders, or reduced depot support costs. These improvements  relate to DOD’s objective of enhancing greater depot efficiency and  viability. For example, reducing repair time results in improved business  processes—one approach for enhancing depot operations. Reducing depot  support cost can result in reduced ownership costs of weapon systems— another approach for enhancing depot operations. Appendix IV provides  six examples of partnerships that are achieving these improvements. On  the other hand, 19 partnerships thus far have generated no work for  the depots.
section_title: Characteristics for Effective Partnerships Identified, but DOD Is Limited in Its Ability to Measure Partnerships’ Overall Success
paragraphs: DOD and contractor officials have identified 14 characteristics that they  believe over time will contribute to a partnership’s success in achieving  DOD’s objective of improved depot efficiency and viability, but DOD has  not developed sufficient data and goals for assessing its partnering  initiative. Many depot partnership managers stated that they are working  toward pursuing these 14 characteristics in their partnerships, including  having the right metrics in place early in the partnership to measure  success. However, DOD’s ability to measure the partnerships’ overall  success is limited because it has not yet developed baseline data and  measurable goals for assessing the outcomes of its partnering efforts and  the metrics that it has developed sometimes will not provide the clear data  needed to fully assess the partnerships.
subsections: section_title: Characteristics Identified by DOD and Contractor Officials Needed to Achieve Effective Partnerships
paragraphs: While DOD continues to gain experience in partnering, senior-level DOD  and contractor officials have identified 14 characteristics, or best practices,  that they believe over time may be important for a partnership’s success in  contributing toward achieving DOD’s objective. Almost all officials cited  three characteristics as key—long-term relationship and commitment,  shared vision and objectives, and the right metrics. The other 11 attributes  were cited less frequently but, according to the identifying officials, will  nonetheless improve the potential for success if present in a partnership.  Table 1 summarizes the 14 characteristics cited by DOD and contractor  officials as important to the success of partnerships.
While we observed the presence of these characteristics in some of the  partnerships we reviewed, we did not attempt to validate the extent to  which the characteristics were present in all partnerships reviewed, given  the newness of many of the partnerships. (See appendix V for examples of  how some of the partnerships we reviewed exhibited these  characteristics.) Nonetheless, many of the depot officials responsible for  managing partnerships stated that the characteristics identified by senior- level contractor and DOD officials will contribute to making partnership  efforts successful. They also stated that while the characteristics are not  currently present in all partnerships, over time, more partnerships will  evolve to include these characteristics. The officials agreed that the  characteristic of having long-term commitment should permit both  contractors and depots to better plan future workload requirements and  create a better business case for the contractor to make investments to  improve depot repair capability. The officials agreed that the characteristic  of sharing the same partnership vision and objective helps ensure that the  partners will not be working at cross-purposes. Additionally, these officials  pointed out that another of the characteristics—having the right metrics— is critical to develop early in a partnership. Without establishing sound  metrics for partnerships early, the services cannot effectively measure that  progress is being made toward achieving the partnerships’ goals and  objectives. The officials added that in such instances a partnership risks  making no progress toward its goal or possibly even having an impact that  is counter to the partnership’s goals and objectives.
section_title: DOD’s Ability to Measure Success Is Limited by Lack of Measurable Goals for Outcomes and Unclear Metrics
paragraphs: DOD is limited in its ability to measure the overall success of its partnering  efforts because it has not yet developed baseline data and measurable goals  for the expected outcomes of the effort. Furthermore, the metrics that  DOD has developed sometimes will not provide the data needed to assess  the partnerships’ results.
While some partnerships have produced positive results, such as reduced  repair time, DOD has neither established a baseline regarding efficiency  and viability for where the depots are today nor developed measurable  goals for the expected outcomes that would define success for achieving  improved depot efficiency and viability. Such goals could include  measurable targets for the amount of reductions in general and  administrative expenses, degree of increased utilization of depot capacity,  number of jobs created at depots, and amount of private-sector investment  in depot infrastructure and equipment. Establishing such goals would  provide DOD and the Congress with a measuring stick against which to  determine the progress that DOD’s partnering initiative is making toward  improved depot efficiency and viability.
Without the goals, DOD’s existing metrics—the data that DOD is collecting  to measure individual partnership performance—do not provide the clear  information needed to assess a partnership’s progress in improving a  depot’s performance. DOD is collecting data to measure individual  partnership performance—revenue generated, capital investment, jobs  created, cost avoidance, increased facility utilization, improved business  processes, and improved responsiveness to customers. However, these  metrics are not tied to overarching goals for DOD’s partnership initiative.  Consequently, DOD does not have a clear means for assessing the  accomplishments of its individual partnerships toward meeting its  overarching objective and therefore risks not achieving the improvements  to depot operations expected from public-private partnership efforts. For  example, investments made by the private sector in military depots to date  have been about $6.9 million in total at all DOD depots. However, without  an established goal for such investments based on each depot’s strategic  capital investment needs, DOD does not have a means of evaluating how  effective these investments are toward improving a depot’s viability  or efficiency.
Furthermore, in some cases, the metrics that DOD has developed may not  indicate whether improvements in depot performance are due to a  partnership or to other factors. This is because some partnerships coincide  with changes to a weapon system program (such as adopting a new repair  approach) that may cloud the service’s ability to measure whether the  partnership is responsible for any of the measured impacts. For example,  metrics for the Army’s T700 helicopter engine partnership will measure  changes in an engine’s reliability. However, the Army began a  recapitalization effort shortly after the start of the partnership, and  according to a program management official, the recapitalization effort will  affect the reliability of the metrics. An Army depot official stated that it is  not possible to separate the impact of the recapitalization from the impact  of the partnership, since the two initiatives were implemented  concurrently. Eleven of the partnerships we reviewed involved similar  recapitalization or other major weapon system modifications and  improvements that likewise have the potential for distorting the metrics for  these partnerships.
section_title: Several Factors Could Affect DOD’s Planned Partnership Expansion
paragraphs: While DOD plans to expand its use of public-private partnerships to  improve the efficiency and viability of its depots, several factors could  affect the department’s expansion efforts. The opportunities for increased  partnering may be limited by external factors that the services cannot  create at will, and uncertainties over the extent to which the private sector  will invest to improve or develop new capabilities at DOD depots to  support partnerships. In addition, should the Congress change title 10  provisions pertaining to depot maintenance, the changes could affect the  impetus for public-private partnerships.
subsections: section_title: Partnering Opportunities May Be Limited by External Factors
paragraphs: The opportunities available for DOD to expand its use of public-private  partnerships may be limited by external factors that the services cannot  replicate or create at will. Indeed, the creation of some partnerships  resulted from the occurrence of one-time business opportunities arising  from external factors, such as contractors’ decisions to divest themselves  of repair capabilities.
Such one-time opportunities may be critical to developing successful  partnerships, but their occurrence is unpredictable. For example, Northrop  Grumman made a business decision to discontinue its in-house composite  repair capability for B-2 aircraft flight control surfaces. This created an  opportunity for the Air Force’s Ogden depot to develop repair capability for  the flight control surfaces and enter into a partnership with Northrop  Grumman, which retained the overarching contract responsibility for the  B-2’s airframe maintenance. This partnering opportunity between the  Ogden depot and Northrop Grumman was wholly contingent on the  contractor’s decision to divest itself of this repair capability.
section_title: Expected Private-Sector Investments to Establish New Capabilities Are Uncertain
paragraphs: Expanding the use of partnerships to new or upgraded systems where  depots do not currently have the capability to accomplish the work will  require investment directly from system program offices or from the  private-sector partner to develop new system capabilities in the depot.  Although DOD expects private-sector partners to contribute to developing  these capabilities, the extent to which the private sector will make such  investments is uncertain.
The department’s January 2002 partnership policy encourages public- private partnerships to be structured to improve the deteriorating  condition of depot facilities and equipment by “leveraging private-sector  investments, such as facilities and equipment, to contribute to re- capitalization of depot maintenance activities.” However, DOD’s data on  the investments made by the private sector in military depots to support  partnership as of the end of fiscal year 2002 show only about $6.9 million in  private-sector investment at all DOD depots. Ninety-six percent of this total  occurred at one depot—the Army’s Anniston depot—and the remaining 4  percent occurred at one other depot—the Air Force’s Warner Robins depot.  For fiscal year 2002, DOD invested about $330 million in the depots through  its defense working capital fund’s capital investment program. This funding  was for equipment replacement, productivity improvements,  environmental compliance, computer equipment and software, and minor  construction. Additional investments are made in depots by program  management offices for establishing new system capabilities, and while  DOD does not quantify the amount of this investment, we reported in 2001  that program management offices had invested $403 million over a 10-year  period ending in 2000—about $40 million annually. The department  recognizes that adequate funding has not been made available to revitalize  the depots and incorporate new systems capabilities, and is looking to  private-sector investments by its partners to mitigate this shortfall.
In its recently issued depot maintenance strategy plan, the Air Force states  that a commercial-sector benchmark for adequate investment levels in  depots is from 6 to 7 percent of revenue per year. Assuming that this  represents a reasonable target for the services, investments in depots’  infrastructure would equate to about $621 million for fiscal year 2002.  However, at its fiscal year 2002 level, private-sector depot investments  resulting from partnerships equated to about 1 percent of this investment  level. While the department has not established specific goals for the share  of private-sector investments, the extent to which DOD will be able to rely  on the private-sector investments is uncertain.
section_title: Changes to Title 10 Could Limit Impetus for Expanding Use of Partnerships
paragraphs: Recently, DOD considered proposing changes to title 10 provisions  that limit the outsourcing of depot maintenance workloads. Should  the Congress make such changes, the impetus for expanded use of  public-private partnerships could be reduced.
While DOD recognizes that some of its partnerships have resulted from  external factors beyond the services’ control, the department expects that  its initiative to expand contractors’ involvement in logistics support for  weapon systems will increase partnering opportunities for depots.  According to DOD officials, this will occur because the services will require  contractors to partner with depots for some depot maintenance work to  satisfy title 10 provisions that limit the amount of depot maintenance work  that can be performed by the private sector. Recently, however, much  publicity has surrounded discussions within DOD over its tentative  proposal to change title 10 by repealing six provisions in order to create  greater flexibility in determining the most effective and efficient sources  for depot maintenance. At the time we completed our review, DOD had  discontinued this current effort to repeal these provisions, but the  department has proposed repeal of depot-related provisions in the past and  could again in the future. If the Congress were to repeal these provisions,  private-sector contractors might not consider public-private partnering as  an attractive alternative to performing the work themselves or to  subcontracting the work to another private-sector entity.
Our work found that these provisions have fostered the use of  partnerships. For example, 11 percent of the 90 partnerships we reviewed  cited compliance with title 10 provisions as the reason for partnering (see  fig. 3 in app. III), and depot officials indicated it was an underlying factor  influencing the decisions to form other partnerships. According to depot  officials, these title 10 provisions currently provide the key impetus for the  expansion of public-private partnerships and removal of these title 10  provisions could have an adverse impact on partnering opportunities.
section_title: Conclusion
paragraphs: Even with the significant increase in the number of DOD’s public-private  partnerships from fiscal year 1998 through fiscal year 2002, the existing  partnerships represent only 2.2 percent of DOD’s $19 billion depot  maintenance program. DOD does plan to greatly expand the use of  public-private partnerships to help achieve the partnership initiative’s  objective of improving the efficiency and viability of its military depots.  However, it has neither established a baseline regarding depots’ efficiency  and viability for where they are today nor developed measurable goals for  expected outcomes to define the degree of the improved depot efficiency  and viability desired. Additionally, the metrics that DOD has developed will  not, in certain circumstances, provide the relevant data needed to assess  individual partnership results. Without initially establishing both clear and  measurable goals to define success in improving the efficiency and viability  of its depots and the metrics that provide the relevant data for the  measurement, DOD has limited objective means to assess whether the  partnerships are working as intended. Furthermore, while DOD is  expecting private-sector investment in public depots to support the  creation of capability to support new systems the extent to which this  investment is likely to occur is uncertain. Absent additional planning, this  situation could result in capability shortfalls or lead to delays in  establishing needed capabilities.
To improve DOD’s management, direction, potential for success, and  assessment of its public-private partnerships, we provided DOD with a  number of recommendations in a draft of this report. In commenting on the  draft, DOD indicated that it does not plan to implement our  recommendations because it found them to be too general and thus not  actionable. However, the department’s reluctance to establish overall goals  for partnerships makes it unclear as to the overall role that DOD envisions  for partnerships in its depots—even though DOD’s focus on partnering was  intended as one means of fostering improvements in government owned  and operated depot facilities. We have long reported on weaknesses in  DOD’s processes for identifying core capabilities to be accomplished in  government-owned depot maintenance facilities, continuing deterioration  in depot facilities with inadequate recapitalization plans, and a smaller but  aging workforce with inadequate human capital plans in place to preserve  depot capabilities for the future. Such conditions place at risk the role of  these facilities in ensuring the existence of a ready and controlled source of  in-house technical competence and resources so that the military can  respond to mobilizations, national defense emergencies, and  contingencies. Clear goals for partnership arrangements are important if  they are expected to play a role in improving depot operations.
section_title: Recommendations for Executive Action
paragraphs: To improve the management, direction, potential for success, and  assessment of its public-private partnerships, we recommend that the  Secretary of Defense direct the Under Secretary of Defense for Acquisition,  Technology and Logistics to  establish baseline data and overarching goals for expected outcomes of  partnership efforts, including the partnership initiative’s desired  improvements to depot operations and  develop or refine metrics as needed to provide a more complete basis to  assess the results of the depot partnering arrangements as well as  ensuring that they differentiate between improvements to a weapon  system’s support resulting from partnering and from other factors or  changes affecting the weapon system.
To support the expansion of partnership arrangements for new systems, we  recommend that the Secretary of Defense require the Under Secretary of  Defense for Acquisition, Technology and Logistics  to require specific assessment and planning for new capability in  military depots where partnership arrangements for new systems are  expected and  as part of this planning, assess the likelihood of private-sector  investment in new systems capability in military depots and other  alternatives as needed.
section_title: Matters for Congressional Consideration
paragraphs: To encourage the Department of Defense to more clearly identify its  long-term goals for its depot facilities and the role of public-private  partnerships in meeting those goals, the Congress should consider  requiring DOD to develop measurable goals for improving future  operations of its depot facilities to include (1) facilities recapitalization,  (2) retention of specific depot capabilities, and (3) human capital plans for  preserving a viable workforce. In doing so, the Congress should also  consider requiring DOD to establish time frames against which it will  periodically assess and report to the Congress on progress in each of  these areas, including the contribution of partnering arrangements to  those goals.
section_title: Agency Comments and Our Evaluation
paragraphs: In commenting on a draft of this report, the Deputy Under Secretary of  Defense for Logistics and Material Readiness agreed with the report’s  information, analysis and conclusions but only partially concurred with the  report’s recommendations. Overall, he expressed the view that the  recommendations were so generally drawn that they are not actionable as a  practical matter. We disagree and continue to believe that they are needed  actions. The department’s comments are included in this report in  appendix VI.
With regard to our first recommendation to establish baseline data and  overarching goals for expected outcomes of partnerships, DOD stated that  it has already established baseline data and goals. However, these baselines  and goals relate to individual partnerships rather than to the partnership  program as a whole. We agree that baseline data and goals are needed to  measure the progress of individual partnership initiatives; however, our  intent was to have the department establish overarching goals with  measurable outcomes to help gauge the success of DOD’s overall  partnership initiative toward strengthening DOD’s depot maintenance  operations. Such goals would be key to measuring progress toward  achieving the expectation identified in DOD’s partnership policy  memorandum, which was to have partnerships “contribute to more  effective depot maintenance operations, the introduction of innovative  processes or technologies, and the economical sustainment of organic  capabilities.” We do not agree that the goals stated in the policy  memorandum in and of themselves are specific enough to provide  measurable outcomes against which to assess the collective effectiveness  of the department’s efforts to improve depot efficiency and viability.
Regarding our second recommendation to develop or refine metrics as  needed to provide a more complete basis to assess the results of depot  partnering arrangements, DOD said it will be difficult, if not impossible, to  differentiate between improvements solely resulting from partnering  versus other factors. While we agree that it may be difficult, we nonetheless  believe that it will be critical in assessing the department’s partnering  initiative. Unless the department develops meaningful metrics that  reasonably determine relative contributions of various factors contributing  to changed conditions in weapon system support, it will not be in a position  to determine the results of ongoing partnerships and the conditions under  which additional partnerships should be undertaken.
Regarding our third recommendation to require specific assessment and  planning for new capability in military depots where partnership  arrangements for new systems are expected, the department stated that it  currently requires assessment and planning for new weapon systems but  agreed that more emphasis could be placed on determining the role that  public-private partnerships may play in establishing new depot capabilities.  However, it did not identify any specific action planned to do so—we  believe it is important for the department to identify steps to be taken to  give this increased emphasis.
Regarding our fourth recommendation to assess as part of planning, the  likelihood of private-sector investment in new systems capability in  military depots, the department stated that capital investment by the  private sector across the broad spectrum is unrealistic, stating that it was  never the department’s intention for its public-private partnership program  to supplant the need for capital investment and funding by the services. We  did not intend to suggest that partnerships supplant service funding but  rather give visibility to a goal established by the department in its public- private partnership policy memorandum, which states that one objective of  public-private partnerships is “leveraging private-sector investments such  as facilitates and equipment to contribute to re-capitalization of depot  maintenance activities.” We continue to believe that the assessment called  for in our recommendation is important both to help assess the  contribution of partnerships in achieving this partnering objective as well  as to more clearly assess capital investment needs from other sources.
Finally, we disagree with the department’s statement that our  recommendations are not actionable as a practical matter. A key element  needed for the department to achieve its objective of more effective  military depot maintenance operations through public-private partnerships  is the ability to measure and assess the contribution of partnerships toward  meeting that objective. As a practical matter, without establishing clear and measurable goals for its partnering program, the department is limited in  its ability to assess whether the partnerships are working as intended to  produce positive results or, conversely, are having a negative effect on  military depot maintenance operations.
We are sending copies of this report to interested congressional  committees; the Secretary of Defense; the Secretaries of the Army,  the Navy, and the Air Force; the Commandant of the Marine Corps; and the  Director, Office of Management and Budget. We will make copies available  to others upon request. In addition, the report will be available at no charge  on the GAO Web site at http://www.gao.gov.
If you or your staff have questions regarding this report, please contact me  at (202) 512-8412 or holmanb@gao.gov. Other major contributors to this  report are listed in appendix VII.
section_title: Scope and Methodology
paragraphs: To determine the extent to which the Department of Defense (DOD) is  participating in public-private partnerships for depot maintenance; we met  with officials from the Office of the Secretary of Defense (OSD) and from  service logistics offices to identify recent, ongoing, and planned  partnerships within each service and identified the military depots  associated with these partnerships. We also reviewed partnership data  maintained in the Joint Depot Maintenance Activities Group partnering  database. We visited 14 of DOD’s 20 major military depots (see appendix II  for the depots visited and the partnerships reviewed) to examine in more  depth the partnerships associated with these depots. We selected depots  that had the greatest volume of partnership activity, also ensuring that we  included each service. Of the six depots we did not visit, four did not have  any partnerships reported in the Joint Depot Maintenance Activities Group  partnering database—the Marine Corps Maintenance Center Barstow,  Barstow, California; the Naval Surface Warfare Center, Crane Division,  Crane, Indiana; the Naval Undersea Warfare Center, Keyport Division,  Keyport, Washington; and the Aerospace Maintenance and Regeneration  Center, Tucson, Arizona—the other two depots—Pearl Harbor Naval  Shipyard and Letterkenny Army Depot—reported two partnerships and  one partnership, respectively. We did not assess why these sites had this  low volume of partnership activity. To collect information on the  partnerships we reviewed, we developed a data collection instrument for  each depot to complete for each partnership. The information collected on  each partnership included the type of partnership, reasons why the  partnership was formed, roles and responsibilities of each partner, and the  legislative authority or basis for the partnership. We did not, however,  validate the data provided by the depots or attempt to assess whether or  not the tasks and responsibilities assumed by the contractor and military  depot partners represented the best division of work for achieving success  within the partnership.
To calculate the growth in public-private partnerships, we used our 1998  work reviewing the use of public-private partnerships in DOD as a baseline,  tallied the number of partnerships by service, and compared these numbers  with the partnerships reported in the Joint Depot Maintenance Activities  Group partnering database as of December 4, 2002. To determine the  relative size or scale of the partnership efforts within DOD, we analyzed  fiscal year 2002 data on (1) the workload that each partnership brought to  the each depot compared with the total ongoing workload for each depot,  (2) the total workload that the partnerships brought to the depots  compared to the total combined workload for all depots visited, and (3) the  total dollar value of depot maintenance performed under the partnerships  at the depots we visited compared with the department’s total depot  maintenance expenditures.
To determine the characteristics that need to be present to achieve  effective partnerships and where DOD is in its ability to measure success,  we met with OSD logistics officials, service logistics officials, high-level  contractor officials, and officials at each depot visited. We discussed  evaluating the effectiveness of ongoing partnerships—measuring success  against DOD’s objective of improved depot efficiency and viability—with  these officials and collected relevant data and also discussed the  characteristics of successful partnerships with the senior-level DOD and  contractor officials. To identify the characteristics of successful  partnerships, we reviewed the information collected through structured  interviews with senior-level DOD and contractor officials and grouped the  characteristics into categories based on the similarities of responses. We  also discussed the extent to which depot partnership managers expect  these characteristics to be present in current partnerships or will be  present in future partnerships. To determine whether DOD has developed a  sufficient framework for measuring success, we reviewed the metrics that  DOD has developed to gauge the performance of its partnerships and  assessed whether these metrics included measurable goals and outcomes  tying the partnerships’ performance to DOD’s public-private partnership  policy objective. We also assessed the relevance of the department’s  metrics to DOD’s public-private partnership policy objective. We did not  test or validate the accuracy of the reported performance data related to  the public-private partnerships but instead considered the structure of the  metrics to assess their relevance to DOD’s partnership policy objective. To  analyze the sufficiency of data for evaluating the extent to which  partnerships improved the economy and efficiency of depot operations and  improved the viability of the depots, we compared the relative volume of  each depot’s partnership workload with the ongoing workload at each  depot visited and assessed the age of the partnerships to determine if  enough data existed to make an evaluation. To determine the amount of  investments made by the private sector in military-depot plant and  equipment, we extracted information from a database on partnerships  developed by the Joint Depot Maintenance Activities Group at OSD’s  request. We also used this database to identify the expected annual value of  depot work for each partnership and presented this data in appendix II.  When no annual estimate was identified in the database, we calculated an  annual work value by dividing the total expected value for the partnership  by the expected partnership life, where possible. In those instances where  this was not possible, we presented the total revenue generated by the  partnership to date. We did not perform a reliability assessment on this  Joint Depot Maintenance Activities Group database. Through discussions  with depot officials and reviews of individual partnerships, we identified  instances where the partnering efforts produced promising outcomes as  related to DOD’s objective of improved depot efficiency and viability.
To determine what future management challenges face DOD’s planned  expansion of public-private partnerships, we relied on our discussions with  OSD logistics officials, service logistics officials, high-level contractor  officials, and officials at each depot visited to identify challenges that may  inhibit the department’s expansion efforts. To assess the potential impact  of proposed legislative changes on limiting DOD’s planned expansion of  public-private partnerships, we discussed the impact of removing title 10  provisions that currently limit the outsourcing of military depot  maintenance and repair workload with OSD maintenance policy officials,  depot officials, and contractor officials and discussed how these title 10  provisions affect contractors’ and military depots’ decisions to form public- private partnerships. To assess whether the opportunities for partnering  are limited, we reviewed the reasons why ongoing partnerships developed  and then discussed with these officials the services’ ability to control or  create opportunities that can lead to successful partnerships. We also  discussed the relationship between the expansion of public-private  partnerships and DOD’s implementation of performance-based logistics  with OSD officials and reviewed the services’ performance-based logistics  implementation plans. To assess the potential impact of DOD’s new policy  calling for private-sector investment in depots on establishing and funding  needed depot capabilities, we reviewed and compared the new public- private partnership policy with DOD’s overarching acquisition policy, and  discussed the partnering policy’s implementation with depot and OSD  officials.
We conducted our review from February 2002 through February 2003 in  accordance with generally accepted government auditing standards.
section_title: Depot Maintenance Public-Private Partnerships Reviewed and Depots Visited
paragraphs: Contractor sought  out depot for its  unique capabilities  and advantageous  labor rates. $2 million Direct sale/government-furnished  resources—Depot performs  finishing operations, paints the  vehicle and provides production  services. The contractor performs  vehicle test and acceptance and  supplies all parts and material for  the production of the vehicle. Both  the depot and the contractor  perform vehicle assembly.
Contractor sought  out depot for its  unique capabilities  and advantageous  labor rates. $40,000 Direct sale—Depot performs hull  and component modification and  repair. The contractor performs  vehicle assembly, test and  acceptance, and provides all parts  and material.
Contractor sought  out depot for its  unique capabilities  and advantageous  labor rates. $1 million Direct sale/lease—Depot performs  vehicle hull upgrade, tail upgrade,  paints vehicle, disassembles  engine, and removes asbestos. The  contractor performs vehicle  disassembly and reassembly, sub  assembly/component rework, and  systems integration and test.
Provided collocation  with related Fox  vehicle upgrade  partnership.
Lease—Depot provides use of a  facility. Contractor uses facility to  receive, store, and issue Fox  vehicle subassemblies,  components and parts for fielded  vehicles.
Depot had available  production facilities  needed by the  contractor.
Lease—Depot provides use of a  facility. Contractor performs  manufacture of a new gunner’s  primary site.
Program manager  directed work share  and contractor  sought out depot for  its unique  capabilities.
No annual estimate available, but total revenue reported since partnership’s inception in January 1997 through March 2002—$15.9 million.
Work share/lease—Depot performs  vehicle disassembly, hull overhaul  and conversion, and provides the  “dismate” power pack. The  contractor overhauls  subassemblies and components,  performs engine and suspension  modification, vehicle assembly,  systems integration and test, and  final paint.
Program manager  directed work share. $15.3 million Work share—This is a partnership  for the upgrade of the M1 tank to  the M1A2 version. Depot performs  vehicle receipt, disassembly, hull  rework and upgrade,  demilitarization of the turret,  overhaul of major subassemblies  and components, and then ships  tank parts to the contractor in Lima,  Ohio. Contractor performs vehicle  reassembly, turret installation and  systems test and integration.
Program developed  by program  manager, contractor,  and depot to  enhance current  depot engine  overhaul programs,  and reduce  operations and  support costs.
Lease—Depot provides use of  underutilized facility to contractor.  Contractor uses facility to supply  parts and material to support the  depot’s turbine engine  repair/overhaul line.
Base realignment  and closure (BRAC)  process closed a  government-owned  facility where  contractor  performed work. $200,000 Direct sale/lease—Depot provides  material handling and movement,  and the contractor manufactures  recuperator plates.
Program manager  directed work share. $47 million Work share—This is a partnership  for a recapitalization of the M1A1  tank. Depot performs vehicle  receipt, disassembly; overhaul of  hull, turret, and major  subassemblies and components;  and ships the tank to contractor in  Lima, Ohio. The contractor  performs vehicle reassembly and  systems test and integration.
Program manager  directed work share.
No annual estimate available, but total revenue reported since partnership’s inception in January 1998 through March 2002—$9 million.
Work share—Depot performs  vehicle disassembly, structural  repair of the hull and front blade  repair. Contractor performs  modification, reassembly, and  systems test and integration.
BRAC process  closed a  government-owned  facility where  contractor  performed work.
No annual estimate available, but total revenue reported since partnership’s inception in January 1998 through March 2002—$1.6 million.
Work share—Depot performs  overhaul and conversion of chassis  assembly and armament system,  and provides turret kit components.  Contractor fabricates and  assembles the new cab, performs  vehicle reassembly and systems  test and integration.
Program manager  directed work share. $1.6 million Work share—Depot performs  vehicle disassembly, hull rework,  demilitarization of turrets, overhaul  of major subassemblies and  components, and ships the vehicles  to the contractor in Lima, Ohio.  Contractor performs chassis  assembly, procures and installs  bridge systems, and conducts  inspections and testing.
Contractor sought  out depot for its  unique capabilities  and advantageous  labor rates. $8.2 million Work share—Depot fabricates  unique parts and spares;  disassembles vehicle; cleans,  machines, and repairs hull; repairs,  converts and paints; and  assembles and integrates turret.  Depot also performs program  management functions. Contractor  overhauls subassemblies and  components, modifies engine and  suspension, assembles and paints  vehicle, and performs final systems  integration and testing.
Desire to reduce  repair turnaround  time.
Partnership involves reengineering of ongoing workload that annually has a value of about $87.7 million.
Teaming—Depot provides the  labor, facilities and equipment for  the overhaul and repair of airframes  and components. Contractor  provides technical, engineering and  logistical support, and spare parts  to improve repair turn around time.
Desire to reduce  repair turnaround  time.
Partnership is in initial phase of development and implementation, and depot work has not yet begun—no annual estimate yet available.
Teaming—Depot will provide the  labor, facilities and equipment for  the overhaul and repair of airframe  and components. Contractor will  provide technical, engineering and  logistical support to improve repair  turn around time.
Desire to reduce  repair turnaround  time.
Partnership is in initial phase of development and implementation, and depot work has not yet begun—no annual estimate yet available.
Teaming—Depot will provide the  labor, facilities and equipment for  the overhaul and repair of airframes  and components. Contractor will  provide technical, engineering and  logistical support, and some parts  on an emergency basis.
Desire to reduce  repair turnaround  time.
Partnership is in initial phase of development and implementation, and depot work has not yet begun—no annual estimate yet available.
Teaming—Depot will provide the  labor, facilities and equipment for  the overhaul and repair of engines.  Contractor will provide technical,  engineering and logistical support,  and some parts to depot  workstations.
Program manager  directed work share. $17.5 million Work share—Depot modifies and  overhauls the A2 configuration of  the Bradley fighting vehicle and  transports the vehicle to the  contractor’s York, Pennsylvania  facility. Contractor integrates the  Bradley Fire Support Team  capability into the vehicle.
Program manager  directed work share. $7.5 million Work share—Depot and contractor  overhaul or recapitalize a complete  vehicle and each partner performs  work on an equal number of  vehicles.
Program manager  directed work share. $700,000 Work share—Depot is overhauling  vehicle chassis and components  and transports completed chassis  to contractor’s overhaul facility.  Contractor integrates and upgrades  the Loader Launcher and its related  components.
Contractor sought  out depot for its  unique capabilities. $347,200 Direct sale—Depot repairs the hoist  assemblies and ships them to the  contractor’s plant in East Camden,  Arkansas. Contractor installs the  hoist on the vehicle.
Contractor sought  out depot for its  unique capabilities.
No annual estimate available but total revenue reported since partnership’s inception in March 2001 through March 2002— $157,000.
Direct sale—Depot provides  support for testing qualifying and  painting the engine and cleaning  and painting the axel.
Contractor sought  out depot for its  unique capabilities.
Partnership is in initial phase of development and depot work has not yet begun—no annual estimate yet available.
Teaming—Depot and contractor  have agreed to cooperate in  potential partnerships on mutually  beneficial programs and  solicitations.
Contractor sought  out depot for its  unique capabilities.
Partnership completed and total revenue generated during the partnership’s 2 month period of performance— $4,600.
Direct sale—Depot provides all raw  material and labor to manufacture  Patriot missile conduit cover shields  for the contractor. Contractor  incorporates the shields into the  Patriot missile.
Contractor sought  out depot for its  unique capabilities.
No annual estimate available, but total revenue reported since partnership’s inception in June 2002 through December 2002— $4,900.
Direct sale—Depot repairs circuit  cards, which contractor uses in  repair of communications security  cryptographic equipment.
Contractor sought  out depot for its  unique capabilities.
Direct sale—Depot fabricated six  items—Local Area Network Box  Assembly, Remote TAU Radio Box  Assembly, Flat Panel Display  Assembly, V1 RWS Rigid Kit, and  Router Adapter Plate Assembly.  Contractor installed these parts in  communications shelters as part of  retrofit program.
Contractor sought  out depot for its  unique capabilities  and advantageous  labor rates. designed, manufactured, and  tested two engineering  development model Prime Power  groups for the program; and  provided cabling and interfaces  needed to mount Portable  Operations Suite in vehicles and  power transfer boxes, as well as  integration, test and logistics  support at the system level.  Contractor is responsible for overall  design and manufacture of the  weapon system.
Contractor sought  out depot for its  unique capabilities  and advantageous  labor rates.
Teaming—Depot produces modular  azimuth positioning system kits.  Contractor incorporates kits into  AN/TPQ-37 FIREFINDER radars.
Contractor sought  out depot for its  unique capabilities.
No annual estimate available, but total revenue reported since partnership’s inception in June 2001 through March 2002—$209,000.
Teaming—Depot manufactures  cable assemblies. Contractor is  prime for electronic warfare system  that uses these cable assemblies.
Contractor sought  out depot for its  unique capabilities. $500,000 Direct sale/teaming—Depot  designed and manufactures  modification installation kits that are  installed by Laguna Industries at  the depot and Fort Hood. The  contractor provides the radio that is  connected to existing systems  using the depot’s installation kit.
Blackhawk  Management, Inc.
Contractor sought  out depot for its  unique capabilities.
No annual estimate available, but total revenue reported since partnership’s inception in December 1999 through March 2002— $941,000.
Direct sale/teaming—Depot  participated in program to secure  repair workload on critical systems  in order to help maintain critical  capabilities and skills at the depot.  The contractor markets the team’s  capabilities to potential customers  and provides depot and other  subcontractors with components for  repair.
Contractor sought  out depot for its  unique capabilities  and to meet new  weapon system title  10 core depot  maintenance  requirements. assembles and warrants the field  radio. Contractor manages overall  contract and provides depot  components needed to assemble  the radio.
Contractor sought  out depot for its  unique capabilities  and advantageous  labor rates.
Although depot initially expected workload from this partnership, none has materialized and none is currently expected.
Direct sale/teaming—Depot  participated in program to secure  repair workload on critical systems  in order to help maintain critical  capabilities and skills at the depot.  The contractor markets its team’s  capabilities to potential customers  and provides depot and other  subcontractors with components for  repair.
Logistics,  Engineering &  Environmental  Support Services,  Inc.
Contractor sought  out depot for its  unique capabilities  and advantageous  labor rates.
Although depot initially expected workload from this partnership, none has materialized and none is currently expected.
Direct sale/teaming—Depot  participated in program to secure  repair workload on critical systems  in order to help maintain critical  capabilities and skills at the depot.  The contractor markets the team’s  capabilities to potential customers  and provides depot and other  subcontractors with components for  repair.
Contractor sought  out depot for its  unique capabilities.
Although depot initially expected workload from this partnership, none has materialized and none is currently expected.
Direct sale/teaming—Depot  participated in program to secure  repair workload on critical systems  in order to help maintain critical  capabilities and skills at the depot.  The contractor markets its team’s  capabilities to potential customers  and provides depot and other  subcontractors with components for  repair.
Contractor sought  out depot for its  unique capabilities.
Although depot initially expected workload from this partnership, none has materialized and none is currently expected.
Direct sale/teaming—Depot  participated in program to secure  repair workload on critical systems  in order to help maintain critical  capabilities and skills at the depot.  The contractor markets its team’s  capabilities to potential customers  and provides depot and other  subcontractors with components for  repair.
Contractor sought  out depot for its  unique capabilities.
No annual estimate available, but total revenue reported since partnership’s inception in October 1998 through March 2002—$2,600.
Direct sale/teaming—Depot  participated in program to secure  repair workload on critical systems  in order to help maintain critical  capabilities and skills at the depot.  The contractor markets its team’s  capabilities to potential customers  and provides depot and other  subcontractors with components for  repair.
Contractor sought  out depot for its  unique capabilities.
Although depot initially expected workload from this partnership, none has materialized and none is currently expected.
Direct sale/teaming—Depot  participated in program to secure  repair workload on critical systems  in order to help maintain critical  capabilities and skills at the depot.  The contractor markets its team’s  capabilities to potential customers  and provides depot and other  subcontractors with components for  repair.
Information System  Support Inc.
Contractor sought  out depot for its  unique capabilities.
Although depot initially expected workload from this partnership, none has materialized and none is currently expected.
Direct sale/teaming—Depot  participated in program to secure  repair workload on critical systems  in order to help maintain critical  capabilities and skills at the depot.  The contractor markets the team’s  capabilities to potential customers  and provides depot and other  subcontractors with components for  repair.
Contractor sought  out depot for its  unique capabilities.
Although depot initially expected workload from this partnership, none has materialized and none is currently expected.
Direct sale/teaming—Depot  participated in program to secure  repair workload on critical systems  in order to help maintain critical  capabilities and skills at the depot.  The contractor markets its team’s  capabilities to potential customers  and provides depot and other  subcontractors with components for  repair.
To satisfy title 10  core depot  maintenance  requirements for the  workload involved  and contractor  sought out depot for  its unique  capabilities. $5.3 million Direct sale/teaming—Depot repairs  power units providing repair  facilities, skilled labor, support  equipment, production engineering,  and logistics support. Contractor  provides failed power units, spare  parts, engineering support,  inventory management, and  packaging and shipping.
To meet new  weapon system title  10 core depot  maintenance  requirements. $885,000 Direct sale/teaming—Depot repairs  components providing touch labor  and depot maintenance logistics  support. Contractor provides overall  program execution, and customer  and engineering support.
Program manager  directed work share. $6.5 million Work share—Depot disassembles  the AV-8B aircraft, repairs and/or  modifies 287 components, and  ships repaired components to  contractor. Contractor installs  components into new fuselage and  delivers remanufactured aircraft to  the Navy.
Program manager  directed work share. $22,000 Work share—Depot dynamically  balances turbine engine blades  providing facilities, skilled labor, and  logistics support. Contractor  provides unbalanced blades.
Associated Aircraft  Manufacturing &  Sales, Inc.
Contractor sought  out depot for its  unique capabilities.
Partnership began in July 2000, ended in August 2001 and generated total revenue of $7,000.
Direct sale—Depot repaired  components providing repair  facilities, skilled labor, support  equipment, spare parts, and  technical data. Contractor provided  failed components and shipping.
Contractor sought  out depot for its  unique capabilities. $27,042 Direct sale—Depot repairs  components providing repair  facilities, skilled labor, support  equipment, and technical data.  Contractor provides failed  components, packaging, and  shipping.
To satisfy title 10  core depot  maintenance  requirements for the  workload involved  and contractor  sought out depot for  its unique  capabilities. $771,428 Direct sale—Depot repairs  components providing repair  facilities, skilled labor, support  equipment, and technical data; and  collects and provides contractor  with failure data. Contractor  provides total asset management,  failed components, repair parts,  configuration management,  technical and engineering support,  and packaging and shipping; and  investigates and incorporates  reliability improvements.
Contractor sought  out depot for its  unique capabilities. $12,000 Direct sale—Depot responsible for  boresight calibration, shipment  preparation, maintenance of  inspection and test records, and  reporting schedule and funding  expenditures. Contractor  responsible for inventory and asset  tracking, preparation for shipping,  repair parts, and technical support.
To meet new  weapon system title  10 core depot  maintenance  requirements. $130,600 Direct sale—Depot repairs  components providing repair  facilities, skilled labor, and support  equipment; and collects and  provides contractor with failure  data. Contractor provides total  asset management, failed  components, repair parts,  configuration management,  technical and engineering support,  and packaging and shipping.
Contractor sought  out depot for its  unique capabilities. $350,000 Direct sale—Depot repairs  components providing repair  facilities, skilled labor, support  equipment, and technical data; and  collects and provides contractor  with failure data. Contractor  provides failed components, repair  parts, and packaging and shipping.
Contractor made  business decision to  close facility where  work was previously  done $66,667 Direct sale—Depot repairs engines  providing repair facilities, skilled  labor, support equipment, spare  parts, and technical data.  Contractor provides failed engines  and shipping.
Contractor sought  out depot for unique  its capabilities. $61,111 Direct sale—Depot calibrates test  stands, and provides metal  processing and engineering  support services. Contractor  provides access to test stands  requiring calibration and items  requiring metal processing, and  shipping to and from the depot.
Neptune Technical  Services, Inc.
Contractor sought  out depot for its  unique capabilities.
This partnership began in December 2000 and ended in October 2001 but did not produce any workload.
Direct sale—Depot was to provide  antenna and radome testing,  autoclave processing, coordination  of measuring machine inspection,  and technical data. Contractor was  to provide components for testing  and shipping.
S&K Technologies,  Inc.
Contractor sought  out depot for its  unique capabilities. $81,081 Direct sale—Depot repairs  components providing repair  facilities, skilled labor, support  equipment, and technical data.  Contractor provides failed  components, and packaging and  shipping.
System &  Electronics, Inc.
Contractor sought  out depot for its  unique capabilities.
No annual estimate available, but total revenue reported since partnership’s inception in February 1999 through November 2002— $19,000.
Direct sale—Depot repairs  components providing repair  facilities, skilled labor, support  equipment, and technical data.  Contractor provides failed  components and shipping.
To meet new  weapon system title  10 core depot  maintenance  requirements. $10 million Direct sale/teaming—Depot repairs  components providing touch labor,  facilities, equipment, production  engineering, technical data, and  packaging. Contractor provides  failed components, repair parts,  obsolescence management, and  shipping.
Contractor sought  out depot for its  unique capabilities. $150,000 Direct sale—Depot will paint aircraft  providing touch labor, facilities and  equipment. Contractor will provide  ready-for-paint aircraft,  specifications, and paint.
Contractor sought  out depot for its  unique capabilities. $4.5 million Direct sale/government-furnished  resources—Depot is providing a  drydock and related facilities, and  skilled labor. Contractor is providing  skilled labor and overall  management responsibility for this  overhaul.
Contractor sought  out depot for its  unique capabilities. $1.8 million Direct sale—Depot sold general  production services—including  pipefitting, sheet metal, and  insulation—to contractor for these  two overhauls. Contractor had  overall responsibility for these  overhauls.
Contractor sought  out depot for its  unique capabilities. $440,000 Direct sale—Depot sold general  production services—including  pipefitting, sheet metal, electrician,  and machinist—to contractor for  these two overhauls. Contractor  had overall responsibility for these  overhauls.
Contractor sought  out depot for its  unique capabilities.
Partnership expected to generate a total of $28.9 million between January 2002 and December 2002.
Work share/teaming—Depot is  providing manpower (60 percent)  and has overall responsibility for  submarine overhaul. Contractor is  providing manpower (40 percent)  and facilities—including a drydock.
Contractor sought  out depot for its  unique capabilities. $486,487 Direct sale—Depot provides  equipment, technical support, and  knowledge for testing services.  Contractor provides program  management, technical data,  engineering expertise, and  research and development  expertise.
Seavey Island,  L.L.C.
Contractor sought  out depot for its  unique facility.
Partnership has terminated without producing revenue for the depot.
Lease—Depot provided facility.  Contractor’s intent was to refurbish  facility and sublet as office space.  Lease termination negotiations in  process because of death of  lessee.
Contractor sought  out depot for its  unique capabilities.
The sharing of processes under this partnership will not produce workload or revenue for the partners, instead the partners are benefiting from improved repair processes.
Teaming—The partnership’s intent  is to study (benchmark) similar  depot and contractor processes  associated with nuclear aircraft  carrier overhauls, which will  contribute to a mutually beneficial  goal of achieving the most timely  and cost effective ship repair  processes.
Partnership  established to gain  consistent planned  and anticipated  workload on nuclear  aircraft carriers.
This partnership establishes a framework for resource sharing that will be used for carrier overhaul partnerships— resulting revenue to the depot will be reported under these resulting partnerships; however, depot has not reported any revenue to date.
Direct sale/government-furnished  resources—Depot subcontracts  segments of its aircraft carrier to  contractor owing to resource  shortfalls. Contractor also does this  in reverse. Depot supports  contractor by accomplishing work in  propulsion spaces owing to security  classification. Contractor supports  depot by providing resources such  as painters, welders, and pipe  fitters.
Contractor sought  out depot for its  unique capabilities.
Partnership completed and between partnership’s inception in October 2000 and November 25, 2002 generated total revenue of $156,000.
Direct sale—Depot performed work  in propulsion plant owing to security  classification. Contractor was  responsible for overhaul.
Contractor sought  out depot for its  unique capabilities.
Partnership completed between partnership’s inception in October 2000 and January 2001 generated total revenue of $31,000.
Direct sale/government-furnished  resources—Depot provided  explosion bulge testing services.  Contractor provided high-strength- low-alloy plates for testing.
Puget Sound and Pacific Railway 1944 triggering  event is unknown.
Contractor allowed use of Navy  owned railway in exchange for  normal maintenance to rails and  roadbed. Depot provides funding  for major maintenance and capital  improvements.
Contractor sought  out depot for its  unique capabilities.
No annual estimate available, but total revenue reported since partnership’s inception in October 2001 through November 2002— $67,000.
Teaming—Depot will develop work  packages for installation on  submarine on the basis of  contractor provided conversion  drawings. Contractor will also  provide all standard material,  engineered components, and  manufactured assemblies.
Partnership type—description of  partnership tasks  out depot for its  unique capabilities.
Partnership is in initial phase of development and depot work has not yet begun—no annual estimate yet available.
Direct sale/work share/lease— Depot provides touch labor, non- destructive inspection, and support  equipment operators. Contractor  provides engineering, supply chain  management, and oversight. $10 million Work share—Test station design is  out depot for its  unique capabilities. a joint engineering effort between  depot and contractor. Contractor  will fabricate test stations. Depot  and contractor will share effort to  rehost software test programs on  new test station.
Contractor sought  out depot for its  unique capabilities. resources—Depot performs  software maintenance tasks.  Contractor integrates products  associated with these tasks into the  avionics system.
Contractor sought  out depot for its  unique capabilities  and advantageous  labor rates. $1.2 million Work share/government-furnished  resources—Depot provides labor  for program installation, and share  responsibility for the development  of program hardware and software  requirements with the contractors.  Contractor provides program  management and engineering  support.
BRAC process  closed a  government-owned  facility where work  was performed.
Because this partnership is terminated, there is no continuing annual workload expected.
Teaming—Depot performed  analytical inspection and painted A- 10 aircraft, overhauled components  and subcontracted KC-135 PDM  workload to contractor. Contractor  overhauled KC-135 aircraft. The Air  Force transferred the contract  management out of the depot;  therefore, the depot no longer  considers this a partnering effort— there is no ongoing partnering  interaction between the depot and  the contractor.
Program manager  directed work share. $4.1 million Work share—Depot provides labor  to replace antiquated automatic test  station. Contractor maintains  overarching ICBM system  integration responsibilities and  oversight.
Partnership type—description of  partnership tasks  $3.0 million Direct sale/work share/government- out depot for its  unique capabilities. furnished resources—Depot  provides maintenance and repair  for 413 different B-2 bomber  panels, doors, and surfaces.  Contractor provides engineering  services and technical assistance. $800,000 Work share/lease—Depot performs  out depot for its  advantageous labor  rates. specified development and  software maintenance tasks.  Contractor maintains total system  performance responsibility for this  support effort.
BRAC process  closed a  government-owned  facility where work  was performed.
Teaming—Depot performs overhaul  and repair of F100 engines,  modules, components, and fuel  accessories. Contractor performs  overhaul and repair of T56 and  TF59 engines, modules,  components, and fuel accessories.
Contractor sought  out depot for its  unique capabilities. $276,933 Direct sale—Depot performs jet  engine testing. Contractor provides  jet engines.
Contractor sought  out depot for its  unique capabilities. $697,894 Work share—Depot inspects and  polishes F100 engine parts.  Contractor provides F100 engine  parts.
Contractor made  business decision to  close facility where  work was previously  done.
Lease—Depot provides depot  space and support to contractor.  Contractor performs proprietary  spray coating processes in depot  spray booth.
To meet new  weapon system title  10 core depot  maintenance  requirements and  contractor sought  out depot for its  unique capabilities. resources—Depot provides  software development and  integration support for new  components being added to  aircraft, which increases the depot’s  software capabilities. Contractor  maintains its overarching C-130  system integration responsibilities  and oversight under the Air Force’s  Total Systems Support  Responsibility contract; therefore,  specific contractor tasks will vary  depending on the specific  subsystem.
To meet new  weapon system title  10 core depot  maintenance  requirements and  contractor sought  out depot for its  advantageous labor  rates. $1.6 million Direct sale—Depot identifies  hidden defects, deteriorating  conditions, corrosion, fatigue,  overstress, and other conditions  that affect structure of C-17 aircraft.  Contractor provides the depot with  engineering, parts, and equipment  support.
Contractor sought  out depot for its  unique capabilities.
No workload has materialized yet and because of the variable and unpredictable frequency of task orders no annual estimate of workload value is available.
Work share—Depot will provide  labor to support delivery or task  orders issued to one of five  contractors under the Air Force’s  flexible acquisition sustainment tool  contract. Contractor will manage  the delivery or task orders to  ensure performance, however, the  specific contractor tasks will vary  depending on the specific delivery  or task order.
Contractor made  business decision to  close facility where  work was previously  done.
Lease—Depot provides facility  where contractor repairs LANTIRN  components.
Contractor made  business decision to  close facility where  work was previously  done, and contractor  sought out depot for  its unique  capabilities and  advantageous labor  rates. $796,000 Direct sale—Depot repairs 155  different components and delivers  repaired components to contractor.  Contractor provides failed  components for repair.
To meet new  weapon system title  10 core depot  maintenance  requirements and  contractor sought  out depot for its  unique capabilities  and advantageous  labor rates. $1.4 million Work share—Depot upgraded two  laboratories to accommodate  testing of upgraded avionics, and  provides software engineering  support to rehost operational flight  software into upgraded avionics.  Contractor provides upgraded  avionics components for testing  and rehosting.
Northrop Grumman To satisfy title 10  $9.7 million Work share—Depot performs prime  core depot  maintenance  requirements for the  workload involved. mission equipment repair, system  and ground support software  maintenance, and various  backshop functions. Contractor  determines depot’s work  requirements, and provides depot  with sustaining engineering and  other support functions.
Program manager  directed work share. $22 million Work share/lease—Depot  disassembles and reassembles  vehicle; rebuilds transmission,  electronics, generators, and other  components; installs new engine;  and blasts and paints vehicle.  Contractor provides labor expertise  and equipment to modify vehicle  hulls.
section_title: Summary Data Regarding the Reasons Cited and Approaches Used for the 90 Partnerships Reviewed
paragraphs: Partnerships were formed for a variety of reasons such as to allow industry  to take advantage of depots’ unique capabilities and advantageous labor  rates, to take advantage of industry’s engineering capabilities and  accessibility to spare and repair parts, and to help meet title 10  requirements while increasingly relying on the private sector for logistics  support activities. Depending on the specific circumstances surrounding  the work to be performed, the services used various arrangements—such  as work share and teaming—to form their partnerships. Although the  partnerships involve many logistics functions performed in various  combinations by both public- and private-sector partners, in general,  contractors perform more spare parts, engineering, and technical data  functions, while the military depots provide more repair labor, facilities,  and equipment.
Reasons for Partnering Partnerships between military depots and contractors were formed for a  variety of reasons. Service depot officials identified nine reasons for  entering into partnerships as indicated in figure 3.
In some instances, a combination of these reasons motivated the parties to  form a partnership. As shown by figure 3, the largest category involved  contractors seeking out a depot for its unique capabilities—57 times for the  partnerships we reviewed. Other reasons frequently cited were contractors  seeking out a depot for its advantageous labor rates—13 times, program  mangers directing work share arrangements—12 times, and meeting title  10 requirements that limit the outsourcing of depot maintenance—10  times. As discussed in the body of the report, DOD expects these title 10  requirements to increasingly become an important driver to expanding  partnerships as the department increases contractors’ involvement in  logistics support for weapon systems because the contractors will often be  required to partner with depots in order to satisfy title 10 provisions that  limit the outsourcing of depot workload.
subsections: section_title: Partnership Approaches Used Vary
paragraphs: The reasons for partnering discussed above and the circumstances  surrounding a depot’s workload shape how the services develop the  approach used for each of their partnerships, including the selection of a  partnership type and how they divide responsibilities for the performance  of logistics functions. The depot maintenance partnerships we reviewed  used one or a combination of five partnering approaches: work share,  direct sale, lease, government-furnished resources, and teaming. Figure 4  illustrates how frequently the five partnership types were used for the  partnerships we reviewed.
As indicated by figure 4, “direct sale” was the most frequently used  approach. According to DOD officials, that approach is expected to  increase in number with the expansion of contractor-managed logistics- support arrangements for weapon systems. The five public-private  partnership approaches are described below. 1. Direct sale. An arrangement whereby military and commercial entities  enter into a contractual relationship for the use of military depot  maintenance facilities and employees to provide the private sector with  articles and/or services. Forty-eight—53 percent—of the 90  partnerships we reviewed used the direct sale approach, making it the  most frequently used partnering arrangement. DOD expects the use of  direct sale arrangements to increase as DOD expands contractor  involvement in logistics support for weapon systems in order to comply  with title 10 provisions that limit the outsourcing of depot maintenance.  The Navy’s F-18 Integrated Readiness Support Team and the Air Force’s  B-2 Advanced Composite partnerships are examples of the direct sale  approach to partnering. These examples each involve one partner—the  depot—performing work directly for, and receiving payment from, the  other partner—the contractor. (See appendix II for more detail on these  and other partnerships.) 2. Work share. An arrangement whereby a combination of military and  commercial facilities and/or employees is used to execute a program  manager’s work package—including tasks such as weapon systems  remanufacture, modification, or upgrade. Under the work share  arrangement, the program manager issues a work order to the military  participant and a contract to the private-sector participant. The  relationship between the participants to accomplish the work package  is usually coordinated with a memorandum of understanding or  memorandum of agreement instead of a contract. Twenty-six—29  percent—of the 90 partnerships we reviewed used the work share  approach, and this approach was typically used to form the services’  larger partnerships. The Army’s M1/M1A2 Abrams Tank upgrade  partnership and the Navy’s Harrier Aircraft remanufacturing  partnership are examples of work shares. These examples involve each  partner’s performing its designated share of the workload directly for  the weapon system’s program office and the paying of each partner by  the program manager. 3. Teaming. An arrangement whereby military and commercial entities  enter into a contractual relationship to accomplish a deliverable  stipulated in a contract. The relationship between the participants is  usually initially outlined in a teaming agreement during the proposal’s  preparation and then formalized as a contractor/subcontractor  relationship subsequent to contract award. Twenty-seven—or 30  percent—of the 90 partnerships we reviewed used the teaming  approach. Most of the teaming arrangements occurred in the Army— 19, with the Navy using the teaming approach for six of its partnerships  and the Air Force using teaming for two of its partnerships. 4. Lease. An arrangement whereby military and commercial entities enter  into a contractual relationship for the private sector’s use of public  depot maintenance facilities and/or its equipment to perform work for  either the public or private sector. Twelve—13 percent—of the 90  partnerships we reviewed used the lease approach, often in  conjunction with other partnering approaches. For example, the  upgrade partnership for the Army’s Fox Nuclear, Biological, Chemical  Reconnaissance System vehicle uses a lease arrangement in  conjunction with a direct sale arrangement. The lease portion of the  Fox partnership involves the depot’s providing underutilized facilities  at Anniston Army Depot and the contractor’s paying for facility upkeep  and utilities. The Air Force’s partnership for the F100 aircraft engine  special technologies coating facility is an example of a stand-alone  lease arrangement not involving other partnering arrangements. In this  example, the Air Force’s Oklahoma City depot provides underutilized  facilities, while the contractor pays the depot for the use of the  facilities, provides facility upkeep, and pays utilities. 5. Government-furnished resources. An arrangement whereby military  and commercial entities enter into an agreement for private-sector use  of public depot maintenance facilities and/or its equipment and  employees at no cost in connection with and under the terms of a  contract. Nine—10 percent—of the 90 partnerships we reviewed used  the government-furnished resources approach, which was also often  used in conjunction with other partnering approaches. The Air Force’s  F-16 block 40 avionics software maintenance/upgrade and the Navy’s  Puget Sound railway partnerships are examples of the government- furnished resources approach to partnering. Under the F-16  partnership, the government performs F-16 component software  maintenance tasks for the contractor without charge as a government- furnished resource, while the contractor performs final software  integration. In the railway partnership, the government provides the  contractor with access to a Navy-owned railway in exchange for the  contractor’s performing normal maintenance on the railway.
According to DOD and contractor officials, the type of partnership selected  is based on what approach or combination of approaches best served the  objectives of the partnership. For example, in the case of the Army’s Fox  vehicle upgrade partnership, the Army contracted with General Dynamics  to upgrade its Fox vehicle. To improve the economy and efficiency of the  upgrade, the contractor elected to partner with the Army’s Anniston depot  for a portion of the work and to colocate its segment of the upgrade with  Anniston’s segment at the Anniston depot. Consequently, the contractor’s  approach used a combination of two partnership types—direct sale  and lease.
section_title: Functions Performed Vary between Public- and Private-Sector Partners
paragraphs: Depot maintenance involves not only the application of labor to repair and  maintain military equipment but also several other logistics elements or  functions such as supply support, production engineering, facilities, and  equipment. For the partnerships we reviewed, these logistics elements or  functions were performed or provided by both public- and private-sector  partners in various combinations on the basis of the characteristics of the  workload and the abilities of the partners. In the case of the Navy’s  auxiliary power unit repair effort, for example, the depot was repairing  power units but did not have all the spare parts needed to complete repairs  in a timely manner. To improve the availability of overhauled power units,  the Navy awarded a contract for the power unit program’s overall system  support and performance. As a condition of the contract, the contractor  partnered with a Navy depot to perform depot repairs to comply with title  10 requirements that limit the outsourcing of depot maintenance. The  partnership that developed for this workload involved the depot’s providing  labor, facilities, and equipment, while the contractor provides technical  data and spare parts. Figure 5 compares the frequency with which logistics  functions are performed by depots and contractors for the partnerships we  reviewed. As indicated by figure 5, the contractors’ contribution to the  partnerships consisted of performing or providing more of the spare parts,  engineering, and technical data functions than the other functions; and the  depots’ contribution to partnerships consisted more of providing repair  labor, facilities, and equipment.
section_title: Examples of Partnerships That Are Achieving Positive Results
paragraphs: Some partnerships provide promising results or good potential for results  related to improvements in parts availability, reduced repair time, reduced  back orders, or reduced support costs. These improvements align with  some of the partnership approaches included as a part of DOD’s logistics  reengineering initiative—more efficient business processes, better facility  utilization, workforce integration, and reduced cost of ownership—and  may therefore contribute to enhancing depot efficiency and viability. The  following examples provide illustrations of some of the improvements the  partnerships achieved: T700 Engine. Corpus Christi Army Depot wanted to reduce the repair time  and improve reliability for the Army’s T700 helicopter engine.  Consequently, it entered into a partnership with General Electric to achieve  these improvements. (See fig. 6 on p. 53.) Under the partnership, Corpus  Christi provides the needed facilities and equipment and repairs the engine.  General Electric provides spare parts, and technical, engineering, and  logistics services. According to depot officials, this effort has resulted in  the introduction of General Electric’s best practices at the depot, which in  turn has resulted in the T700 engine repair line’s realizing a 26 percent  reduction in engine turnaround time and a 40 percent increase in test cell  pass rates. Depot and contractor officials both attribute the T700 engine’s  improved depot repair times to better parts availability and improvements  to the depot’s repair processes, although they also recognize that the  related T700 recapitalization effort begun shortly after the formation of the  partnership may also be a factor influencing these improvements.
Auxiliary Power Unit. Cherry Point Naval Aviation Depot was repairing  auxiliary power units for four aircraft but was experiencing production  delays owing to poor spare parts support. To improve the availability of  overhauled power units, the depot formed a partnership with Honeywell— the auxiliary power units’ manufacturer. (See fig. 7 on p. 54.) Under the  partnership, the depot provides labor, facilities, and equipment, while the  contractor provides production engineering and spare parts. According to  depot officials, the number of units’ awaiting depot repair because of lack  of parts went from 118 when the partnership began in July 2000 to zero in  October 2002. According to the auxiliary power units users in the fleets, the  resulting improvement in support has been outstanding. For example, the  back orders for the power units were reduced from 125 in July 2000 to 26 in  October 2002. Depot officials attribute these improvements to better parts  support and the introduction of more efficient business practices to the  repair process that include replacing rather than repairing worn  components.
USS Enterprise. Northrop Grumman Newport News shipyard was  scheduled to overhaul the nuclear-powered aircraft carrier USS Enterprise  in fiscal year 2002 but lacked the necessary capacity at its facility to  perform the work as scheduled. (See fig. 8 on p. 55.) Consequently,  Northrop Grumman formed a partnership with the Navy wherein the  Norfolk Naval Shipyard provided drydock space and the Navy’s four  shipyards provided 108,000 man-days of labor to augment Northrop  Grumman’s overhaul of the aircraft carrier, which resulted in the overhaul’s  completion as scheduled. Northrop Grumman retained overall  responsibility for the overhaul and also contributed labor, equipment,  production engineering, and technical data. According to shipyard officials,  this partnership allowed the contractor and the shipyards to share their  labor resources, which along with the drydock space, increased the  Navy’s maintenance ability and therefore increased its production,  making carriers available to the fleet sooner than would otherwise have  been feasible.
AGT1500 Recuperator. The Abrams Tank Recuperator production was  formerly located at the Army’s Stratford Engine Plant in Connecticut,  which was closed by BRAC in 1995. Honeywell relocated the capability to  Anniston Army Depot in 1998 and entered a partnership with the depot at  that time. (See fig. 9 on p. 57.) According to depot officials, this partnership  is an example of a “pure” facility lease arrangement in which production  has been colocated with its primary user—Anniston’s M1 tank engine  repair line. The production operation benefits from base operations  support provided by the depot. On-site production eliminates the need for a  parts manager at the depot. It also eliminates the need for the Defense  Logistics Agency to stock and issue recuperators, which means Anniston  avoids Defense Logistics Agency surcharges. The minimal supply chain  also reduces the need for raw material inventory and on-hand finished- goods inventory. Production is adjusted to meet customer demand on a  near “just-in-time” basis. According to depot officials, these benefits  resulted from Honeywell’s recuperator production operation’s proximity to  the depot.
LANTIRN Phase II. Lockheed Martin was under contract for the depot  maintenance and repair of the Air Force’s LANTIRN system, but its  vendors were not providing timely turnaround on the repair of certain  LANTIRN components. To improve component support, Lockheed Martin  and the Air Force’s Warner Robins depot negotiated a direct sale agreement  for the depot to repair various quantities of 155 LANTIRN components.  (See fig. 10 on p. 58.) According to Warner Robins officials, since the start  of partnership in August 2001, the depot’s performance in repairing the  components has been very good. For example, the depot’s average  component repair turnaround time of 18 days under the partnership is  much better than the average turnaround time of 93 days under Lockheed  Martin’s prior vendors and also better than the negotiated turnaround time  of 45 days agreed to under the partnership. Depot officials attributed these  improvements to (1) Lockheed Martin’s colocation at the depot, which  reduced the shipping time between Lockheed Martin and its vendors— some of which were overseas—and (2) ongoing Warner Robins’ operations  that historically were more efficient in the repair of the LANTIRN  components than were Lockheed Martin’s prior vendors.
ICBM Global Positioning System. As the Air Force’s intercontinental  ballistic missile (ICBM) logistics integrator, TRW Inc. had a requirement to  arrange for the modification of ICBMs to add satellite global positioning  capability. (See fig. 11.) However, TRW’s component manufacturing  subcontractor’s estimate for the modification was too costly. To achieve the  required modification at less cost, TRW Inc. formed a partnership with the  Air Force’s Ogden depot to replace the old tracking system with the  required global positioning system capability. Under the partnership,  Ogden provides the labor for the modification installation, while TRW Inc.  performs its integration and engineering support responsibilities. As a  result of the partnership, the depot estimates that the program will save  about $11 million in 4 years, thereby reducing the overall support cost of  ICBMs. According to depot officials, the savings will result from the depot’s  ability to produce and install the guidance modification for less than the  original equipment manufacturer.
section_title: Fourteen Characteristics Identified by DOD and Contractor Officials Needed to Achieve Effective Partnerships
paragraphs: DOD and contractor officials have identified 14 characteristics that they  believe over time will contribute to a partnership’s success in achieving  DOD’s objective of improved depot efficiency and viability. The following  describes these characteristics and provides examples of how some of the  partnerships we reviewed exhibited these characteristics. 1. Long-term relationship and commitment. A long-term relationship  and commitment (1) permits both contractors and depots to better plan  future workload requirements and create a better business case for the  contractor to make investments to improve depot repair capability and  (2) allows the contractor to help manage parts obsolescence. For  example, the F/A-18 partnership involves a long-term relationship  between the Navy and Boeing to provide logistics support for the F/A- 18E/F aircraft over the life cycle of the weapon system. Boeing and the  depots are projecting partnering workloads for the Navy depots for the  next 30 years, allowing the partners to create a phased plan to move  from providing maintenance and repair on limited aircraft components  to eventually encompass the entire weapon system. 2. Shared partnership vision and objectives. Having partners share the  same partnership vision and objectives helps ensure that the partners  will not be working at cross-purposes. The Navy ship depot  maintenance partnerships involving shipyard work and workforce  sharing—USS Memphis, USS Enterprise, and USS John C. Stennis— exemplify this characteristic. With the downsizing of the Navy, a  corresponding decrease in the Navy and contractor shipyard  workforces occurred. To manage the resulting downsized workforces  and avoid the unnecessary duplication of skills, Navy and private  shipyard officials developed and implemented a workforce-sharing  initiative whereby shipyard workers are assigned to public or private  workloads depending on the skills needed to perform the work and the  Navy’s ship maintenance priorities. The partners view the shipyards as  a shared resource that needs to be effectively managed in order to  provide the Navy with the needed overhaul capability and cost and  schedule performance while minimizing the collective workforce  requirements. 3. The right metrics and incentives. The right metrics and incentives are  needed to effectively measure that progress is being made and that the  partners are effectively motivated to achieve partnership goals and  objectives. For example, the prime reason why the Navy entered into  its auxiliary power unit partnership at its Cherry Point depot was the  shortage of power units within the fleets. To ensure that this problem  was addressed by the partnership, the metrics that the Navy uses to  evaluate the partners are the same metrics used to assess the quality of  auxiliary power unit support to the fleet—e.g., depot turnaround-time,  testing acceptance rates, and system availability. 4. Early acquisition community involvement. Developing the  partnership with acquisition community involvement during the early  phases of a weapon system’s acquisition helps to ensure that any  additional depot maintenance capability development needed is fully  planned and funded. The C-17 partnership efforts under way at Air  Force depots illustrate that not building the partnership concept into  the acquisition process early enough can lead to funding challenges.  Until the Air Force recently determined that a significant portion the  C-17 depot maintenance was core under 10 USC 2464 and would  involve a public-private partnership, the system acquisition strategy  was focused on contractor-provided depot maintenance. Consequently,  the acquisition community had not planned or budgeted for the  development of depot capability to support the currently planned  partnering efforts. The Air Force is exploring ways of dealing with the  potential shortfall. 5. Complementary skills and abilities. Each partner should bring  complementary skills and abilities to the partnership because if each  partner’s capabilities are the same, the relationship may result in a  competitive and potentially adversarial relationship, not the  cooperative synergistic relationship hoped for in a partnership. The Air  Force’s Low Altitude Navigation Targeting Infrared for Night  (LANTIRN) partnering approach provides an example in which each  partner brought complementary abilities to the effort. The contractor  managed the repair of the LANTIRN system but did not have the ability  within its supplier network to repair subcomponents in a timely  manner. The Air Force’s Warner Robins depot already had an ongoing  repair line for these components and was able to easily supply the  contractor’s requirements for maintaining the LANTIRN system. 6. Senior-level advocacy and support. DOD and contractor senior  management support for a partnership is necessary to ensure that the  effort receives the focus and resources needed to achieve success. The  Air Force’s Joint Surveillance Target Attack Radar System (JSTARS)  partnership, for example, illustrates the value of this characteristic.  Senior Air Force and contractor leaders endorsed the partnership,  requiring their managers to be innovative in overcoming the obstacles  created by years of competitiveness and the associated tension. The  partners responded by putting the right people in place with the  mindset and leaderships skills necessary to make the partnership work. 7. Sound business case analysis. A comprehensive business case  analysis, including expected outcomes, should be conducted as part of  the decision process for entering a partnership to ensure a sound result  benefiting both the depot and the private-sector partners. The Air  Force’s ICBM Automatic Test Systems partnership, for example, was  formed after the Air Force conducted an analysis to assess the cost- benefit of the effort. As a result, the Air Force documented its expected  savings of approximately $30 million over the 5-year partnership. 8. Mutual trust and shared risk. The partnership should be firmly  grounded in mutual trust, open communications, and balanced risk  among partners. For example, according to the business development  office at the Corpus Christi Army Depot, the T700 partnership involved  both parties’ investing the necessary time to understand each other’s  goals and develop a level of trust so that both parties were willing to  share risks in order to make their partnering effort successful. 9. Flexibility to change partnership scope. To ensure the ability to adapt  to changing circumstances or factors, the partnerships should have the  flexibility to change the partnership scope. The Air Force’s F100  partnership illustrates this characteristic. For example, the partnership  currently involves two types of F100 workload—the inspections of  selected engine components and engine testing—but the partnership  agreement provides for adding additional F100 workloads and other  engine workloads. 10. Balanced workload. Workload should be balanced among the partners  to ensure meaningful involvement for each partner and ensure that one  partner does not receive only low-skilled work or no work at all. The  AV-8B Harrier Remanufacturing partnership demonstrates a balanced  division of workload among the partners. Both the depot and the  contractor were responsible for segments of the remanufacturing effort  that involved challenging tasks requiring highly skilled labor. For  example, the depot partner modified and rewired the aircraft wing and  rebuilt complex aircraft components, while the contractor built and  provided new aircraft components and then incorporated these  components along with the wing and components from the depot into  the remanufactured aircraft. The division of tasks helped each partner  maintain and improve its respective technical expertise. 11. Independent review and oversight. Independent review and oversight  provides an objective assessment of whether each partnership is  achieving the expected benefits and that each partner performs as  expected. Such a review also provides a basis for correcting or  redirecting partnership efforts if expectations are not being met. To this  end, OSD has begun a process to provide review and oversight of depot  maintenance partnering efforts throughout the department. For  example, OSD has directed its Joint Depot Maintenance Analysis  Group to collect and maintain data on the conduct and performance of  service partnerships. OSD plans to use these data to redirect and  improve partnering efforts toward achieving DOD’s goals and objective. 12. Enforce partnership decisions and requirements. To ensure  successful partnering efforts, the partners’ senior management must  provide a mechanism for enforcing compliance with partnership  decisions and requirements. The Air Force’s JSTARS partnership effort,  for example, incorporates the partnership agreement and requirements  into the overarching system logistics support contract. According to  depot officials, the contract is the most effective means for compelling  partner compliance with partnership decisions and requirements. 13. Full coordination with all stakeholders. Public-private partnership  efforts should include steps to get feedback from all stakeholders on  planned efforts and adjust the partnering strategies to reflect the  legitimate concerns of these stakeholders. The Army’s Multiple Launch  Rocket System Hoist Assembly partnership exemplifies full  coordination among the depot; the contractor; and the major  command’s general counsel, business operations office, and acquisition  community. 14. Clearly documented objectives in partnering agreement. Once clear  mutual partnering objectives are determined, they should be  documented into a formal partnering agreement. For example, the  Army’s Tobyhanna depot follows a standard procedure of documenting  all partnering arrangements with formal agreements. This  documentation typically includes a nondisclosure agreement, which  protects shared information that is proprietary or otherwise business  sensitive, and a partnering agreement that includes the partnership’s  objectives, a statement of work to be performed, the partners’ roles and  responsibilities, and other terms and conditions as needed.
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