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

Letter

Background

Determining Core Capability Requirements

DOD Instruction 4151.20 requires the armed services to apply a process to determine their core capability requirements—that is, to identify what core capabilities are required and what workload would be necessary to enable them to sustain these core capabilities at the depots. DOD Instruction 4151.20 describes a series of mathematical computations and adjustments that the armed services are required to use to compute their core capability requirements and to identify the workload that needs to be planned to support these requirements. Also, the instruction requires that the armed services identify the weapon systems required to execute the Joint Chiefs of Staff contingency scenarios, which represent plans for responding to conflicts that may occur in the future. After systems are identified, the armed services compute annual depot maintenance capability requirements for peacetime, in direct labor hours, to represent the amount of time they will regularly take to execute required maintenance. An armed service may determine that repair capabilities for certain systems maintained at the depots are so similar that they share common base repair processes that can effectively satisfy the repair requirements of other systems.

During this process of identifying the systems for which they will be required to maintain repair capabilities, DOD Instruction 4151.20 requires that the armed services organize and aggregate their capability data by categories of equipment and technologies known as work breakdown structure categories. The work breakdown structure category is a grouping of work associated with DOD’s weapon systems and equipment. DOD uses these categories to organize data on its various core capability requirements and workloads to manage and report on its core capabilities. There are 11 categories at the top level—”first level”—of the work breakdown structure. A first-level category summarizes information for an entire type of system or equipment. Table 1 shows the 11 first-level categories of the work breakdown structure.

A first-level category can be broken down into second-level subcategories, which are the major elements that make up the system or equipment in the first-level category. For example, the first-level category for Aircraft can be broken down into the second-level subcategories for Airframes, Aircraft Components, and Aircraft Engines, which are major elements that make up an aircraft. The second-level subcategories can be further broken down into third-level subcategories, which are subordinate elements that make up the major elements in the second- level categories. For example, the second-level subcategory for Airframes is further divided into the third-level subcategories—different types of airframes, such as Rotary, Fighter/Attack, or Bomber. The subcategories can be further broken down to the lowest-level element of the system. Lower-level categories are subcategories of the eleven first-level work breakdown structure categories. DOD refers to these levels as “levels of indenture.” The work breakdown structure can be expressed at any level of detail down to the lowest-level part, such as a bolt. Table 2 shows an example of the top three levels of the work breakdown structure for Aircraft.

The instruction requires the armed services to identify their core capability requirements and the amount of available planned workload within the work breakdown structure categories and subcategories.

Reporting Core Maintenance Capability

DOD Instruction 4151.20 requires each DOD Component that performs depot maintenance to report biennially to OSD its core capability requirements and planned workload, in accordance with a tasking memorandum issued for each reporting cycle. The instruction includes a worksheet called the “core submission worksheet” that the components are to complete and submit to OSD. The worksheet calls for information to be organized by the work breakdown structure to various subcategory levels, mostly at the second level of subcategories. Appendix III provides a table listing these categories and subcategories.

On October 5, 2015, OSD issued the tasking memorandum for the 2016 Biennial Core Report, which directs the armed services and the Missile Defense Agency to use DOD Instruction 4151.20 as basic guidance and includes further guidance on how to meet the requirement under Section 2464 to report this information to Congress. The memorandum augments the core submission worksheet by adding another column for the estimated costs of performing the planned workload at the first-level of work categories. The instruction and tasking memorandum also require the armed services to provide additional information when reporting shortfalls in planned workloads. If an armed service does not have sufficient workload to sustain the required level of capability that has been identified, a shortfall exists; in other words, the military depots have not been assigned sufficient depot maintenance workload to enable them to sustain their identified core capabilities. For example, an armed service may have identified 10,000 direct labor hours of core capability requirements for ground vehicles but have only 4,000 hours of anticipated depot maintenance work for ground vehicles. This armed service will have a workload shortfall of 6,000 hours. The instruction requires that the armed services report on shortfalls by providing a description of those shortfalls and a plan to address them to accompany the core submission worksheet, but it does not require that the shortfalls be calculated in the core submission worksheet.

Missile Defense Agency Included as a Reporting Agency in DOD’s 2016 Biennial Core Report

The Missile Defense Agency (MDA) was created in 2002 to develop a variety of systems, known as elements—including sensors, interceptors, command and control, battle management, and communications—to enable the warfighter to destroy enemy missiles before they can reach their targets. The ultimate goal is to integrate these various elements to function as a single system: the Ballistic Missile Defense System (BMDS). Once BMDS capabilities are developed that are useful to the warfighter, the management and some funding responsibility for the operation and sustainment of the capability is to be transferred to a lead service within the armed services.

In 2003, MDA recommended and DOD approved the transfer of one system element, Patriot Advanced Capability–3 (PAC–3) program, to the Army. The PAC-3 was transferred to the Army because MDA had completed the initial development of this element and the Army, as the lead service, would now be responsible for managing the production, operation and sustainment of the PAC-3. According to MDA officials, to date, no other elements of the BMDS have transferred to the armed services. These officials also stated that MDA is responsible for the management, funding, production, operation, and sustainment of these elements and has been providing maintenance through contractor logistics support.

For its 2016 Core Report, DOD included MDA as a reporting agency because, according to OSD, the BMDS developed by MDA is used to respond to contingency operations and has been identified as a core capability. To support the data in the Core Report, MDA provided information on three of the five elements of the BMDS in its core submission worksheet: 1. Aegis Ballistic Missile Defense – includes ship- and land-based ballistic missile defense capabilities using a radar, command and control, and Standard Missile-3 interceptors. The Navy was designated as the lead service in 2006. 2. Army Navy/Transportable Radar Surveillance – forward-based, land-based radar to provide additional advance warning of ballistic missile launches. The Army was designated as the lead service in 2006. 3. Terminal High Altitude Area Defense – a mobile, ground-based system to defend against short- and medium-range threats using a battery that consists of interceptors, launchers, a radar, and fire control and communication systems. The Army was designated as the lead service in 2006.

According to MDA officials, they included these three system elements in their core submission worksheet because these elements are in use by the warfighter. MDA did not include the following two system elements in its core submission worksheet: 4. Command and Control, Battle Management and Communications – a globally deployed system of hardware—workstations, servers, and network equipment—and software that links and integrates individual elements, allowing users to plan ballistic missile defense operations, see the battle develop, and manage networked sensors. MDA developed this system in 2002. 5. Ground-Based Midcourse Defense – defends against intermediate- and intercontinental-range ballistic missiles by using ground-based interceptors that consist of a booster and a kill vehicle, plus a ground system that includes launch, communications, and fire control capabilities. The Army was designated as the lead service in 2006.

According to MDA officials, they did not include these two system elements in their core submission worksheet because these elements are considered developmental programs and are not yet considered safe and suitable for use by the warfighter.

DOD Complied with Two of the Three Required Reporting Elements and Partially Complied with the Third, and the Report Was Not Complete Due to Some Inaccurate Data

DOD’s 2016 Core Report to Congress complied with two of the three required reporting elements of Section 2464—core capability requirements and planned workload. It partially complied with the third element, because it included information on shortfalls and mitigation plans, but it did not provide detailed explanations of all shortfalls and mitigation plans, as shown in table 3 below. Additionally, DOD included MDA as a reporting agency in its 2016 Core Report but did not report accurate information for it. Lastly, reporting agencies did not always provide accurate data for the Core Report because they do not have clear guidance on issues such as how to report additional depot workload performed that has not been identified as a core requirement, accurately capture inter-service workload, calculate shortfalls, and estimate cost of planned workload.

The Report Included Information on Core Capability and Planned Workloads

DOD’s 2016 Core Report complied with the first two elements in Section 2464—to provide information on core capability requirements and planned workload. As requested by OSD to support the Core Report, the armed services provided data on their core capability requirements, organized by lower-level elements of the eleven first-level categories of the work breakdown structure. The report included the required information on core capability requirements—expressed in direct labor hours—at the first-level category of the work breakdown structure, for each of the armed services. As reported in DOD’s 2016 Core Report, DOD’s total core capability requirements are about 58.5 million direct labor hours, as shown in table 4.

As requested by OSD to support the Core Report, the armed services also provided data on their planned workloads—the amount of available work used to maintain the required capability, organized by lower-level elements of the eleven first-level categories of the work breakdown structure. In the report, OSD included information on the amount of planned workload that is available to maintain the required capability at the first-level categories of the work breakdown structure, expressed in direct labor hours, and the estimated cost of these workloads for each of the armed services. As shown in table 5, DOD reported a total planned workload of about 93 million direct labor hours at an estimated cost of about $12 billion.

The Report Included Information on Shortfalls but Did Not Include Mitigation Plans and Detailed Explanations for Some Shortfalls

In the 2016 Core Report, DOD included information on shortfalls; however, DOD did not include mitigation plans and detailed explanations for some of the identified shortfalls. The Air Force identified shortfalls under 1 of the 11 first-level work breakdown structure categories totaling almost 340,000 direct labor hours, as shown in table 6. However, in its Core Report, DOD did not include any shortfalls for the Army, Navy, and Marine Corps at the first-level work breakdown structure categories.

OSD provided shortfall data in the Core Report consistent with how it reported its core requirements and planned workloads. OSD aggregated the workload shortfalls under the first-level work breakdown structure categories for each armed service in its 2016 Core Report.

DOD partially complied with the third reporting element in Section 2464— to provide rationales and mitigation plans for identified shortfalls. The Core Report included (1) rationales and mitigation plans for all of the shortfalls at the lower-level categories identified by the Marine Corps, (2) rationales for shortfalls at the lower-level categories identified by the Army but not mitigation plans to address all of these shortfalls, and (3) rationales and mitigation plans for some but not all of the shortfalls at the first- and lower-level categories identified by the Air Force. The Core Report did not include rationales or mitigation plans for the Navy, because the Navy did not identify any shortfalls at the first- or lower-level categories. Specifically, the Army identified shortfalls in the lower-level category of Bradley Fighting Vehicle. According to the Army, these shortfalls were due to declining depot repair requirements; however, the Core Report did not provide a mitigation strategy for this identified shortfall. In another example, the Air Force identified shortfalls in the lower-level categories of aircraft airframes, aircraft components, aircraft engines, and missile components, but it did not provide a rationale or a mitigation plan for these shortfalls. Section 2464 requires the armed services to provide a detailed rationale for any and all shortfalls and a plan to either correct or mitigate the shortfall. In the Core Report, DOD did not include shortfall rationales and mitigation plans for all of the shortfalls identified by the reporting agencies in the lower-level categories. According to OSD officials, skills, facilities, and equipment are transferrable from one system to another within a work breakdown structure category and could mitigate shortfalls within that same work breakdown structure category. However, DOD did not consistently include in the Core Report these similar capabilities that were used to mitigate the shortfalls. Including this information in the Core Report would provide Congress visibility into whether the armed services’ plans would address the causes of the shortfalls. In February 2013, we recommended that DOD improve its Core Report by including detailed explanations of why the armed services did not have the workload to meet core maintenance requirements for each identified shortfall. DOD concurred with this recommendation and stated that it would take steps to implement it but did not implement it fully for its 2016 Core report.

DOD’s Report Was Not Complete Because Some Data Were Inaccurate

DOD included MDA as a reporting agency in its 2016 Core Report but did not report accurate information for the associated reporting elements. Additionally, the Core Report and reporting agencies’ core submission worksheets included some inaccurate data, such as data on workload performed—which has not been identified as a core requirement—inter- service workload, shortfall calculations, and estimated cost of planned workload.

DOD Included MDA as a Reporting Agency in its 2016 Core Report but Did Not Always Report Accurate Information

While DOD was not required to include information from MDA as part of the Core Report, MDA’s information was included in the 2016 Core Report. According to OSD, MDA was included because the BMDS developed by MDA is used to respond to contingency operations and has been identified as a core capability. For its 2016 Core Report, DOD reported on MDA’s (1) core requirements, (2) planned workloads, and (3) shortfall rationale and mitigation plan. Specifically, DOD included information from MDA on two of the three reporting elements but did not include the third element, as shown in table 7 below.

In assessing the completeness of the Core Report, we determined that the report included the core requirements information, planned workload and estimated cost, and workload shortfall for MDA, as shown in table 8.

However, MDA’s core submission worksheet and the Core Report contained some inaccurate data for the core capability requirement. For example, in the Communication/Electronic Equipment category, DOD reported 39,624 direct labor hours of core requirement, but MDA submitted 0 direct labor hours of core requirement on its core submission worksheet.

As reported in the Core Report, MDA had a total planned workload of 799 direct labor hours and an estimated cost of about $69,000,000. According to MDA officials, this workload is being performed by the Navy Surface Warfare Center; however, Navy officials stated that the Navy is not identifying this workload on its core submission worksheet. Additionally, MDA’s core submission worksheet and the Core Report contained data inaccuracies in some of the work breakdown categories. For example, in the Sea Ships category, DOD reported 0 direct labor hours of planned workload, but MDA submitted 2,139 direct labor hours of planned workload on its core submission worksheet. In another example, MDA reported the estimated cost of planned workload in several categories but did not report any planned workload in those categories. According to MDA officials, they could not accurately calculate planned workload because MDA does not have any depots.

Further, in the Core Report, DOD identified shortfalls for MDA in each of the categories where MDA reported a core capability requirement. However, according to MDA officials, they could not accurately calculate shortfalls because MDA does not have any depots. For example, in the Ordnance, Weapons, & Missiles category, DOD reported 2,125 direct labor hours of workload shortfalls, but our analysis of MDA’s core submission worksheet shows a calculation of 0 direct labor hours of workload shortfalls. According to MDA officials, DOD Instruction 4151.20 requires it to identify workload performed in depots, and MDA does not have any depots. MDA did not complete the core submission worksheet according to DOD Instruction 4151.20, and DOD did not consistently include the data in the Core Report as it was provided by MDA in its core submission worksheet. As a result, the data on MDA in the Core Report contained inaccurate information.

Lastly, MDA did not include a detailed rationale for the shortfalls it identified or a plan to correct or mitigate the effects of these shortfalls. MDA’s narrative in the Core Report provided the current status of the BMDS and reported that it used the military departments for operations and support and would continue to coordinate with OSD to conduct comprehensive depot maintenance assessments to meet all reporting requirements. MDA officials told us that they did not provide a detailed rationale for the shortfalls it identified or a plan to correct or mitigate the effects of these shortfalls because they do not own any depots to perform core workload and thus do not have any shortfalls.

OSD provided MDA with DOD Instruction 4151.20 and the tasking memorandum to assist it with completing the core submission worksheets to comply with the reporting requirements. Additionally, according to MDA officials, they received a briefing to assist them in completing their initial core submission worksheet. According to OSD officials, some of the inaccurate data in the Core Report was due to errors in transferring the data from the core submission worksheet to the final Core Report, and other errors were due to MDA not completing the core submission worksheet according to the instructions provided by OSD because, according to MDA officials, they do not have any depots. However, according to OSD, MDA is responsible for the life-cycle support of the BMDS and currently conducts maintenance through contractors. Therefore, OSD included MDA in the Core Report because the BMDS system has been identified to support a core capability. If DOD decides to continue to include MDA as one of the reporting agencies in future Core Reports, DOD should ensure that the associated data are complete and accurate. We previously recommended that DOD implement improvements to ensure that future Core Reports will be more accurate and complete. DOD concurred with this recommendation and stated that it would take steps to implement it but did not fully do so for its 2016 Core Report.

Core Report Included Other Inaccuracies due to Lack of Clear Guidance

DOD’s Core Report and the core submission worksheets provided to OSD to support the Core Report included some inaccurate data. For example, in the Core Report, OSD reported planned workload for the Marine Corps in the Sea Ships category without reporting a core requirement or an estimated cost associated with this workload, as shown in table 9. This additional information caused an anomaly in the Marine Corps’ data in the Core Report.

OSD and Marine Corps officials explained that this additional work is conducted by the Marine Corps for the Navy and Coast Guard; however, it is not a core requirement for the Marine Corps. Additionally, according to Marine Corps officials, they did not provide an Estimated Cost of Planned Workload for this work because the work is not considered core. According to OSD officials, these data should not be included in the Core Report. However, in its review of the Core Report, OSD did not correct this error. DOD Instruction 4151.20 requires the armed services to calculate and report all planned workload that supports core capability requirements and any additional workload performed at depots. The Marine Corps’ data contained this anomaly in the Sea Ships category because DOD Instruction 4151.20 does not provide clear guidance on how reporting agencies should report additional depot workload they performed that has not been identified as a core requirement.

The reporting agencies expressed concerns about the inter-service workload data requested on the core submission worksheets because, as we found, some of the services do not categorize their inter-service workload in the same work breakdown structure category as the service for which they are performing the workload or which is performing workload for them. According to Air Force officials, one service’s inter- service transfer-in (workload being performed by another service) may not match another service’s inter-service transfer-out (workload given to another service to perform), because the services are not coordinating verification that each service is accounting for inter-service workload in the correct work breakdown structure category. Additionally, MDA is reporting workload being performed by the Navy on MDA systems. However, according to Navy officials, the Navy is not performing any work on MDA systems that are identified as core. DOD Instruction 4151.20 requires the reporting agencies to report inter-service workload as part of their core submission worksheet; however, the instruction does not require the reporting agencies to coordinate on how they are capturing their inter-service workload. The reporting agencies may not be accurately capturing inter-service workload because DOD has not provided any guidance on how they should coordinate to categorize their workload in the same work breakdown structure category.

Further, the reporting agencies are not calculating or displaying their workload shortfalls consistently. For example, the Army and Air Force calculate and display their shortfalls on the core submission worksheet, while the Navy and Marine Corps’ shortfalls are calculated by DOD and not displayed on the core submission worksheet. The Navy and Marine Corps did not calculate or display any shortfalls on their core submission worksheets because, according to Navy and Marine Corps officials, DOD Instruction 4151.20 does not require them to do so. In another example, MDA reported shortfalls in each of the categories where it identified a core capability requirement. However, as we previously mentioned, according to MDA officials, they could not accurately calculate shortfalls because MDA does not have any depots. Also, MDA did not display its shortfalls on the core submission worksheet because DOD Instruction 4151.20 does not require it to do so. The reporting agencies are not calculating or displaying their shortfalls consistently because DOD does not provide the reporting agencies guidance on how to calculate or display their shortfalls.

Additionally, the reporting agencies are not consistently calculating the estimated cost of planned workload as reported in the Core Report. For example, the armed services use the Financial Management Regulation as a basis for calculating their estimated cost of planned workload. Specifically, Air Force officials stated that they calculated the estimated cost of planned workload using rates from the Financial Management Regulation and multiplied those rates by the rate per hour of the repair group category or specific work type. In another example, MDA officials stated that they use the Financial Management Regulation; however, its calculation included private sector maintenance workload and costs for the core planned workload. However, the Core Report should include cost information only for workload performed at military depots, and not workload performed by the private-sector. MDA officials told us that OSD guidance does not explain how to calculate the estimated cost for core planned workloads. OSD provided supplemental guidance as part of its memorandum to the reporting agencies; however, the memorandum stated that the estimated costs of performing the core planned workloads only needed to be identified at the top level of the work breakdown structure. Further, the DOD Instruction 4151.20 template for the core submission worksheet does not include guidance on how to calculate the cost. In the Core Report, MDA’s reported estimated cost of planned workload may not be accurate, because DOD does not provide guidance to the reporting agencies on how to calculate the estimated cost of performing the planned workloads. However, according to OSD and the armed services, they do not use the estimated cost of planned workload to make budgetary decisions.

According to the Standards for Internal Control in the Federal Government, management should design control activities to achieve objectives and respond to risks and they should implement control activities through policies. For example, management should design control activities so that all transactions are completely and accurately recorded. Additionally, management should periodically review policies, procedures, and related control activities for continued relevance and effectiveness in achieving the entity’s objectives. An OSD official told us that OSD answered questions the reporting agencies had as they were assembling their information. Further, OSD explained that its internal controls processes include reviewing each reporting agency’s information submission for factors such as whether it is consistent with DOD policy and the statute. OSD and reporting agency officials stated that before DOD’s final 2016 report was issued, the reporting agencies had the opportunity to review and make any necessary corrections to the report. However, according to an OSD official, when reporting agencies do not comply with DOD instructions—introducing inaccurate information into DOD’s reporting—there is no additional guidance to hold the reporting agencies accountable.

The instruction does not provide guidance on how to report additional information to support the Core report, partly because DOD Instruction 4151.20 was issued in 2007, before the biennial reporting requirement in Section 2464 was enacted in 2011. Since DOD Instruction 4151.20 was issued before Section 2464 was enacted, the Instruction does not completely align with the reporting requirements of the law. DOD Instruction 5025.01 provides that instructions published before March 25, 2012 should be updated or cancelled within 10 years of their publication date. Because the instruction has not been aligned with the requirements in Section 2464, reporting agencies do not have the clear guidance they need to ensure that they are submitting data that is accurate and complete.

Additional Information Could Increase the Transparency of the Biennial Core Report

While DOD generally reports on the required elements set forth in Section 2464(d), there is additional information on core capabilities that DOD could provide to better inform congressional oversight and funding decisions. Such information could include workload shortfalls at lower- level categories; executed workload in similar categories that could be used to mitigate shortfalls; progress on implementing mitigation plans; data reported at the first-level category of the work breakdown structure, except for when shortfalls are identified; explanations for first-level categories of the work breakdown structure(i.e., Special Interest Items and Other); and whether the core requirements reported in the previous Biennial Core Report have been executed.

Additional Information on Workload Shortfalls, Mitigation Plans, and Work Breakdown Structure Categories Could Provide More Transparency in the Core Report

DOD Could Provide Additional Information on Workload Shortfalls

As stated previously, DOD reported workload shortfalls for the first-level categories of the work breakdown structure in its Core Report. DOD also provided rationales and mitigations plans for some shortfalls that were identified by the reporting agencies at the first- and lower-level categories. However, DOD did not break out workload shortfalls at the lower-level categories of the work breakdown structure in its Core Report. Based on our analysis of service data provided to OSD, we determined that the Navy did not have workload shortfalls at any of the lower-level categories of the work breakdown structure. However, we determined that the Army, Marine Corps, and Air Force did have workload shortfalls for some of the lower-level categories of the work breakdown structure for which they provided information to OSD. Specifically, the Army submitted information to OSD on shortfalls in lower-level categories totaling approximately 200,000 direct labor hours. These shortfalls are in various second and third-level subcategories under the top categories of Aircraft, Ground Vehicles, Support Equipment, and Communication/Electronic Equipment, as shown in table 10. For example, the Army identified about 29,000 direct labor hours of core shortfalls under generators—a subset of the Support Equipment category.

The Marine Corps identified shortfalls of about 35,000 direct labor hours at lower-level categories within Ordnance, Weapons, and Missiles; Ground Vehicles; and Support Equipment, as shown in table 11. For example, the Marine Corps identified about 18,000 direct labor hours of core shortfalls under Conventional Weapons—a subset of the Ordnance, Weapons, and Missiles category.

For the Air Force, the report reflects total workload shortfalls of approximately 340,000 direct labors hours at the first-level category of Communication/Electronic Equipment. However, the Air Force also provided information to OSD on additional shortfalls of about 816,000 direct labor hours for lower-level categories in Aircraft; Communication/Electronic Equipment; Ordnance, Weapons, and Missiles; and Other, as shown in table 12. For example, the Air Force identified about 236,000 direct labor hours of shortfalls in missile components—a subset of Ordnance, Weapons, and Missiles.

According to Standards for Internal Control in the Federal Government, management should design control activities to achieve objectives and respond to risks. For example, in determining the level of precision for a control activity, management should consider the level of aggregation. A control activity that is performed at a more granular level generally is more precise than one performed at a higher level.

For the report, OSD aggregated the information on lower-level shortfalls provided by the services to the first-level categories of the work breakdown structure. OSD officials told us that they chose to report at the first-level categories of the work breakdown structure because they believe that extra planned workload in some lower-level categories could make up for shortfalls in the other categories of the work breakdown structure. They noted that skills, facilities, and equipment are transferrable from one system to another within a work breakdown structure category, and that aggregation at higher levels gives a more accurate picture of shortfalls. Therefore, according to officials, they decided not to include these lower-level shortfalls in the report. OSD did not consistently include in the Core Report these similar capabilities that were used to mitigate the shortfalls. OSD officials told us that the data at the first-level category are all the information necessary for oversight. However, DOD obtains these data at the lower-level categories as part of each reporting agencies’ core submission worksheet, and it could readily provide this additional information as part of the Core Report. Reporting the information at the lower-level categories would provide Congress with greater visibility over the core workload shortfalls.

As stated previously, DOD did not consistently include in the Core Report similar capabilities that were used to mitigate the shortfalls. Also, in analyzing data from the reporting agencies on workload executed at the depots, we found that the Army and Navy had workload shortfalls in lower-level categories. For example, the Army did not execute sufficient workload to sustain its core capability requirements in Combat Vehicles, a lower-level category of Ground Vehicles. Additionally, the Navy did not execute sufficient workload to sustain its core capability requirements in Surface Combatants/Others, a lower-level category of Sea Ships. As noted above, Standards for Internal Control in the Federal Government states that management should consider the level of aggregation. A control activity that is performed at a more granular level generally is more precise than one performed at a higher level. Additionally, management should establish and operate activities to monitor the internal control system and evaluate the results. According to Army and Navy officials, they believe that extra executed workload in the first-level categories (i.e., Ground Vehicles and Sea Ships) could make up for the shortfalls in the lower-level categories (i.e., Combat Vehicles and Surface Combatants/Others). It could benefit Congress to have information in the Core Report on how DOD executed workload in similar capabilities to mitigate shortfalls at lower-level categories.

DOD Could Provide Additional Information on Mitigation Plans

While DOD provides in its Core Report mitigation plans to correct the shortfalls it identified, it does not provide information on how prior mitigation plans were implemented to correct shortfalls or an update on the progress of the plans to mitigate shortfalls. For example, in the 2012 Core Report, the Army reported shortfalls in the Ground Vehicles and Support Equipment categories. The Army stated that, as part of its mitigation plan, it would use similar capabilities to correct the shortfalls it identified in both categories. However, the Army did not provide an update in the 2014 or 2016 Core Reports on whether the similar capabilities it used corrected the shortfalls in the Ground Vehicles and Support Equipment categories. In another example, the Marine Corps reported shortfalls in the 2014 Core Report in the category of Communications/Electronic Equipment. The Marine Corps stated that, as part of its mitigation plan, it would establish the capabilities to correct this shortfall within two years and until then would use other sources to mitigate this shortfall. However, the Marine Corps did not provide an update on its mitigation plan in the 2016 Core Report. Similarly, the Air Force reported shortfalls in the 2012, 2014, and 2016 Core Reports in the category of Communications/Electronic Equipment. As part of its mitigation plan to correct this shortfall, the Air Force reported in the 2012, 2014, and 2016 Core Reports that it needed to establish capabilities by 2016. However, the 2014 and 2016 reports did not provide an update on the progress made to establish these capabilities.

As required in Section 2464, in its core reports, DOD provides mitigation plans laying out how the reporting agencies will correct or mitigate workload shortfalls; however, the statute does not require DOD to provide information on how prior mitigation plans were implemented to correct shortfalls or an update on the progress of the plans. According to Standards for Internal Control in the Federal Government, management should establish and operate activities to monitor the internal control system and evaluate the results. As part of its subsequent Core Reports, Congress could require DOD to provide information on how prior mitigation plans were implemented to correct shortfalls or to provide an update on the progress of the plans. Such granular information would increase visibility for congressional oversight and help increase the transparency of the Core Report.

DOD Could Provide Additional Information on Work Breakdown Structure Categories

Section 2464 does not specify at which level of the work breakdown structure the Core Report information should be reported, only that the information should be organized by work breakdown structure and expressed in direct labor hours. As DOD has done in its previous Core Reports, it could continue providing core data at the first-level category of the work breakdown structure. However, for future core reports, when shortfalls are identified, it could also provide these data at the lower-level categories.

Further, DOD could provide additional information in the Core Report that explains what items are included in two categories of the work breakdown structure: “Special Interest Items” and “Other.” DOD does not specify in the Core Report what types of items are included in these categories. Since the 2012 Core Report, no reporting agency has reported in the “Special Interest Items” category. According to the reporting agencies’ officials, they are unsure of what is included in that category and no guidance has been provided on what should be included in it. On the other hand, since the 2012 Core Report, some of the reporting agencies, including the Army, Navy, Air Force, and MDA have reported in the “Other” category. According to reporting agencies’ officials, some of the weapon systems or equipment included in the “Other” category are rail equipment, Marine Air System Remote Firing Device, Laser Range Finder, shelter components, vehicle components, and storage. Additionally, MDA used the “Other” category to report on the Terminal High Altitude Aerial Defense system, since it did not fit into any of the other categories. As previously stated, according to Standards for Internal Control in the Federal Government, management should consider the level of aggregation. A control activity that is performed at a more granular level generally is more precise than one performed at a higher level. However, DOD is not including this additional information, because the statute does not require it. Information about what is included in these two categories could increase visibility to Congress by increasing transparency in the Core Report.

DOD Could Provide Information on Whether the Reporting Agencies Are Meeting Core Capability Requirements

DOD could provide information to Congress on whether the reporting agencies are meeting their core capability requirements. Service officials told us that they are using different mechanisms to assess workload executed at the depots, which provide insight on whether they are sustaining their capability to meet their requirements, but that this information is not being reported to OSD or Congress. For example, the

Army is able to compare executed core workload against the core requirements it reported. The Army uses a reporting tool that tracks the executed core workload against the core requirements for fiscal year 2015, and the report generated with this tool enables it to identify whether the Army is meeting its core capability requirements.

Navy is able to compare some executed core workload against the core requirements reported in the Core Report. For example, Navy officials provided data on the number of hours executed at shipyards that enabled comparison of executed core workload on sea ships against core requirements identified in the Core Report. The Navy also provided executed workload data for fiscal year 2015 at the Fleet Readiness Centers. According to Navy officials at the Fleet Readiness Centers, they are able to distinguish core executed workloads for first- level categories, such as an aircraft, but unable to do so for components. According to officials, they have sufficient workload data to make management decisions to determine whether they are meeting their core capability requirements.

Marine Corps officials told us that they do not maintain executed core workload to compare to the core requirements reported in the Core Report. However, according to Marine Corps officials, the Marine Corps’ system should enable it to track how the executed workload compares with the reported core requirements.

Air Force officials told us that they are not able to compare executed core workload to the core requirements reported in the Core Report.

According to Air Force officials, Air Force systems would not enable a direct comparison, because the work categories tracked by these systems do not align with the work breakdown structure categories in the Core Report. However, Air Force officials stated that they could make general comparisons between executed workload and the Air Force’s core requirements.

The reporting agencies are not consistently comparing or reporting whether workload intended to sustain a core capability has been executed, because DOD Instruction 4151.20 does not require them to do so. Moreover, while Section 2464 requires DOD to assign sufficient depot maintenance workload to sustain a core capability, it does not require DOD to determine whether the assigned workload has been executed. As we have previously stated, according to Standards for Internal Control in the Federal Government, management should establish and operate activities to monitor the internal control system and evaluate the results. Some of the reporting agencies did not execute sufficient workload to sustain their core capability requirements, and DOD does not provide Congress information on whether a core capability has been sustained. As a result, Congress does not have the information it needs to make well-informed oversight and funding decisions, because it does not know to what extent the reporting agencies possess the core logistics capabilities specified in Section 2464.

Conclusions

Section 2464 requires DOD to maintain a core maintenance capability that is government-owned and government-operated, assign sufficient workload to support this capability, and report information on this capability to Congress, among other things. DOD’s third Biennial Core Report to Congress complies with most of the required reporting elements but does not provide detailed or complete explanations for all of the identified workload shortfalls, nor does it provide mitigation plans to address these shortfalls. DOD’s 2016 Biennial Core Report includes incomplete information on additional depot workload performed that has not been identified as a core requirement, inter-service workload, shortfalls, and the estimated cost of planned workload. This information is incomplete because DOD Instruction 4151.20 is not completely aligned with the requirements in Section 2464 and therefore does not provide clear guidance. Detailed rationales for why the reporting agencies do not have the workload to meet core maintenance requirements and their explanations for how they plan to mitigate the shortfalls would provide information that Congress currently does not have about how the reporting agencies’ actions would correct the shortfalls. Additionally, DOD monitors information on whether the reporting agencies are meeting core capability requirements that also could be included in the Biennial Core Reports to increase their transparency. This additional information includes workload shortfalls at lower-level categories; executed workload in similar categories that could be used to mitigate shortfalls; progress on implementing mitigation plans; data reported at the first-level category of the work breakdown structure, except for when shortfalls are identified; explanations for first-level categories (i.e., Special Interest Items and Other) of the work breakdown structure; and whether the core requirements reported in the previous Biennial Core Report have been executed. According to DOD officials, some of these data and information have not been included in the Core Report because they are not required by Section 2464. Such information, if required, has the potential to improve DOD’s Biennial Core Report to Congress so that it will better inform oversight and funding decisions.

Matter for Congressional Consideration

To increase the transparency of future Biennial Core Reports, Congress should consider amending 10 USC 2464 to require DOD to include information such as (1) workload shortfalls at lower-level categories; (2) executed workload in similar categories that could be used to mitigate shortfalls; (3) progress on implementing mitigation plans; (4) data reported at the first-level category of the work breakdown structure, except for when shortfalls are identified; (5) explanations for first-level categories (i.e., Special Interest Items and Other) of the work breakdown structure; and (6) whether the core requirements reported in the previous Biennial Core Report have been executed.

Recommendation for Executive Action

To ensure that DOD’s biennial core reporting procedures align with the reporting requirements in Section 2464 and each reporting agency provides accurate and complete information, we recommend that the Secretary of Defense direct the Under Secretary of Defense for Acquisition, Technology and Logistics to update DOD’s guidance—in particular DOD Instruction 4151.20—to require future Biennial Core Reports to include instructions to the reporting agencies on how to (1) report additional depot workload performed that has not been identified as a core requirement, (2) accurately capture inter-service workload, (3) calculate shortfalls, and (4) estimate the cost of planned workload.

Agency Comments and Our Evaluation

We provided a draft of this report to DOD for comment. In its written comments, reproduced in appendix VII, DOD concurred with our recommendation and stated that the department will update its instruction to reflect clear guidance on reporting non-core sustaining workloads and accurately capturing inter-service workloads, among other things. Additionally, the department will add a column to the core submission worksheet to include workload shortfalls. The department also provided technical comments, which we incorporated as appropriate.

However, DOD expressed concerns regarding the matter for Congressional consideration, in which we asked Congress to consider amending 10 U.S.C.§2464 to increase the transparency of future Biennial Core Reports by requiring DOD to include information such as (1) workload shortfalls at lower-level categories; (2) executed workload in similar categories that could be used to mitigate shortfalls; (3) progress on implementing mitigation plans; (4) data reported at the first-level category of the work breakdown structure, except for when shortfalls are identified; (5) explanations for first-level categories (i.e., Special Interest Items and Other) of the work breakdown structure; and (6) whether the core requirements reported in the previous Biennial Core Report have been executed. In its response, DOD stated that satisfying these additional reporting requirements would be expensive and labor intensive, for what it believes would be little or no apparent return.

We believe that providing this additional information to improve the transparency of future core reports would not be expensive and labor intensive. This is because DOD already collects some of this information to support the Core Report—but does not report it to Congress. For example, DOD collects workload shortfall data at the lower-level categories, workload executed in similar categories that could be used to mitigate shortfalls, workload data at the first-level category of the work breakdown structure, explanations for the first-level category of “Other”, and information on whether the core requirements reported in the previous Biennial Core Report have been executed. DOD could readily provide this additional information as part of the Core Report. The inclusion of this information has the potential to improve DOD’s Biennial Core Report to Congress so that it will better inform oversight and funding decisions.

While there is some information that DOD does not already collect, we believe it would also not be expensive or labor intensive to provide to Congress. For example, DOD already provides mitigation plans to correct identified shortfalls and as part of this reporting, it could provide an update on how prior mitigation plans were implemented to correct shortfalls or an update on the progress of the plans. Also, the reporting agencies already provide explanations on what is included in the “Other” category as part of the core submission worksheet, and could do the same for the “Special Interest Items” category. This information could be beneficial to Congress since it could increase the transparency of the Core Report.

Regarding DOD’s assessment that there would be little or no apparent return from satisfying these additional report requirements, 10 U.S.C. § 2464 requires DOD to assign sufficient depot maintenance workload to sustain a core capability. Information on whether the core requirements reported in the previous Biennial Core Report have been executed would provide information on whether the reporting agencies actually executed their planned workload and therefore possess the core logistics capabilities specified in Section 2464. Requiring DOD to include the recommended information in the Core Report would provide Congress with additional information to make better-informed oversight and funding decisions with respect to DOD’s depot maintenance efforts. Therefore, we continue to believe that our matter for Congressional consideration is valid.

We are sending copies of this report to the appropriate congressional committees; the Secretary of Defense; the Assistant Secretary of Defense for Logistics and Materiel Readiness; the Secretaries of the Army, Navy, and Air Force and the Commandant of the Marine Corps; the Director, Missile Defense Agency; and other interested parties. In addition, the report is available at no charge on the GAO website at http://www.gao.gov.

If you or your staff have any questions about this report, please contact me at (202) 512-5257 or merrittz@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix VIII.

Appendix I: Timeline of 10 U.S.C. §2464 and Related GAO Reports

Congress enacted Core Logistics Capability Requirements in 1984 through Public Law No. 98-525 § 307. Section 2464 of Title 10 of the United Sates Code was amended many times between the late 1980s and the early 2000s; however, these amendments did not change the basic character of the core capability requirements. Rather, the amendments focused on changing definitions or basic processes. In 2011, Congress added a requirement for DOD to provide a biennial core report. Key changes to the law are illustrated in figure 1 below.

Appendix II: GAO Recommendation Follow- up

During the review of DOD’s 2016 Biennial Core Report, we followed up on two recommendations from our prior reports. As outlined in table 13 below, based on our review, we determined that DOD has partially addressed both of these recommendations but needs to take additional steps to fully address both recommendations.

Appendix III: Scope and Methodology

To determine the extent to which DOD’s 2016 Biennial Core Report complies with Section 2464(d), we analyzed the text of the report and obtained supporting information on the process by which DOD identified its core capability requirements and the workload needed to support its core maintenance capability for fiscal year 2017. Two GAO analysts independently reviewed DOD’s report to determine the extent to which it addressed each element required by the mandate. All initial disagreements between the two GAO analysts were discussed and resolved through consensus. For the armed services, when the report explicitly included all parts of the required element provided by each service, we determined that DOD had “complied” with the element. When the report did not explicitly include any part of the element from any of the services, we determined that DOD “did not comply” with the element. If the report included some aspects of an element, but not all, for one or more of the services, then we determined that DOD “partially complied” with the element. For the Missile Defense Agency (MDA), when the report explicitly included all parts of the required element provided by MDA, we determined that DOD “included” the element. When the report did not explicitly include any part of the element provided by MDA, we determined that DOD “did not include” the element. If the report included some aspects of an element provided by MDA, but not all, then we determined that DOD “partially included” the element. We compared the types of information and data provided by each of the armed services and MDA to the data that the Office of the Secretary of Defense (OSD) included in its final 2016 Biennial Core Report, to assess consistency. We also discussed our preliminary analyses with OSD and with armed services and MDA officials to seek additional information.

To assess the report’s completeness, we obtained and analyzed fiscal year 2017 data—including core capability requirements and planned workload expressed in direct labor hours—and costs and other information, such as workload shortfall explanations, that OSD required the reporting agencies to provide in support of the report. We compared the reporting agencies’ submissions to the reporting template in DOD Instruction 4151.20, in order to determine the extent to which the reporting agencies submitted the information required by DOD’s instruction, and we identified any inconsistencies or errors. We conducted data-reliability assessments on the data that were provided by the reporting agencies to OSD to support their submissions for the Biennial Core Report in order to determine if these data and information were complete. We performed a number of steps to compare and reconcile the data that OSD included in the final Biennial Core Report. These steps included (1) ensuring that each reporting agency consistently reported the direct labor hours identified as the total adjusted requirements and the workload needed to sustain depot maintenance core capability requirements; (2) reconciling the information in the report against each reporting agencies’ submission for accuracy; (3) comparing and contrasting DOD’s 2016 report against its 2012 and 2014 Biennial Core Reports to determine whether there were noticeable changes in the data for specific categories; and (4) evaluating each reporting agencies’ submission to verify that the information reported for each work breakdown structure category and associated subcategory level was computed correctly and contained data for those requirements and the armed service’s corresponding workload. In addition, we interviewed OSD and reporting agencies’ officials and discussed our analyses, which led us to conclude that the data were sufficiently reliable for the purposes of this report. We also met with OSD and reporting agency officials responsible for overseeing the data collection and preparing the data submissions, to obtain clarification and understanding of the content of the submissions. We assessed the accuracy and completeness of the information in DOD’s 2016 Biennial Core Report with criteria outlined in Standards for Internal Control in the Federal Government and DOD Instruction 4151.20.

To identify potential changes to 10 U.S.C.§2464(d) that could increase the transparency of future Biennial Core Reports, we reviewed DOD’s guidance, 10 U.S.C.§2464(d), and Standards for Internal Control in the Federal Government to determine what additional information OSD could provide in its report and what changes could be made to improve the report. Lastly, we interviewed OSD and officials from the reporting agencies who were responsible for the core submission to identify any additional information that could be included in the Core Report and what changes could be made to improve the law or DOD’s guidance.

We conducted this performance audit from June 2016 to November 2016 in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives.

Appendix IV: Core Capability Determination Process

DOD Instruction 4151.20 prescribes a “core capability determination process”—procedures to identify required core depot maintenance capabilities and “sustaining workloads”—the workloads required to sustain these capabilities. The instruction describes a methodology for DOD components to compute their core capability requirements and to identify the associated workloads needed to sustain these required capabilities. The process is illustrated in figure 2.

Appendix V: Category Levels from DOD’s Depot Maintenance Core Capability Worksheet

Appendix VI: Variations in DOD’s 2012, 2014, and 2016 Biennial Core Reports

Each armed service reported variations in its core capability requirements, planned workload, estimated cost of planned workload, and workload shortfalls, as reported in the fiscal years 2012, 2014, and 2016 Core Reports, as shown in figures 3, 4 and 5. These variations occurred in different work breakdown structure categories for each armed service.

Workload Shortfalls

Shortfalls exist when the core capability requirement exceeds or is expected to exceed planned workload. At the first-level category of the work breakdown structure, for example, the

Army reported shortfalls in fiscal year 2012 in the categories of Ground Vehicles (869,547 direct labor hours) and Support Equipment (112,462 direct labor hours). No shortfalls were reported in fiscal years 2014 and 2016.

Navy reported no shortfalls for fiscal years 2012, 2014, or 2016.

Marine Corps identified shortfalls in fiscal year 2014 in the category of Communication/ Electronic Equipment (144,535 direct labor hours). No shortfalls were reported in fiscal years 2012 or 2016.

Air Force reported shortfalls in fiscal years 2012 (260,698 direct labor hours), 2014 (388,063 direct labor hours), and 2016 (339,556 direct labor hours) in the category of Communication/Electronic Equipment. According to Air Force officials, the decrease in the Communication/Electronic Equipment shortfall was a result of some airplane models retiring and therefore no longer requiring maintenance and repair. Additionally, the Air Force reported a shortfall in fiscal year 2012 (143,280 direct labor hours) in the category of Ordnance, Weapons, & Missile but did not report this shortfall in fiscal years 2014 or 2016.

Appendix VII: Comments from the Department of Defense

Appendix VIII: GAO Contact and Staff Acknowledgments

GAO Contact

Zina Merritt, (202) 512-5257 or merrittz@gao.gov.

Staff Acknowledgments

In addition to the contact named above, Carleen Bennett, Assistant Director; Clarine Allen; Chaneé Gaskin; Ashley Houston; Joanne Landesman; Amie Lesser; Jim Melton; Alexandra Rouse; Michael Silver; and Sabrina Streagle made key contributions to this report.

Related GAO Products

Depot Maintenance: Accurate and Complete Data Needed to Meet DOD’s Core Capability Requirements. GAO-14-777. Washington, D.C.: September 18, 2014.

Depot Maintenance: Additional Information Needed to Meet DOD’s Core Capability Reporting Requirements. GAO-13-194. Washington, D.C.: February 11, 2013.

Defense Logistics: DOD Input Needed on Implementing Depot Maintenance Study Recommendations. GAO-11-568R. Washington, D.C.: June 30, 2011.

Depot Maintenance: Actions Needed to Identify and Establish Core Capability at Military Depots. GAO-09-83. Washington, D.C.: May 14, 2009.