Army’s 2003 Proliferation Report Did Not Fully Identify Depot-Level Maintenance Performed outside Public Depots

Although the mandate directed the Army to identify the proliferation of  depot-level maintenance performed outside the public depots, the Army’s  report on depot-level maintenance proliferation did not fully identify the  extent of depot-level maintenance work performed at nondepot facilities. Instead, the report estimated that depot-level maintenance work valued at  $188.6 million for fiscal year 2001 was not included in the Army’s depot- level maintenance data and that further validation of this amount was  needed. Although the report recognized that the  Army has redundant capabilities and capacities, it did not provide any  information on the extent of this redundancy or the extent of maintenance  activities that could be consolidated. According to the report, two  categories of work accounted for about 75 percent of the $188.6 million. These factors include  (1) inconsistent application of the congressionally mandated definition  of “depot maintenance” and related guidance, (2) weaknesses in the  management information systems for collecting and reporting data,  and (3) the failure to follow established policies and procedures for  authorizing depot-level work at field-level facilities and outsourcing  work. Our current analysis and our prior work identify these factors as  underlying causes affecting the Army’s determination that it has  complied with the 50-50 rule. Underreported Depot-Level Work Performed by Nondepot Maintenance Facilities Affects Accuracy of 50-50 Report

We have reported in the past that by not having complete information on  the amount of depot-level maintenance work being performed in nondepot  facilities, DOD cannot provide Congress with an accurate and complete  report regarding the allocation of depot-level maintenance between the  public and private sectors as required by 10 U.S.C. Limitations More Significant for Future Assessment of 50-50 Compliance

As the Army moves closer to the statutory ceiling for the funding for  depot-level maintenance work performed in the private sector, the  limitations in the Army’s ability to precisely capture its depot-level  maintenance work will become more significant. However, our adjustments for known errors in  reporting for that year increased the percentage of private-sector work to  49 percent from the 46.5 percent reported by the Army. Efforts have been undertaken to address some of the problem  areas; however, no action plan to manage the implementation has been  developed. Evaluating the success of the proposed 29 recommendations  will be difficult until the Army develops an action plan with priorities, time  frames, responsible organizations, evaluation criteria, and the resources  required to implement these recommendations. While improvements should be accomplished, the complexity and  vastness of the Army’s maintenance system and continuing questions  about such issues as the definition of depot-level maintenance and  changing maintenance strategies could continue to present challenges  in fully recording all depot-level maintenance work. Recommendation

To ensure the timely and effective implementation of the  recommendations in the Army’s 2003 proliferation report to help the  Army improve its management of maintenance operations, including the  proliferation of depot-level maintenance facilities, and more precisely  capture and report depot-level maintenance data, we recommend that the  Secretary of the Defense direct the Secretary of the Army to establish a  specific plan to manage the implementation of the 29 recommendations  identified in the 2003 proliferation report. To answer whether the corrective actions identified in the Army’s report  are likely to address the proliferation issue and enhance the Army’s  reporting, we examined the recommendations to determine how  effectively they were linked to the identified problems. We also compared  the recommendations with those that we had previously made to test for  consistency. Appendix III: Army Report’s Issues and Recommendations

The Army’s Fiscal Year 2002 Study of the Proliferation of Depot  Maintenance-Type Activities identified 7 issues and made  29 recommendations for the following improvements to enhance the  Army’s ability to (1) evaluate the proliferation of nondepot facilities  that perform depot-level maintenance and (2) identify and report on  its 50-50 data. Depot Maintenance: Future Year Estimates of Public and Private  Workloads Are Likely to Change.
Why GAO Did This Study

Each year, the U.S. Army spends about $3 billion on depot-level maintenance and repair work for weapons systems and other equipment. However, because its data gathering and reporting processes have been limited, the Army historically has been unable to fully identify how much depotlevel maintenance takes place outside its five public depots. As a result, it has not been able to determine with precision how well it was meeting statutory requirements to limit contracted depot-level maintenance work to 50 percent of the program budget. In the House report on the Fiscal Year 2001 Defense Authorization Act, Congress directed the Army to report on the proliferation of depot-level maintenance work at nondepot facilities and asked GAO to review that report. GAO examined the extent to which (1) the Army's report identifies the amount of depot-level maintenance work done outside public depots; (2) the Army can account for its depot-level maintenance workload, as required by statute; and (3) the corrective actions in the report are likely to address the proliferation issue and enhance the Army's reporting.

What GAO Found

The Army's proliferation report, issued in September 2003, did not fully identify the extent of depot-level maintenance work performed outside the Army's public depots. The report estimated that the Army underreported its fiscal year 2001 $2.7 billion depot-level maintenance program by $188.6 million but indicated that this was a rough estimate and that further analysis is needed. It attributed this underreporting largely to work performed in two categories--work that met the criteria for depot-level maintenance work but was not reported as such and work at nondepot field facilities that involved depot-level maintenance tasks. GAO's prior reviews also identified these categories as key contributors to underreporting. While the report noted that the Army has an extensive maintenance infrastructure with redundant capabilities, it did not address the extent of this redundancy. The lack of complete information on the extent of depot-level maintenance workloads limits the Army's ability to fully account for this work in the Department of Defense's (DOD) annual report to Congress on the allocation of public- and private-sector depot-level maintenance spending. The 2003 proliferation report identified key Army limitations, including inconsistencies in applying the congressionally mandated definition of "depot maintenance," weaknesses in its management information systems, and the failure to follow established policies and procedures for authorizing depot-level maintenance work at nondepot facilities. GAO's current analysis and prior work confirmed that these limitations make it difficult for the Army to fully account for its maintenance workload as it moves closer to the 50 percent ceiling for work performed by contractors. GAO's most recent report on the Army's 50-50 reporting for fiscal year 2002 showed that, after adjustments for known underreporting, the percentage of private-sector work increased to 49 percent. If implemented, the 29 recommendations in the 2003 report could enhance the Army's ability to report on its 50-50 data and to evaluate the proliferation of depot-level maintenance work at nondepot facilities. The recommendations, which are consistent with those that GAO has previously made, are focused on key problem areas, such as the need for an improved understanding about the 50-50 rule and for compliance with reporting policies and procedures. Efforts have been undertaken to address some of the problem areas. However, the Army has not yet developed an action plan that identifies priorities, time frames, roles and responsibilities, evaluation criteria, and resources for managing the implementation of the recommendations. Until the Army does this, it will be difficult to assess to what extent the Army is likely to meet its desired objectives. While improvements should be accomplished, the complexity and vastness of the Army's maintenance system and continuing questions about such issues as the definition of "depot maintenance" and changing maintenance strategies could continue to present challenges in fully recording all maintenance work that should be captured.