In fiscal year 2002, the depots reported that the total value of work  performed was $1.5 billion. The extent to which Operation Iraqi Freedom will result in increases  in future years is not clear. Future projections may not be a reliable  indicator, since they change with changing conditions. In addition, the percentage of work performed for non-Army customers  increased from fiscal year 1987 through fiscal year 2002 from 6 to 26  percent of the total hours for maintenance programs completed in those  years. Army component and recapitalization workload is projected to be the  majority of the depots’ work. According to an AMC official, the Army does not yet have a plan for  managing the reconstitution, but one is being developed. Workload Efficiency and Sufficiency Issues

Army depots have had some efficiency problems, caused by several  factors, including the loss of work to the private sector and field-level  maintenance activities. Initiatives such as facility and equipment  downsizing, depot partnerships, and “lean manufacturing” have been  implemented to address depot inefficiencies. Trends in two key metrics— capacity utilization and employee productivity—-show that progress has  been made in recent years, although further improvements are still  desirable. Whether new systems  work will be assigned to the depots is unclear, but depot officials believe  that partnerships may offer the best potential for new systems work. Initiatives to Improve Depot Efficiency and Productivity

Initiatives that have been implemented to improve depot efficiency and  productivity include “rightsizing” at realigned depots, depot partnerships  designed to improve the efficiency and performance of depot operations,  and lean manufacturing initiatives. Additional Workloads Possible and Essential for Depot Viability

Additional workloads could play a key role in further improving the cost- effectiveness of the Army depots and are essential for the depots’ long- term viability. Some of the weaknesses were that (1) the existing  policy did not provide a forward look at new weapon systems and  associated future maintenance capability requirements, (2) the existing  policy did not link the core identification process to source-of-repair  policies and procedures for new and upgraded systems, and (3) the  various procedures and practices being used by the services to implement  the existing policy, such as using “like” workloads to sustain core  capabilities, were affecting the ability of the depots to establish core  capabilities. Thus, we have not reviewed the methodology in detail and  cannot be sure whether the new methodology will correct the weaknesses  we identified in the core process. The  Army has taken steps to develop a strategic plan for its depots, but it is not  comprehensive or current and the Army has not yet implemented it. 4. Conclusions

Continuing issues about (1) the assignment of reduced workloads to Army  maintenance depots, (2) deficiencies in the process of quantifying both  core depot maintenance capabilities and the workload needed to ensure  cost efficiency and technical competence and to preserve surge capability,  and (3) strategic planning for depots raise significant questions about the  long-term viability of Army depots. We have discussed these issues in the  past, but they remain unresolved. Recommendations for Executive Action

To improve the reliability of future maintenance workload projections in  all DOD maintenance depots, we recommend that the Secretary of  Defense through the Under Secretary of Defense for Acquisition,  Technology, and Logistics,  require the Army Materiel Command in conjunction with the Army  acquisition community to develop and implement standard  business rules and procedures for identifying and reporting Army  depot workload projections from the Army acquisition community  and   require the DOD depot maintenance community to develop and  implement ways to improve the identification and reporting of  depot inter-service workload projections across all the military  services using standard business rules and procedures. To answer whether the Army has identified the depots’ core capability and  provided its depots with workload to use that capability, we reviewed the  Department of Defense and Army guidance for computing core capability  requirements and associated workloads in December 1999 for fiscal year  2001 and compared the results with workloads assigned to the depots  since fiscal year 1999. For the question of whether the Army has a long-range plan for the future  viability of an efficient depot system, we relied upon prior work that  shows that neither the department nor the Army had a comprehensive  defense maintenance strategic plan.
Why GAO Did This Study

The Army's five maintenance depots produced work valued at $1.5 billion in fiscal year 2002, with the remaining 49 percent of the Army's depot work performed by contractors. GAO was asked to assess (1) the trends in and the reliability of depot workload projections; (2) whether workloads are sufficient for efficient depot operations, initiatives are under way to improve efficiency, and additional workloads are possible; (3) whether the Army has identified depots' core capability and provided workload to support that capability; and (4) whether the Army has a long-range plan for a viable, efficient depot system.

What GAO Found

The work assigned to Army maintenance depots has declined by 36 percent, although the cost of the Army's total maintenance program has increased since fiscal year 1987. Except for fiscal year 2003, projections for future work in the depots through fiscal 2008 show further decline. Depot work also changed from predominately overhauling Army end items to the increased repair of components. In addition, work from non-Army customers has increased from 6 to 26 percent. Army component and recapitalization work is projected to be the majority of depot work in the future. Depot planners generally do not have reliable projections of work requirements for non-Army customers. Because of this and other factors, including changing conditions, future projections have limitations. Potential increases in depot work resulting from the Iraq war are not yet clear. Various factors, including workload reductions and workload performance issues, have resulted in efficiency and productivity problems in Army depots. Such initiatives as facility and equipment rightsizing, depot maintenance partnerships, and "lean manufacturing" have been implemented. Trends in two metrics--capacity utilization and employee productivity--show that, while more needs to be done, efficiency and productivity improvements have been made. Additional workloads, particularly for new and upgraded systems, are essential for future depot viability. However, in the past most new work has gone to private contractors. Some new-systems work is being explored for depots, and depot managers believe that partnering with the private sector may be the best chance for getting such work. The Army has not identified its depots' core capability requirements using a revised DOD methodology meant to overcome weaknesses in the core process. At the same time, it is unclear whether the revised methodology, which is undergoing further changes, will correct weaknesses in the core process. Moreover, no one in the Army assesses the extent to which depot work compares with identified core capability requirements. Depot managers are concerned about the loss of work and the failure to obtain work necessary to support core capabilities. The Army does not have a comprehensive and current strategic plan for the depots and has not implemented the limited plan it developed. GAO concluded in a 1998 report that the Army had inadequate long-range plans for its depots and that such planning is essential if significant progress is to be made in addressing the complex, systemic problems facing the depots. Despite the time that has passed, the same issues remain. DOD has not implemented a comprehensive and current plan for resolving continuing issues about (1) reduced workloads being assigned to Army maintenance depots and (2) deficiencies in the process of quantifying both core depot maintenance capabilities and the workload needed to ensure cost efficiency and technical competence and to preserve surge capability. Without such a plan, the long-term viability of Army depots is uncertain.