Objectives, Scope, and Methodology

As requested, we reviewed the Navy’s public-private competition program for aviation depot maintenance to determine (1) the nature and extent of past competitions, (2) whether savings resulted, (3) prospects for and impediments to future competitions, and (4) whether program improvements can be made. Public-Private Competition for Navy Aviation Repairs Has Been Limited

Between fiscal years 1987 and 1990, the Navy’s public-private competition program for aviation depot maintenance went from a limited pilot program to a planned program that was to include nearly all aircraft and engine maintenance work and result in savings of $550 million over 6 years. The public and private sectors both performed maintenance on the remaining three components. Although the Navy subsequently initiated action that was expected to substantially increase the amount of competed work, the planned expansion never occurred for the following reasons:
The time and cost of performing competitions. Defense downsizing resulted in rapidly declining maintenance workloads and less workload available for public-private competition. These cost increases can be a significant factor over a 5-year period such as that involving the F-14 competition work. However, quantifying the precise savings is not possible. Future Use of Public-Private Competition Appears Advantageous

Although it appears the Navy’s aviation public-private competitions resulted in benefits and DOD plans to privatize more of its depot work, DOD is not allowing the use of public-private competitions. The Commission report recommended that the DOD transition to a depot maintenance system relying mostly on the private sector. Following DOD’s 1994 decision to terminate the public-private depot competition program, the fiscal year 1995 defense appropriations conference report directed DOD to reinstitute public-private competition and to report its policy regarding public versus private competition for depot maintenance workloads. The officials further commented about problems with the NADEPs’ cost accounting and work control systems in a competitive environment. However, they noted their concern over the fairness issue, which centers on concerns that depot prices may not reflect the cost to the government of performing competition work, including all labor, material and overhead. In practice the competition program has not been reinstituted.
Why GAO Did This Study

Pursuant to a congressional request, GAO reviewed the Navy's aviation depot maintenance competition program, focusing on: (1) the nature and extent of past competitions; (2) whether savings resulted from the program; (3) the prospects for and impediments to future competitions; and (4) whether the program can be improved.

What GAO Found

GAO found that: (1) Navy public-private competitions generally resulted in savings and benefits, although precisely quantifying such savings is not possible; (2) for competition workloads, public depots substantially reduced operating costs by streamlining production processes and reducing overhead, but the Navy's expectations to greatly expand public-private competitions and to thereby achieve over $550 million in savings over a 6-year period never materialized; (3) the time and cost of performing such competitions, combined with a rapidly declining depot maintenance workload and a private-sector concern about fairness, resulted in much less maintenance work being subjected to public-private competition than had been projected; (4) the fairness issue centers on private-sector concerns that military depot prices did not reflect the total cost to the government of performing this work; (5) congressional direction to reinstitute public-private competitions, together with recommendations by the Commission on Roles and Missions to privatize most depot maintenance work has resulted in DOD reexamining its deport workload with a view toward moving more work to the private sector; (6) while DOD maintains it has reinstituted its public-private competition program, in practice no competitions have been held since DOD terminated the program in 1994; (7) a number of factors may limit or impede a major competition program in the current environment, including the cost and difficulties of performing such competitions and the amount of work available for competition under current law and policies limiting the mix of public and private depot maintenance work; and (8) initiatives, such as improving cost accounting systems for deport work, can be undertaken to improve public-private competitions to ensure their future usefulness in identifying the most cost-effective source of repair for depot maintenance workloads.