Navy officials told us that when the Navy announces its intention to begin an A-76 study that includes military billets, the funding for those billets is eliminated from the military personnel budget beginning with the year the study is expected to be completed. According to OMB’s Circular A-76, certain functions should not be outsourced to the private sector. Historically, the Navy has attempted to minimize the number of sailors in general duty billets. New Outsourcing Coordination Efforts Will Be Instrumental in Making Decisions on Future Studies

Until May 1997, the Navy did not have procedures in place to ensure that rotational requirements were adequately considered when it determined potential functions for outsourcing study. Specifically, a memorandum of agreement was established specifying the coordination process between the Navy’s headquarters infrastructure officials and the military personnel officials regarding the procedures for studying military functions for potential outsourcing. This memorandum of agreement was further strengthened in September 1997 by a more detailed Navy-wide memorandum of agreement that applied to all major commands for all infrastructure reductions, including outsourcing. If a rotational shortage is identified, the specific rating is not recommended for outsourcing to avoid further degradation of the sea-shore rotation base. Future Outsourcing Goals Reinforce Need for Strategic Planning

Between fiscal years 1997 and 2002, the Navy plans to study 80,500 civilian and military positions for potential outsourcing at an estimated savings of $2.5 billion. Navy officials stated that they began a series of planning conferences in September 1997 involving appropriate officials from Navy headquarters and major commands. In addition, improved planning and coordination could minimize the elimination of required military shore billets, as well as avoid prematurely programming savings into future years’ budgets. While the Navy has recently begun to focus on strategies for attaining its outsourcing goals for future years, improved planning and coordination between headquarters and major commands are needed to reach agreement on realistic goals and time frames. DOD provided a number of comments addressing how the Navy has taken significant steps to implement policies and coordination procedures to protect rotational billets from outsourcing considerations and to involve the major commands in the strategic planning process for attaining its future years’ outsourcing goals. However, the Navy has not completed its plan as of April 1998. At the same time, our report points out that it appears likely the Navy will fall short of its goal for new outsourcing studies in fiscal year 1998, and some Navy officials expressed concern to us over whether they will be able to attain the optimistic goal of studying 10,000 military billets by the year 2003 and save $2.5 billion from outsourcing in its future years defense plan. We obtained documentation regarding current and planned A-76 studies, and A-76 study plans that were eliminated because of the impact on rotational requirements. We reviewed the outsourcing initiatives and the impact of these initiatives on rotational billets in the Army, Air Force, and Navy.
Why GAO Did This Study

Pursuant to a congressional request, GAO reviewed whether the Department of Defense's (DOD) outsourcing of commercial activities reduces the availability of rotational billets for active duty military personnel, focusing on: (1) how the Navy's current outsourcing efforts have affected rotational billets; and (2) whether the Navy has policies and procedures in place to minimize the impact of outsourcing on rotational billets in the future.

What GAO Found

GAO noted that: (1) several Navy Office of Management and Budget Circular A-76 competitions announced for study in fiscal years (FY) 1997 and 1998 have the potential to eliminate military billets in areas where rotational shortages exist for personnel returning from sea duty; (2) as a result, the Navy has decided not to begin some of these A-76 studies and plans to reinstate funding authorization for the military positions eliminated when the studies were announced; (3) until recently, the Navy had not developed specific policies and coordination procedures to protect rotational billets from outsourcing considerations; (4) according to Navy officials such policies and procedures were not needed prior to FY 1997 because the Navy's outsourcing initiatives were limited and not centrally managed; (5) in May 1997, Navy officials signed a memorandum of agreement specifying a coordination process between the Navy's headquarters infrastructure officials and military personnel representatives to ensure that consideration is given to rotation requirements when determining potential functions for outsourcing; (6) this memorandum of agreement was further strengthened in September 1997 by a more detailed Navy-wide memorandum of agreement that applied to all major commands, which the Navy refers to as major claimants, for all infrastructure reductions, including outsourcing; (7) this coordination policy should prove important since the Navy's goal is to have completed A-76 competitions for 80,500 positions by the year 2002, including about 10,000 military billets; (8) the Navy expects that its outsourcing efforts will produce savings and accordingly has programmed expected savings of $2.5 billion into its future years defense plan for FY 2000 through 2003; (9) the Navy has not identified the specific activities and locations that will be studied to achieve projected savings, but has tasked its major commands with recommending specific activities and locations for A-76 competitions to meet this savings goal; (10) the Navy recently began a series of planning conferences involving appropriate officials from headquarters and major commands focusing on strategies for attaining its future years' outsourcing goals; (11) however, given the Navy's plans for outsourcing competitions, ongoing coordination and improved planning between headquarters and major commands is needed to reach agreement on realistic goals and timeframes; and (12) in addition, improved planning and coordination could minimize the elimination of required military shore billets, as well as avoid prematurely programming savings into future years' budgets.