A 1999 amendment established the requirement for the future-years report. Weaknesses in Data Preclude Determinations of Compliance in Prior-Years Report

DOD’s prior-years report for fiscal years 2000 and 2001 showed the Departments of the Army and Navy to be below the 50-percent funding limitation on private-sector workloads and the Air Force to be above it (see table 1). However, recurring weaknesses in DOD’s data gathering and reporting processes prevented us from determining with precision whether the services had complied with the 50-50 requirement. As a result of transcription errors in compiling the Army’s prior-years report, depot maintenance funds for two major commands were reported in the millions rather than thousands of dollars, greatly overstating both public and private workloads by a total of $414 million for 2000 and 2001—an 8 percent overstatement. As authorized under 10 U.S.C. Support contracts. Contractor augmentees. Future-Year Projections Are Not Reasonable and Not Very Useful

The projections of the Army, the Navy, and the Air Force in DOD’s 50-50 report for fiscal years 2002 through 2006 are not reasonable estimates of the future allocations of funding for public- and private-sector workloads. We also noted that they are based, in part, on incorrect data, questionable assumptions, and some inconsistencies with existing budgets and management plans. For example, compared to the future-years report submitted to the Congress last year, the Army reported substantially more workload in total and increased private-sector percentages this year. The Navy’s data did not include the Trident missile work and Aegis software maintenance, understating private-sector funding an estimated $162 million per year and understating public-sector funding about $80 million per year. This occurs because of the changing nature of projections, a combination of errors and omissions, less emphasis by the services on the collection and validation of future-years data, and the use of ever-changing budgetary estimates to construct projections. Recommendations for Executive Action

To improve the 50-50 data collection, validation, and reporting processes, we recommend that the Secretary of Defense require the Assistant Deputy Under Secretary of Defense for Maintenance Policy, Programs, and Resources, in conjunction with the secretaries of the military departments, clarify guidance on (1) the exemption of partnering workloads from the 50-50 requirement and (2) the treatment of component repair costs to prevent the double counting in 50-50 reports when the repaired items are used in higher-level assemblies; the Secretary of the Navy to (1) direct the use of the Naval Audit Service to review and validate 50-50 processes and data during next year’s and subsequent reporting cycles and (2) revise its guidance in order to report nonnuclear-related depot maintenance and modification work accomplished on aircraft carriers in conjunction with nuclear refueling overhauls as discussed in this report; the Secretary of the Army to (1) initiate steps to improve management and controls of the 50-50 data collection and documentation process and (2) finalize and issue guidance concerning the reporting of depot maintenance at nondepot locations; the Secretary of the Air Force to determine the extent and nature of depot maintenance and depot-like tasks accomplished at nondepot locations (including field and regional maintenance centers) and apart from Air Force Materiel Command reporting responsibility and, pending the outcome of that determination, revise Air Force 50-50 guidance and management processes for tasking, collecting, and validating data in order to ensure more complete and consistent reporting of 50-50 data; and the Commandant of the Marine Corps to (1) initiate steps to improve management and controls of the 50-50 data collection and documentation process and (2) ensure that 50-50 reporting guidance is disseminated and understood by all potential reporting organizations. 2466. Defense Depot Maintenance: Information on Public and Private Sector Workload Allocations.
Why GAO Did This Study

Under 10 U.S.C. 2466, the military services and defense agencies can use no more than 50 percent of annual depot maintenance funding for work by private-sector contractors. The Department of Defense (DOD) is to submit two reports to the Congress annually on the costs of public- and private-sector depot maintenance workloads: a "prior-years" report on the past 2 fiscal years and a "future-years" report on the next 5. Section 2466 also requires GAO to report to the Congress on whether DOD complied with the so-called "50-50 requirement" in the prior-years report and whether the future-years projections are reasonable. This report fulfills that requirement.

What GAO Found

While DOD's prior-years report for fiscal years 2000 and 2001 showed the U.S. Army and Navy to be below the 50-percent funding limitation on private sector workloads and the Air Force to be above it, continuing weaknesses in DOD's data gathering and reporting processes prevented GAO from determining with precision whether the services complied with the 50-50 requirement. As in past years, GAO found errors and omissions in the data. For example, the Army erroneously reported workloads at two commands in millions of dollars instead of thousands of dollars, resulting in a $414 million--or 8 percent--overstatement of both public- and private-sector obligations for the 2 years in total. Because of the changing nature of budget projections and supporting data deficiencies, the future-years report does not provide reasonable estimates of public- and private-sector depot maintenance funding allocations for fiscal years 2002 through 2006. The services tend to place less emphasis and priority on collecting and validating future-years data. The reported projections are based, in part, on incorrect data, questionable assumptions, and some inconsistencies with existing budgets and management plans. For example, the Navy did not report depot maintenance workloads for a missile system and a ship defensive system, understating funding for private-sector work each year by an estimated $162 million and public-sector work by about $80 million.