This downsizing has taken place largely through the base closure and realignment (BRAC) process. Objectives, Scope, and Methodology

The Chairman and Ranking Minority Member of the Subcommittee on Military Readiness, House Committee on National Security, requested that we (1) assess the reliability of DOD’s depot closure cost and savings estimates; (2) obtain information on the policies and programs used to provide employment and training opportunities to employees at closing depots; (3) determine if the military services can increase depot closure savings by using competitions between DOD depots (public-public competitions) and between DOD depots and the private sector to redistribute closing depots’ workloads; and (4) determine if the military services adequately consider other services’ depots when they use methods other than public-public or public-private competitions to redistribute their closing depots’ workloads. The current budget estimates indicate that closing the 10 depots will result in a net savings of $222.4 million during the 6-year implementation period allowed by law and an annual savings of $656 million after that. However, actual savings are still uncertain because (1) the budget estimates do not include many closure-related costs, (2) DOD has not updated the annual savings estimates since it submitted the initial budget estimates to Congress, and (3) DOD has not developed an effective methodology for estimating the cost of accomplishing closing depots’ workloads at new sources of repair. Estimates of annual recurring savings after the 6-year implementation period have also been reduced. Efforts to Limit Involuntary Separations Have Been Successful, but Costly

DOD has thus far been successful in limiting the number of employees that must be involuntarily separated when depots close. In addition, other actions can be taken to further improve the competitions and ensure their fairness. Further, the Air Force is privatizing most of AGMC’s depot maintenance workload. DOD terminated its public-private competition program in May 1994. They acknowledged that this two-step process is not as efficient as transferring the work directly to the private sector, but they believe it is necessary. Conclusions

The military services can substantially increase the savings from closing unneeded depots by transferring the work to the most cost-effective source of repair. Recommendations

We recommend that the Secretary of Defense maximize the use of competitive procedures and merit-based selection criteria by including military depots in determining the most cost-effective source of repair for workloads that have not yet been transferred from closing depots and require the services to reengineer workloads that are redistributed from closing depots on any basis other than competition, starting with the largest and most stable workloads.
Why GAO Did This Study

Pursuant to a congressional request, GAO reviewed maintenance depot closures and realignments, focusing on: (1) the reliability of the Department of Defense's (DOD) depot closure cost and savings estimates; (2) DOD efforts to provide employment and training opportunities at closing depots; (3) whether the military services can increase savings by using competitions between DOD depots and the private sector when redistributing closing depots' workloads; and (4) whether the military services adequately consider other services' depots when redistributing the workloads.

What GAO Found

GAO found that: (1) DOD has substantially reduced its initial estimates for the net savings that depot closures will achieve during the 6-year implementation period allowed by law and, to a lesser extent, for the annual savings after the implementation period has been completed; (2) although DOD believes its estimates have improved, current estimates still do not accurately reflect potential savings because some closure-related costs are not included, and some estimates have not been updated to reflect major changes in such areas as the expected cost of doing the work after it is transferred to new sources of repair; (3) as a result, the magnitude of savings is uncertain; (4) by offering a comprehensive and costly outplacement program for displaced employees, that provides assistance, benefits, and separation incentives, DOD has greatly facilitated this transition and has thus far successfully limited the number of depot employees who were involuntarily separated; (5) the military services can substantially increase their savings by ensuring that closing depots' workloads are transferred to the most cost-effective source of repair; (6) they can accomplish this goal by conducting public-public and public-private competitions for the work or by analyzing the cost-effectiveness of moving the work to not only their own depots but also those of the other services; (7) in addition, they can improve the efficiency of their operations and reengineer workloads that are transferred from closing depots without competition; and (8) neither DOD nor the military services have taken action to maximize these savings: (a) public-public and public-private competition programs were discontinued in May 1994; (b) the Air Force is implementing a privatization-in-place plan that will likely increase maintenance costs; (c) the military services rarely consider interservicing alternatives when they redistribute workloads; and (d) neither DOD nor the services require depots to reengineer workloads they receive from closing depots.