Statutes and regulations influence the mix of maintenance work performed by the public and private sectors. Third, it is not consistent with congressional guidance in one key area—the use of public-private competitions. Policy Report Provides Depot Maintenance Framework

In response to the congressional requirement for a comprehensive statement of depot maintenance policy, DOD provided an overall framework for managing DOD depot maintenance activities. Section 311(d)(5) of the act provides that in cases of workload in excess of the workload to be performed by DOD depots, DOD’s policy should provide for competition “between public and private entities when there is sufficient potential for realizing cost savings based upon adequate private-sector competition and technical capabilities.” DOD’s report provides a policy that is inconsistent with this instruction. We have reported that public-private depot maintenance competitions can be a beneficial tool for determining the most optimum cost-effective source of repair for non-core workloads. In May 1995 the CORM concluded that 20 percent savings could be achieved by the privatization of various commercial activities and recommended that DOD transfer essentially all depot maintenance to the private sector. Privatization-In-Place Plans Do Not Appear to Optimize Savings

There have been a number of recent initiatives to privatize depots recommended for closure or realignment by BRAC. On the other hand, if the remaining centers do not receive additional workload, they will continue to operate with significant excess capacity, becoming more and more inefficient and more and more expensive as their workloads continue to dwindle due to downsizing and privatization initiatives.
Why GAO Did This Study

Pursuant to a congressional request, GAO discussed the privatization of defense depot maintenance activities.

What GAO Found

GAO noted that: (1) the Department of Defense's (DOD) evolving depot maintenance policy includes a public-private mix and shifts work to the private sector where feasible; (2) depot privatization could worsen excess maintenance capacity and inefficiencies if not carefully managed; (3) DOD's policy report provides an overall framework for managing depot maintenance activities and substantial implementation flexibility, but the policy is not consistent with congressional guidance providing for public-private competition for non-core workloads; (4) privatizing depot maintenance is not likely to achieve the 20-percent savings DOD projects, since the 20-percent savings were for commercial-type activities that more readily led to competition which produced the reported savings; (5) most non-ship depot maintenance private-public competitions have been won by the public sector and averaged fewer than two competitors; (6) DOD plans to privatize in place and delay downsizing and closure of two air logistics centers will probably cost more than closing them and relocating their workloads to underutilized defense or private facilities; and (7) statutes governing competition and base closures may have to be repealed or amended before DOD can proceed with its privatization efforts.