Privatizing-in-place does not substantially reduce infrastructure and excess capacity. The privatization-in-place of the Sacramento and San Antonio depots will not reduce the large amount of excess capacity in the Air Force depot system and the private sector or their associated costs, unless additional facilities are closed or other cost-reduction means are successfully implemented. Consolidating Workloads Could Produce Substantial Savings

The Air Force’s planning has not progressed far enough to compare precisely the cost of privatizing depot workloads in place with the cost of transferring the work to other underused depots. Our analysis of BRAC Commission estimates indicates that the closure of the depots at the San Antonio and Sacramento logistics centers were expected to save about $70 million annually. This evaluation did not attempt to measure economy and efficiency improvements that resulted from workload consolidation. Finally, the potential $200 million annual savings that could result from the consolidation is in addition to the BRAC Commission’s $268-million savings estimate for eliminating base support operations and non-depot maintenance personnel at the McClellan and Kelly Air Force Bases. On the other hand, if the remaining depots do not receive additional workload, they are likely to continue to operate with significant excess capacity and become more inefficient and expensive as workloads dwindle due to downsizing and privatization initiatives. The savings were to be achieved by reducing personnel requirements and operating costs. While DOD has stated that it will structure these conversions to comply with existing statutory restrictions, details of its privatization plans for Kelly and McClellan are still evolving. Sufficient information regarding the detailed procedures for conducting the competitions for the Sacramento and San Antonio workloads is not available for us to assess whether the planned conversions will comply with the requirements of existing law. To evaluate DOD’s rationale for (1) delaying the closure of McClellan Air Force Base and the realignment of Kelly Air Force Base and (2) privatizing the Sacramento and San Antonio air logistics centers’ depot maintenance workloads, we reviewed various documents, including the Secretary of Defense’s July 13, 1995, letter to the President and a July 13, 1995, White House press release. To determine whether Air Force plans for privatizing the closing depots is consistent with (1) laws relating to the allocation of depot maintenance workloads to the private sector and (2) the BRAC Commission’s recommendations, we identified the applicable requirements and determined their impact on DOD’s plans to privatize depot-level maintenance workloads.
Why GAO Did This Study

Pursuant to a congressional request, GAO reviewed the Air Force's plans to privatize-in-place depot maintenance workloads at the Sacramento and San Antonio air logistics centers, focusing on: (1) the impact on excess depot capacity and operating costs at the remaining defense depots; (2) the cost-effectiveness of planned privatization initiatives, including the impact of delaying base closures until the year 2001; and (3) compliance with statutory requirements.

What GAO Found

GAO found that: (1) privatizing-in-place rather than closing and transferring the depot maintenance workloads at the Sacramento and San Antonio air logistics centers will leave a costly excess capacity situation at remaining Air Force depots that a workload consolidation would have mitigated; (2) although the Air Force's privatization initiative for the Sacramento and San Antonio depots has not progressed far enough for GAO to estimate precisely costs and savings, consolidating depot maintenance workloads at remaining underused depots could result in a net savings in 2 years or less; (3) GAO's work shows that transferring the depot maintenance workloads to other depots could yield additional economy and efficiency savings of over $200 million annually in addition to the $268 million annual savings the Base Realignment and Closure (BRAC) Commission estimated could be achieved by eliminating the McClellan and Kelly infrastructures and downsizing nonmaintenance personnel; (4) if the workload consolidation does not occur, the remaining Air Force depots are likely to become more inefficient and more costly, unless other workloads are added, costly excess capacity is eliminated, or other efficiency and economy initiatives are successfully implemented; (5) plans to delay many closure-related actions until 2001 will substantially reduce future savings envisioned by the BRAC Commission and could result in a net loss of $644.4 million between 1997 and 2001 for the Air Force and $24 million for the Army; and (6) the Department of Defense (DOD) stated that it will structure the San Antonio and Sacramento privatizations to comply with existing statutory restrictions, but DOD's privatization plans are still evolving and sufficient information is not available for GAO to assess whether the conversion plans will comply with existing law.