Summary

The Defense Department (DOD) spends $15 billion annually to maintain aircraft, ships, tracked and wheeled vehicles, and other equipment. However, it believes that it can reduce maintenance costs by better matching its depots' workload capacity with current maintenance requirements. Accordingly, as part of the ongoing base closures and realignments, DOD is closing 15 of its major maintenance depots and is transferring their workloads to other depots or the private sector. This report (1) assesses the reliability of DOD's depot closure cost and savings estimates, (2) provides information on the policies and the programs used to provide employment and training to employees at depots being closed, (3) determines if the military can increase savings by using competitions between DOD depots or between depots and the private sector when redistributing the workloads of closed depots, and (4) determines if the military services adequately consider other services' depots when they use methods other than competition to redistribute the workloads.

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.