Military Base Realignments and Closures:

Transfer of Supply, Storage, and Distribution Functions from Military Services to Defense Logistics Agency

GAO-08-121R: Published: Oct 26, 2007. Publicly Released: Oct 26, 2007.

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As a result of the 2005 base realignment and closure (BRAC) round, the military services are required to transfer to the Defense Logistics Agency (DLA) all of their supply, storage, and distribution functions at specified depot maintenance locations that are collocated with a DLA distribution depot. These transfer actions are part of a larger BRAC recommendation, commonly referred to as the Supply, Storage, and Distribution (SS&D) recommendation, that is intended to reduce both the number of supply distribution depots and related excess capacity, while providing the Department of Defense (DOD) with a logistics base that saves money and enhances the effectiveness of logistics support to operational forces. There has been disagreement among the services and DLA about whether certain personnel positions that include functions inherently involving both supply and maintenance operations at the services' industrial depots should transfer to DLA as part of this recommendation. The Air Force, Navy, and Marine Corps reached agreement with DLA about these positions in January, February, and April 2007, respectively. After repeated opposition to the transfer of certain positions, in July 2007 the Army agreed to comply with direction from the Office of the Secretary of Defense (OSD) on the specific functions and positions to transfer. DLA subsequently submitted its draft business plan for implementing the SS&D recommendation to OSD for approval on September 18, 2007. Because of the broad congressional interest in the implementation of the 2005 BRAC round recommendations, we prepared this report under the Comptroller General's authority to conduct evaluations on his own initiative. Our work was in response to concerns raised by several congressional offices about possible inefficiencies and disruptions in depot maintenance production that could potentially generate higher costs at the department's depot maintenance activities and affect equipment readiness during a critical time for maintenance and support of our nation's warfighters. Our objectives were to determine (1) what efforts have been made to determine which supply-related functions will transfer to DLA, (2) what are the military services' key concerns in implementing the transfer of functions, (3) the extent to which DLA's plans establish a transfer process that minimizes disruptions depot maintenance, and (4) what are the estimated costs and savings associated with implementing this transfer of functions.

DLA and the services have taken several actions in an effort to reach agreement on which SS&D functions and related positions and inventories are to transfer to DLA as a result of implementing the 2005 BRAC SS&D recommendation. These actions have been ongoing since late 2005 when DLA began its planning process for implementing the consolidation of SS&D functions across DOD. Some key actions include defining SS&D functions at the beginning of the planning process, contracting a study to assess the effects and risks associated with the transfers, establishing integrated process teams to work through problems and concerns and identify potential solutions, and conducting detailed analyses of depot positions to identify transfer candidates. DLA has also worked with the services to develop comprehensive action plans that include specific and detailed actions that identify each task's duration, including start and completion dates; percentage completed; organization and personnel assigned; criticality of task; and milestones. Although the services have reached agreement with DLA on the specific functions to be transferred, officials from all of the services have expressed concerns in four key areas regarding the transfers. First, officials from all of the services expressed concern that the insertion of DLA into the internal operations of their depot maintenance activities may hinder their ability to meet depot production schedules and maintain equipment readiness. Second, depot maintenance officials expressed concern that if the transfer of functions to DLA takes place using DLA's existing price structure, it would increase the cost of depot maintenance operations and the depots will have to pass these additional costs on to their customers by increasing their hourly rates, which, in turn, would affect their operation and maintenance budgets. Third, officials from each of the services expressed concern about the future maintenance, upgrades, and usage of service information technology systems transferring with depot maintenance supply functions to DLA. Fourth, depot maintenance and service officials expressed concerns about several human capital issues, ranging from turnover among affected employees and limited promotion potential to the possibility of outsourcing transferred positions to the private sector. The extent to which any of these concerns may actually materialize is unknown, as implementation has not yet begun. DLA is developing plans to minimize the risk of disrupting depot maintenance, but it faces several challenges. In addition, DLA plans to time phase the transfer of SS&D functions across the implementation period, which extends to September 2011. Our analysis of the BRAC Commission cost and savings estimates and DLA's planning documents shows that over the fiscal year 2006 to 2011 BRAC implementation period, estimated costs have increased by about $45 million and estimated savings have decreased--by about $1 billion--for transferring the SS&D functions and associated inventories from the military services' industrial depots to DLA.

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