Military Base Realignments and Closures:

Review of the Iowa and Milan Army Ammunition Plants

GAO-11-488R: Published: Apr 1, 2011. Publicly Released: Apr 1, 2011.

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The 2005 Base Realignment and Closure (BRAC) Commission report recommended that the Army close Kansas and Lone Star Army Ammunition Plants and relocate certain munitions production-related functions from the Kansas and Lone Star Plants to Iowa and Milan (Tennessee) Army Ammunition Plants. As a result of the recommendations, the Army closed the Kansas and Lone Star Plants in 2009 and is in the process of relocating munitions production functions to the Iowa and Milan Plants. The 2005 BRAC recommendations must be completed by September 15, 2011. In addition, in February 2008, the U.S. Army Sustainment Command issued a request for proposals for operating and maintaining both the Iowa and Milan Plants. As part of the proposals, all offerors were to submit optimization plans for the optimum operation, maintenance, and utilization of the plants. In October 2008 the Army awarded a contract to American Ordnance for the operation and maintenance of the Iowa and Milan Plants at no direct cost to the government. Under the contract, American Ordnance will perform (among other things) security and maintenance for the facilities and will perform the actions identified in its Baseline Optimization Plan to optimize the facilities. In exchange for these services, American Ordnance is given the use of government equipment and facilities and will be able to use the facilities and equipment to manufacture ammunition, either for sale to the government or for commercial sale to other authorized parties. As part of its Baseline Optimization Plan, which is incorporated in the contract, American Ordnance intends to relocate certain munitions functions existing at the Milan Plant and consolidate them at the Iowa Plant. Due to the proprietary nature of American Ordnance's optimization plans, certain information has been omitted from this correspondence. This correspondence responds to an Explanatory Statement accompanying the Department of Defense Appropriations Act, 2010. That Statement directed GAO to conduct an audit on the amount and sources of the funds used in furtherance of the 2008 contract with American Ordnance to operate and transform the Iowa and Milan Army Ammunition Plants. In examining Iowa and Milan Ammunition Plants, our objectives were to determine the extent to which (1) the Army has implemented its plan for relocating munitions production-related functions to Iowa and Milan in accordance with the provisions of the 2005 BRAC Commission's recommendations, (2) the federal government is providing funding to implement either the Baseline or the Enhanced Optimization Plans included in the contract awarded to American Ordnance for operating and maintaining the Iowa and Milan Army Ammunition Plants, and (3) the plan to relocate functions between the plants, in accordance with the 2008 contract, has been implemented.

We found that the Army is implementing plans to relocate munitions production-related functions from Kansas and Lone Star Army Ammunition Plants to the Iowa and Milan Plants in accordance with the 2005 BRAC Commission's recommendations. According to senior Army officials, the Kansas and Lone Star Plants have been closed since 2009. In addition, certain munitions production-related functions have been moved to the Iowa and Milan Plants. Additional related actions, such as designing the layout for new production lines and installing equipment are in process at Iowa and Milan and according to documentation provided by Army plant officials all work is expected to be completed by the September 15, 2011 BRAC recommendation deadline. In regard to realigning production functions from Milan to Iowa as described in the 2008 contract, we found that activities to date have been funded by American Ordnance and that, in accordance with the no-cost provisions of the contract, Army contracting officials do not plan to provide funding to support the realignment. Furthermore, we found that the Army has not used and has no plans to use any BRAC funding to support American Ordnance's plans to shift munitions functions from Milan to Iowa. As to the extent that American Ordnance has begun to execute its plan for relocating functions to Iowa, we found that although new equipment is being installed at the Iowa Plant, American Ordnance will not be able to shift munitions production from Milan until required Environmental Assessments at the Iowa Plant and Milan are approved.

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