MANAGING DEFENSE DEPOT MAINTENANCE
BILLY J. ADAMS
At the conclusion of the Cold War, we found ourselves with too much of not the right stuff, outdated information management tools, and organic capabilities that didn't address contemporary needs. The passing of the Cold War and the strategy we embraced to fight it-if nothing else- demands a fundamental rethinking of our supporting logistics systems, processes, capabilities, and inventories.
Paul G. Kaminski, Department of Defense (Note 1)
The body politic of America has decreed victory in the Cold War with the former Soviet Union. With the determination of that victory has come the attendant reduction of American military forces that has been the hallmark of every postwar period in the United States.
This essay, written by Lieutenant Colonel Billy J. Adams, U.S. Army, while a student at the Marine Corps War College, won Distinguished Essay recognition in the 1996 Chairman, JCS, Strategy Essay Competition.
Because of congressional inability to agree on which military bases should be closed in conjunction with the reduction of forces, Public Laws 100-526 and 101-510 included language authorizing Base Closure and Realignment Commissions (BRAC) to determine those bases no longer necessary for the defense of the United States.
The BRAC Commissions were chartered to review the necessity of bases. However, there was no authority in the congressional language that authorized the respective Commissions to comment on force structure of U.S. military forces. As a result, force structure decisions, as supported by Title 10 U.S.C., have remained the purview of the service Secretaries in consultation with the senior military leadership in the respective service. Each service, by way of the budget appropriation, receives manpower guidance for each budget year. As an example, the Army goal for military manpower for FY 96 end strength is 495,000 personnel. In addition, there are civilian manpower goals.
The services are generally achieving military and civilian manpower reduction
goals in line with congressional legislation and current Office of the Secretary
of Defense manpower workyear ceilings.(Note 2)
The BRAC Commissions ensured the closure of numerous unnecessary installations,
but the focus on personnel reductions has centered in the field forces, while
base closures have cut across all lines of the Department of Defense. As a result,
the defense wholesale logistical maintenance management force structure, while
taking some cuts, exceeds the level required to support the remaining forces
in the field.(Note 3)
The major logistical maintenance management commands of the respective services are oversized in relation to the remaining logistical maintenance complex. Although personnel reductions have been ongoing for several years, these commands could be reduced or eliminated by consolidation of all wholesale-level maintenance related activities under an activity similar to the Defense Logistics Agency (DLA) or some other suitable organization that could provide depot-level maintenance management capability to the entire force in a more efficient manner. This action is comparable to the consolidation of wholesale-level supply activities that occurred previously. Before making a decision on the construct of such an agency, there are some key questions to answer.
With the current strategic concept of fighting no more than two major regional conflicts (MRCs) at one time, reduction of the wholesale maintenance management structure should have no negative impact on U.S. national security. The BRAC Commissions established a baseline for defense industrial maintenance capacity. The reduction of personnel from the existing overhead structure brings manpower authorizations more in line with remaining industrial base requirements.
To understand the current issues and proposed structure of depot maintenance management for the future, it is helpful to understand the history of this subject.
Efforts to streamline depot maintenance in the Department of Defense are not
new. In 1958, the Office of the Secretary of Defense issued DoD Directive
4000.19, Basic Policies and Principles for Interservice, Interdepartmental,
and Interagency Support. The focus of this directive was on economies which
could be achieved by "contracting" work from one service to another
which had better or excess capacity to perform the required function.(Note
4) During the next few years, several follow-on directives were issued by
DOD designed to improve consistency in depot maintenance reporting procedures
relating to the various services. These directives did not preclude the services
from developing service-unique maintenance costing and reporting procedures.
In 1970, two key events occurred:
Essay on Strategy XIV8
PREPARING FOR CHANGE
In downsizing the military complex, funding reductions require a force structure in balance with existing facilities and the tax payer's propensity to pay the bill. While it is imperative that America maintains a sound defense capability, it must be done without unwarranted expense. Reducing or eliminating excess wholesale logistics overhead may contribute to a more effective and efficient defense structure without penalizing the tax payer.
In 1973, the General Accounting Office (GAO) published a report, Potential for Greater Consolidation of Maintenance Workloads in the Military Services, that found that:
The report recommended that either an independent agency similar to DLA be established
to assume responsibility for depot-level maintenance of all commonly used items,
or a single manager be assigned for maintenance of specific classes of items.
The DOD response to the GAO report was that the single manager concept had merit
and would be studied further.(Note 9) Additional
DOD Directives were published concerning streamlining of depot activities, and
GAO studies recommending "centralization" were conducted from 1974 through
1977 without much impact.
In 1978, a GAO report, Aircraft Depot Maintenance: A Single Manager is Needed to Stop Waste, was highly critical of excess public-sector, productive, depot-level maintenance capacity and unnecessary duplication of facilities, equipment, and skilled personnel. The GAO concluded that a master plan was needed and that only a single manager would have the perspective, objectivity, and motivation to develop and maintain such a plan. DOD responded that "there may be benefits to be had from a single manager who could facilitate further reductions in unutilized and underutilized capacity . . . but additional preliminary work would be required prior to making any decision to study the recommendation further."(Note 10)
The pattern at this point was now clear. Regardless of the source of recommendation for consolidation, DOD consistently studied it further. It is unclear how much, if any, influence was exerted by the individual services in opposition to consolidation. There were initiatives at cross-servicing common items (e.g., the Army is responsible for depot rebuild of Marine tanks); however, the consolidations recommended by GAO have not occurred.
Between 1978 and 1981, the "Single Manager" option for aeronautical systems recommended by GAO made no meaningful progress within DOD. In the summer of 1981, Deputy Secretary of Defense Frank Carlucci tasked the Assistant Secretary of Defense for Manpower, Reserves, and Logistics (ASDMR&L) to conduct a 90-day review to determine the desirability of a "Single Manager" for aeronautical depot maintenance. At the time, only two options were considered viable by the services-status quo or the single manager. As the study was initiated, the services and the Joint Chiefs of Staff (JCS) preferred the status quo, although OSD, the Department of Defense Inspector General (DODIG,) and GAO voiced reservations about the status quo option. Tasked by the ASDMR&L to prepare the report, the Deputy Assistant Secretary of Defense for Logistics (DASD(L)) completed the review in fall 1981 and recommended that all aeronautical maintenance be consolidated under the Air Force as the single manager. Unsatisfied with the study results, the ASDMR&L directed that the DASD(L) reconsider the recommendation; subsequently, a recommendation went forward to Mr. Carlucci that did not support the single manager concept "at this time."(Note 11)
Between 1981 and 1988, substantial discussions occurred within DOD concerning single managers and consolidation, but little was accomplished. service reports continued to be published, showing an increase in interservicing for depot maintenance, but the amounts were small in comparison to total capability and opportunity.(Note 12) From 1988 forward, considerable discussions occurred between and among the services and DOD concerning consolidation and single managers. The 1989 Defense Management Review called for consolidation of depot maintenance into three single managers-one for air systems, one for land systems, and one for water systems. Again, the services opposed the concept. In 1990, a Defense Depot Maintenance Council (DDMC) was established, and a Corporate Business Plan was developed claiming substantial savings for the outyears, none of which can be currently measured. Finally, in 1992, the Air Force submitted another single manager plan for review by the Secretary of Defense and the services. But once again, the services could not agree on which service should be responsible for which task, or if a single manager should be used at all.(Note 13)
While much discussion occurred between 1958 and 1992, it is clear that there was no real progress leading to an acceptable resolution of depot maintenance consolidation or identification of single managers for maintenance dependent systems (ground equipment, aircraft, water craft, and communications). More recently, from 1993 to 1995 five significant documents were produced that indicate the possible options for depot maintenance and management in the future. The following chapter highlights the basic premise of these documents and provides personal insights from DOD logisticians to clarify further the potential future of depot maintenance management.
Previous studies concerning depot maintenance consolidation focused internally to DOD and the services, and concepts and options were discussed without consensus. Recent studies continue the same consolidation debates, but greater consideration has surfaced concerning privatizing depot maintenance workloads. Between 1993 and 1995, three DOD studies focused on consolidation while two agencies external to DOD produced reports recommending maximum privatization of depot maintenance workloads as an alternative for reducing costs within DoD.
Consolidation
Although widely discussed during the past 40 years, there is no consensus within
the services as to how consolidation should be accomplished or which service
should be responsible for what systems. The Chairman of the Joint Chiefs of
Staff Depot Maintenance Consolidation Study, hereafter called the Went Study
after study chairman General J. J. Went, USMC (Ret), concluded in January 1993
that while the services were doing many things right, the current system is
inefficient. In addition, costs have not come down in concert with the declining
force reductions; there is multi-Service duplication of effort; efficiency gains
must be realized out of overhead expenditures; competition and interservicing
offer the greatest potential for additional efficiencies; current excess capacity
exceeds requirements by 25 to 50 percent; and significant savings can be realized
by cross-Service consolidations.(Note 14)
The Went Study indicates that there is a better way of doing business than the current depot maintenance management structure. However, during the course of discussions with DOD personnel, it was readily apparent that the services are not interested in letting one service become responsible for the management of a commodity that crosses all service lines or establishing a consolidated maintenance command. Captain Spence Robbins, Head of the Industrial Facilities Policies and Resources Branch (N431), Department of the Navy, stated that the Navy prefers to outsource or privatize all of its maintenance requirements.(Note 15) The Air Force also prefers to maximize privatization of depot maintenance workloads when based on sound business practices that will result in the best value to the government and is seeking legislative relief.(Note 16) Some service officials appear to believe that a private contractor would exhibit more loyalty and responsiveness to service programs than the sister services.
The Integrated Management of Department of Defense Depot Maintenance Activities Study, completed in October 1993, identified four alternatives for depot maintenance management for the future:
In April 1994, the Defense Science Board published the recommendations of the Depot Maintenance Management Task Force:
Concerning consolidation, there are members of Congress waiting for the introduction of the Single Manager Executive (SME)(Note 20) concept of depot maintenance so legislation or riders may be introduced to preclude DOD from using the SME concept, because it is viewed as a threat to jobs in congressional districts. The SME concept also has winners and losers based on perceptions of the various services. The Air Force perceives itself as a winner, the Navy and the Marines see themselves as losers to the Air Force and Army, respectively, and the Army is a minimal gainer from the Marines. Efforts to convince the services to accept the SME concept have generally fallen into the "too hard" box for political and parochial reasons. In addition, there is a lack of commonality in data systems for consolidation and comparison activities. And finally, there are those that argue that the span of control would be too great.(Note 21)
The SME concept is not exactly dead in the Army. There are opportunities for cross-Servicing in some commodities. The Army currently repairs most helicopters and helicopter engines for all services at Corpus Christi Army Depot (CCAD). Mr. Robert T. Mason, in the Office of the Deputy Under Secretary of Defense for Maintenance Policy, is convinced that all helicopter repair could be done at CCAD as a "joint depot." At the same time, he believes it makes sense for all fixed wing aircraft to be repaired in the Air Logistics Centers (ALCs) as joint depots. Others disagree, but the Army already repairs tanks for the Marines. The DDMC has discussed initiatives and opportunities for some time on what type of cross-servicing should occur, such as all communications-electronics repair work conducted at Tobyhana Army Depot and missiles repaired at Letterkenny Army Depot. While opportunities exist, the services are a long way from a fully implemented SME concept.(Note 22) Recent actions taken by the DDMC may prolong or preclude BRAC- directed consolidation of ground electronic equipment maintenance at Tobyhanna Army Depot.(Note 23)
When asked about down-sizing and/or consolidation of Army Materiel Command, Air Force Logistics Command and the Navy depot maintenance management structures into a single logistics command and downsizing some of the 50 percent of the DOD budget located in the logistics area, Mr. Mason indicated that, besides the normal parochial and political issues, the services are afraid of losing command billets. On that same issue in a subsequent interview with Deputy Chief of Staff for Logistics, Army, LTG Johnnie E. Wilson, he stated,
The first problem is that Title 10 places responsibility for equipping the force on the respective service Secretaries. A legislative change is required before another entity would be allowed to take over that mission. The second problem is that the CINCs look to the services to provide materiel resources. If another agency took over the materiel provisioning mission, there is a question as to whether they would be responsive to the services or the CINCs.(Note 24)
Mr. Mason is not the only senior individual in the Pentagon who believes that making changes quickly will be difficult. LTG Wilson stated,
It is my assessment that if these changes come, it will be slowly, in an evolutionary manner. It will be a long time and will be driven by changing circumstances and requirements that can't be foreseen today.(Note 25)
As previously noted, the services have made significant reductions in installations, facilities, and some missions for all sectors of the force during the four rounds of BRAC process. However, significant logistics structure remains within all services. Within the Army, the largest wholesale logistics structure is Army Materiel Command (AMC). When asked if there were any reason, logistically, why AMC depots could not be merged with similar elements of the Air Force and Navy to establish a joint defense maintenance management agency under a reduced structure, Major Yolanda Dennis, Office of the Army Deputy Chief of Staff for Logistics, Maintenance Plans and Policy Directorate, responded:
These agencies could be consolidated based on the few remaining depots in each service and the declining maintenance workload in comparison to existing capacity. In fact, there is a study called the Integrated Management of Department of Defense Depot Maintenance Activities which identified a similar option as a result of the study. However, none of the four options identified in the study were recommended for implementation. Right now, that issue is in the "too hard" box for parochial and political reasons.
Major Dennis concluded by stating that no one wants to discuss consolidation because this study indicates it is not necessary.(Note 26)
The reports listed above were primarily focused on consolidation in some form or another. However, a fundamental shift in recommendations concerning depot level maintenance is on the horizon. In May, 1995, the Commission on Roles and Missions of the Armed Forces released its report. In regard to depot-level maintenance and management, the recommendations were clear. The Commission recommended privatization of all depot-level activities while creating a special office of Assistant Secretary of Defense to oversee the privatization process.(Note 27) Following release of the Commission's report, in July 1995, the Congressional Budget Office (CBO) produced a report which also provided convincing arguments for maximum privatization of the depot-level maintenance process.(Note 28)
Privatization
Privatization is the current "buzzword" concerning more efficient
conduct of depot-level maintenance for DOD. It is not a new concept; however,
its current vogue dates to May 1995, when the BRAC Commission recommended the
closure of Kelly (Texas) and McClellan (California) Air Force Bases. President
Clinton voiced strong objection to these closures. However, forced to accept
all or none of the BRAC Commission recommendations, the President agreed to
the closures, but vowed to keep the jobs from these two installations in the
respective geographical areas through "privatization."(Note
29)
Commenting on this issue, Mr. Mason said,
Privatization will reduce overall personnel costs by lowering outyear retirement benefits. In addition, it would reduce unneeded overhead in the short term and provide flexibility to add or terminate positions as required without worrying about civilian RIFs [Reduction in Forces] and associated timing of RIFs. The IG has previously stated a concern related to regaining previously outsourced workloads. Once outsourced, the jobs would be difficult to bring back in house if the contractor defaulted or if the workload was so small that no contractor wanted to pick it up. The service would lose both the personnel skills and the facilities/equipment related to the maintenance function. Depots can do soup-to-nuts [top to bottom] maintenance today. In privatization, contractors would act as the contract manager and outsource some or all functions of repair or new acquisition to subcontractors.(Note 30)
Mr. Mason described additional drawbacks. In the past, Original Equipment Manufacturers (OEMs) have been abundant during hard times (downsizing) and therefore available and competing with DOD for workload. However, in prosperous times, OEMs have been scarce, if existent at all, to accomplish work because they are chasing the most lucrative contracts, which may or may not be defense- maintenance related. In order to attract OEMs to take on depot maintenance workload, long-term incentives (10 to 15 years) are required. There are three types of people/organizations that most likely would be interested:
That's a key issue with the current administration. Candidates are being reviewed, such as the ICPs [Inventory Control Points], where we have six ICPs at various locations. There are possible opportunities here. In addition, we are looking at opportunities to privatize the Defense Reutilization and Marketing Offices. Some of the opportunities lead to delicate and difficult situations.(Note 32)
LTG Wilson expressed an additional reservation:
My concern is that privatization could lead to the loss of the wherewithal to sustain the warfight. If a soldier can go downtown and quickly get parts for unit equipment, that helps short term readiness. However, the Army loses visibility of the "demand"which subsequently erodes the support base. Then when we go to war, there is no supply structure to support the requirements in the area of operations.(Note 33)
Major Dennis of Army ODCSLOG Maintenance Policy Directorate reports that, within the Army,
Privatization efforts are on hold. The Army was looking at privatization, particularly at places like Red River Army Depot. However, there are parochial and political issues which affect these actions. The Texas congressional delegation wants the jobs lost as a result of realignment of Red River Depot to remain in Texas instead of going to other depots or privatization as directed by the 1995 BRAC Commission. However, the Army has not found any way to ensure that the jobs would stay in East Texas if the workload was put out for competitive bid. This issue is being worked at the senior officer level in all services. The Air Force and the Navy are impacted in the same manner.(Note 34)
The services believe their operational forces have been reduced as far as possible while still supporting the two MRC concept. The major untouched "overhead" in the services is the logistics tail. With Congress still looking for areas for budget reductions, it is only a matter of time before the services will be required to reduce logistics overhead.(Note 35)
When asked how the Navy will accommodate further reductions in logistics positions if not through consolidation, Captain Robbins stated,
The Navy strongly supports the concept of privatization. Currently, 50 percent of our shipbuilding rework is done through outsourcing and privatization. And, we would gladly do more except that we are precluded by law based on core competency requirements. Our goal is reduced costs and increased or sustained readiness. The Navy believes it will only achieve those goals by doing the work in-house or outsourcing/privatizing to private industry. We believe it is impossible to achieve these goals by contracting to the other services.(Note 36)
But there are limits as to how much workload can be contracted out or privatized. By law, the services may utilize no more than 40 percent of available funds for depot-level maintenance by non-Federal Government employees. Historically, the balance of the funds available for depot-level maintenance (60 percent) is utilized by organic service capabilities. Workload identified as "core" work required to ensure completion of service missions is not currently subject to privatization. While it has been the Army intent to stay close to the 60/40 split, the Army is currently at a 65/35 split (consistent with its historical average of 66/34). This was reinforced at the Secretary of Defense/Deputy Secretary of Defense level when they recently announced that no waivers would be granted to allow for increased privatization in excess of the 60/40 split.(Note 37) Under current and projected budget restraints, the Air Force seeks legislative relief for the 60/40 requirement.(Note 38)
Existing legislation is a substantial impediment to privatization. In previous circumstances, there was little cause for concern that this legislation would be changed, thus providing the depot maintenance system a degree of security concerning future workloads. But the world has changed significantly in the past 6 years. The demise of the Soviet Union as a peer competitor and threat to national security, reduction of U.S. Armed Forces, domestic employment issues as a result of base closures and other economic influences, and the diminishing number of Members of Congress with military service are combining to increase pressure for legislative change to allow increased, if not complete, privatization of the depot maintenance workload. These political issues, internal and external to the Department of Defense, are explored in the next section.
There are two perspectives of politics that impact the potential reduction of the logistics structure in DOD and consolidation of depot-level maintenance into a single organization. One perspective is internal to DOD and relates to service disagreements on whether and how to consolidate. The second perspective is external to DOD and concerns the impact Congress may have in changing the manner in which depot-level maintenance is performed and managed.
One of the goals of the 1986 Goldwater-Nichols Act was to increase interservice operability and create a basis for "jointness"within the services. However, despite the Act, service parochialism persists, and the Act did nothing to prevent songressional members from practicing pork barrel protectionism for constituents. Each of the five principal studies conducted from 1993 to 1995 possessed its own particular "flavor,"depending on the composition of the study group and the amount of influence which could be applied either by congressional or service interests. As discussed earlier, the services favored the Integrated Management Study for a variety of reasons, but it should be noted that it had essentially no impact on the existing depot maintenance management structure. The Integrated Management Study provides the basis for maintaining the status quo, while the Went Study suggests that consolidation of depot maintenance management is a better solution.
When asked what prevented, if anything, a joint maintenance organization similar in nature to DLA, Mr. Mason stated,
There are pros and cons about establishing a defense maintenance organization. On the positive side, it would be a single agency responsible for acquiring resources to execute the program and focus on maintenance. In addition, I believe that defense readiness would benefit. Finally, the agency would own all of the people responsible for execution of the programs. On the negative side, there is too much political heat instigated by the military services for self-protection.(Note 39)
Mr. Mason continued by explaining that the services believe they would lose opportunities for command of depot-level activities. The Army Materiel Command (AMC) and Industrial Operation Command (IOC) type activities (for all services) could be downsized or eliminated under a consolidation or privatization plan except for the ensuing political heat or parochialism. The maintenance management organizations for the Army, Air Force, and Navy Major Commands (AMC, Air Force Logistics Command (AFLC), and Navy wholesale level activities) could be integrated into a defense organization similar to DLA. As a result, at least one or two four star billets could be eliminated. One four-star billet could be used to take command of an enhanced defense maintenance and supply agency with a three-star deputy on each side with the command aligned along functional, not Service, lines. Functions in the command would be multiService staffed to ensure that all views were represented during development of maintenance or supply related actions.(Note 40)
Another option is to establish a defense maintenance command with a two- or three-star commander. This would not affect several organizations resident in AMC, AFLC, and the Navy logistics activities, which are concerned with materiel development and acquisition, as opposed to depot-level maintenance.(Note 41)
Current outyear budget projections for the Army indicate a continued decrease in Total Obligation Authority (TOA) funding. The President's proposed budget for 1994 indicated a turnaround increase for the Army of more than $60 billion, while the Army budget for the Program Objective Memorandum (POM) years of FY96-01 shows a level budget of less than $60 billion. Senior Army officials doubt that the budget will increase during this period, and most officials believe the budget will actually decline further.(Note 42) The same sentiment concerning declining future budgets was expressed by the Navy.(Note 43) On March 4, 1996, the President submitted his 1997 proposed defense budget to Congress requesting $242.6 billion, $10 billion less than the 1996 defense budget.(Note 44)
In reality, Congress and the budget process will drive the direction of consolidation and/or privatization for the services. With less than 40 percent of the current Congress having any military experience and with the strong congressional drive for a balanced budget, the services are losing a substantial base of program support. Bbudget battles rage over deficit spending and balancing the budget by FY2002, so it is not unrealistic to believe that service budgets will continue to decline. As senior congressional leadership gives way to younger members, it is reasonable to expect that, in the absence of a clear threat to national security interests, younger Members of Congress will focus their concerns on domestic issues affecting constituents with less emphasis on defense spending.
The 1995 BRAC Commission recommendation directed the movement of all Red River Army Depot (RRAD) maintenance missions, except for that related to the Bradley Fighting Vehicle System (BFVS), to other depot maintenance activities, to include the private sector. This could result in the loss of jobs from Red River if the workload is moved, and there would be a corresponding loss of jobs at Anniston Army Depot (ANAD) if the RRAD workload is not moved to ANAD (the Army selected ANAD to pick up the maintenance missions lost at RRAD). The congressional delegations of Texas and Arkansas want to hold those jobs in Red River and keep the employees in place, even if that means privatization.(Note 45) When the President pledged to keep the Air Force jobs at Kelly and McClellan Air Force Bases,(Note 46) California, he also opened the door for privatization at Red River. Unfortunately, privatization does not guarantee that the jobs will remain at the closing or realigning locations. The winning contractor could move the jobs to a location more suitable for the private company. If that happens, jobs at both Red River and Anniston could be lost.(Note 47)
But before the services can fully privatize, legislative changes are required. The services are attempting to redefine core maintenance requirements, and DOD is attempting to recompute core requirements. As noted previously, current law requires that no more than 40% of money authorized by Congress for depot maintenance be used for contractor performance, with the remainder performed by government employees in government facilities. Some leaders in DOD want to reduce or possibly eliminate the in-house requirement thus opening the door for full privatization. There is strong disagreement between those who want to change the legislation and those who desire to maintain the status quo, but there is little likelihood that the legislation will be changed in the immediate future.(Note 48)
Political in-fighting within both DOD and Congress continues concerning consolidation and privatization. At stake within the services are structure and positions of power. At stake for some Members of Congress are potential jobs for constituents and opportunities for further reducing the Defense budget. It appears that these two competing entities may clash in the near future.
After 50 years of maintaining the largest standing defense force in the Nation's history, the services find themselves in a dilemma. The Armed Forces are faced with declining budgets, an increasingly less friendly Congress, no peer threat, and potentially expanding military operations other than war. While those outside the Department of Defense continue the debate about how much of an armed force is required, the services are increasingly required to do more with less. Inside the Department, there are two senior leaders who espouse a logistics vision for the future--the Honorable John P. White, Deputy Secretary of Defense, and Dr. Paul Kaminski, Assistant Secretary of Defense for Acquisition and Technology. The Commission on Roles and Missions of the Armed Forces, under the Chairmanship of Mr. White, strongly encouraged privatization of every aspect of depot- level maintenance possible, leaving in-house only those missions that could not be privatized because of lack of commercial capability or lack of interest. Mr. White's position on the future of depot maintenance appears clear. Dr. Kaminski's logistics vision is equally adamant. In a recent speech, he remarked,
Today we are developing a vision for other major changes in warfare-it is called a Revolution in Military Affairs or RMA. We need a complementary vision for the logistics concepts that will support the style of warfare the RMA envisions in our future.(Note 49)
Dr. Kaminski's speech focused on "dominant battlefield awareness" with an ability to "see" the entire battlefield, including logistics, at one time; tailoring capabilities to be able to operate within the "dominant battle cycle time" exploiting existing technology; and pursuing widespread private sector participation in depot maintenance as well as disposal and distribution to the maximum extent consistent with readiness and cost effectiveness. He further stated that the time for testing the concept with pilot programs at the margin of our logistics infrastructure is past, big payoffs of privatization are yet to be realized, and we must think more broadly of privatization and outsourcing--much broader than depots and privatization in place.(Note 50) A clear direction is espoused by Dr. Kaminski concerning depot maintenance operations.
In his speech, Dr. Kaminski extolled the virtues of the Air Force lean logistics concept that reduces transportation time and inventories at the installation level. He envisions a flexible, modernized logistics information infrastructure which can be the catalyst for fundamental changes required to evolve from the "just in case" logistics environment to a lean and adaptable "just in time" environment.(Note 51) The purpose of this change is to reduce or eliminate our current stovepipe functionality and inability to communicate information across functions and among echelons of command. A modernized information structure is required to facilitate joint operations, provide timely access to data, enable an electronic interface with the commercial sector and support the flexibility required to adapt to the dynamic environment of the post-Cold War period.(Note 52)
Dr. Kaminski noted that Operation Desert Shield/Storm was a prime example of the battlefield of the future supported by the cumbersome logistics systems of the past-a strictly Cold War logistics effort that substituted brute force and deployment of massive quantities of materiel in place of a well managed logistics system. The services must have total asset visibility to overcome this.(Note 53) In summary, Dr. Kaminski stated,
My vision for the revolution in logistics is enabled by improved information systems and faster and cheaper transportation systems. Since the technology is largely developed, what we need is the vision, leadership, commitment and stakeholder engagement on the part of the warfighters, logisticians, developers, and industry to make this revolution a reality.(Note 54)
The Army is taking a radical approach to the reduction of its institutional headquarters and its major commands. This includes divesting itself of nonessential functions, removing layers, consolidating some functions of the secretariat and the staff, and moving some responsibilities of the headquarters to the field. The Army believes that while headquarters should articulate policy and oversee resource management, it should rarely exercise operational responsibility. The philosophy is that operational functions related to warfighting, training and logistics should be performed in the field, not the headquarters.(Note 55) This radical approach does not penetrate to depot maintenance management.
Depot maintenance management has not changed and is not likely to change on the basis of current recommendations postulated by the Army. Several studies recently conducted and referenced earlier achieved no consensus on how to proceed with the management of depot maintenance. The Army recently published a booklet entitled Depot Maintenance Management in which the Army declares the only acceptable management practice to be the current system, whereby the services maintain control of their own depots.(Note 56) Support for this decision is cited by referencing the Defense Science Board Depot Maintenance Task Force Study, which supported service retention and ownership of depots and congressional language in the 1994 Defense Authorization Act, which precluded the consolidation of defense depot maintenance under a single entity.(Note 57)
In May 1994, Deputy Secretary of Defense John Deutsch issued a memorandum precluding further public/private and public/public competitions for depot work load, as it would be impossible to achieve on a fair playing field or make accurate costing comparisons for solicitations. In addition, he indicated that the Department can no longer assume that new systems will eventually transfer to an in-house depot maintenance facility.(Note 58)
During and after the American involvement in the Vietnamese conflict, private contractors supported defense operations forward on the battlefield. That is true today in Bosnia, but with an added perspective. For the peacekeeping mission in Bosnia, the Army hired a private contractor, Brown and Root, to establish and run base camps responsible for cooking food, washing clothes, base camp operations, and entertaining troops. Brown and Root hired 750 local Hungarians to perform the work and is only one of hundreds of contractors supporting Operation Joint Endeavor. Since 1992, Brown and Root has conducted operations in support of U.S. deployments to Somalia, Zaire, Haiti, Saudi Arabia, Italy, and now in Bosnia.(Note 59) In addition to providing support for weapons system operations, the services, and in particularly the Army, are moving more and more to contractor-assisted operations in operations other than war. It is realistic to expect to see this same type of support occurring during a period of armed conflict.
But initiating change in the manner in which the services conduct business is different when the services to be performed are relatively low skill, nontechnical, or overseas (such as Brown and Root in Bosnia) than when they are high- skill operations such as depot maintenance (which represent good wages in the local community). Organizational structures take on a life of their own and therefore become resistant to any change which would reduce the size of the organization or structure (self preservation). In order to change, there must be strong commitment from the top leadership of the organization. In service structures, there is resistance to privatization because this is life threatening to the organization. Privatization threatens the targeting of federal funds to a specific location/activity and is therefore a threat to congressional delegations who see the activity as a source of jobs and therefore a basis for reelection. Delegations opposed to privatization are primarily maintenance workload "gainers" in their respective state or district as a result of BRAC actions, while delegations in favor of privatization are primarily BRAC maintenance workload losers. Privatization "in-place" cannot be guaranteed, thus creating resistance to change.(Note 60) However, in today's environment, there are forces at work which make privatization an acceptable alternative to the complete loss of jobs in an area or region.(Note 61)
The consolidation of service activities is most cost effective when equipment and/or personnel are being seriously underutilized. Without these circumstances, consolidation may not reduce costs. In fact, when implemented in operations already vast, consolidation can create a system that is less responsive to the consumer and therefore, as in the case of military logistics and support functions, less sufficient for sustaining warfighting capabilities.(Note 62)
On the one hand, arguments can be made against consolidation of defense maintenance operations (to the benefit of the service's position) while on the other, there are arguments for privatization, which cannot be accomplished without legislation (also to the benefit of the services). The recent Commission on Roles and Missions report stated,
There are many objections to outsourcing offered by DOD managers, many of which were accompanied by assertions of cost savings. In addition, there is an asserted right of government employees to compete for government work with the private sector, now deeply embedded in Office of Management and Budget Circular A-76 and in law. There are differences in defining differences in cost related to incomparable accounting systems, lack of profit and loss mechanisms, and uncertainty of future workloads. Additional objections assert that contractor support is unreliable. We have found these concerns are not well founded. Finally, the largest practical obstacles to outsourcing involve fears that these initiatives will disrupt lives and economies. After consideration of all the arguments presented against outsourcing, we urge the Department to proceed without delay to make reliance on private sector support activities a central tenet of the Department's policies. The Secretary should direct outsourcing of existing commercial type support activities and all new support requirements, particularly the depot-level logistics support of new and future weapons systems.(Note 63)
Regarding depot maintenance, the Commission on Roles and Missions recommended that DOD
In order to accomplish the Commission's concept to achieve additional efficiencies in government, particularly defense-depot maintenance, the following legislative actions are recommended by the Commission:
The services are strongly opposed to a consolidated maintenance structure under DOD, and they are adamant about not forming any structure resembling DLA. These feelings were clearly articulated in the previously referenced studies. However, under a "consolidated and privatized" scenario, the most likely structure would be one similar to that recommended in the 1993 Went Study. The preferred structure would be a Defense Maintenance Agency (DMA) or a Joint Depot Maintenance Command (JDMC). The Went study concludes, in a comparison of attributes, that the JDMC offers the greatest flexibility by keeping the services directly involved in the process.(Note 67)
The Integrated Management of Department of Defense Depot Maintenance Activities Study offers a similar alternative as a viable option (one of four options studied). The JDMC structure in this study authorizes a four-star commander as Commander in Chief, Depot Maintenance (CINCDM), directly reporting to the Chairman of the Joint Chiefs of Staff (CJCS). This places the CINCDM on equal footing with the combatant command commanders as well as with the commanders of the existing service logistics commands.(Note 68) However, for the relatively small number of personnel under CINCDM's command, this appears to be grade overkill. A more reasonable approach, given the reduction in force structure, is to consolidate all defense-depot maintenance activities under a two-star commander from the consolidation of service depot maintenance commands, with a one-star deputy for each of the ground/electronics/missiles, air and sea systems.
The consolidation of the service depot maintenance command staffs could notionally result in the elimination of approximately 60 percent of the existing combined overhead structure. The remaining structure would be slightly larger than any one of the previous single staffs since each commodity would bring some unique requirements to the resulting organization which were not available on other service staffs. A proposed JDMC headquarters structure is located at figure 1. At the same time the JDMC is created, the DLA structure should be reduced from a three-star to a two-star director for the same logic that JDMC has a two-star commander-the existing force structure does not support a three-star billet. Both organizations could report directly to the Deputy Under Secretary of Defense for Logistics or the CJCS. Previous conversations with personnel supported by DLA revealed displeasure at the lack of DLA responsiveness. Responsiveness may be improved if both DLA and the JDMC reported directly to the CJCS.
Any number of alternatives could be developed and implemented for the consolidation of defense depot maintenance. However, in order to be effective, it must be consolidated into a joint organization with ties to each service without reporting to the Chief of the service and must have a single commander/executive with overall responsibility for program execution. The Defense Depot Maintenance Council has not made the hard choices on reductions for efficiencies in the past.(Note 69) There is still too much service influence and parochialism in a DDMC for it to be as effective as a JDMC.(Note 70)
While there are arguments for consolidation of depot maintenance activities under one service based on commodities (Army for ground and electronic systems, Navy for sea systems, Air Force for aircraft), consensus of the interviewees for this report, as well as service expressions during the referenced studies, indicate a tremendous fight would erupt among the services on this issue. Plainly, the services do not now, nor will they likely ever, trust each other to embrace such a system. While each service claims to have a better idea on how to do depot maintenance, it is clear, based on past efforts at consolidation, that the better idea is "status quo." Unfortunately, status quo is not likely to be acceptable after the next round of budget cuts.
The future of defense-depot maintenance management, surely to be forced on the Department of Defense as a result of budget constraints and politics, is a consolidated joint maintenance command with a military commander reporting to the DUSD(L) or the CJCS. The command will employ approximately 1,200 personnel, with approximately 10 percent of the command comprising military personnel and the balance DOD civilians. The number of maintenance depots existing today will see further reductions to achieve additional efficiencies with a substantial portion of the existing depot workload transferred to private contractors who can add or subtract manpower more efficiently based on program budgets.(Note 71) Quality assurance processes and programs already exist in the current structure for both private and public operations. These activities may change in size, but little will change with the process or programs.
Development of the budget for a JDMC will be based on analysis of projected workloads for public depot activities in conjunction with projected workload requirements now completed by private contractors. Management, as always, would be one of the many functions included as an overhead cost in the budget formulation process along with utilities, projected capitalization requirements, direct labor, acquisition costs, and other non-direct labor hour costs. The budget would be prepared in consultation with the respective services and submitted through the Deputy Secretary of Defense for inclusion in the DOD budget. Measurement of productivity would be based on analysis of execution of program to budget in conjunction with initial comparison of depot billing rates against the previous system billing rates. Subsequent rates would be analyzed/measured against previous year rates within the new system. The objective is declining customer billing rates with improved quality of maintenance.
The efficiency of the new system would be predicated and dependent on the cross-service assignments to the JDMC structure, because depot structures would remain essentially unchanged. It would be reasonable to see some degree of multiservice representation at each depot installation that supports multiservice programs. Gains from the depot level will be primarily a function of the number of reductions of depots because the consolidation of workload within the remaining depots should increase the size of the work force to the optimum level of efficiency workloaded to 85-90 percent capacity. The remaining 10-15 percent of capacity would be available for surge exclusive of multishift operations.
As always, there is a concern on behalf of warfighters that the depots remain responsive to combatant command requirements. However, changing the management structure of the defense-depot maintenance system does not change the relationship of the service-owned depot to the warfighter. Directly associating the warfighter to the wholesale-level maintenance base (echelons above corps) is like linking an automobile owner directly to General Motors or Ford headquarters when the car owner needs vehicle repair or support. If a Ford needs maintenance, one goes to the local Ford dealer; this is synonymous with the warfighter taking his equipment to his associated direct-support (DS) maintenance company or general-support (GS) maintenance company, depending on the item to be repaired or replaced or parts needed. While nothing prevents a Ford owner from corresponding directly with the Ford headquarters about a car, or a warfighter from going directly to the depot about equipment, that interface is rare. It is the responsibility of the Ford dealer or the DS/GS maintenance unit to provide the interface between the warfighter and the wholesale level of logistics. And, there is nothing about a JDMC that precludes the depot representative from visiting the warfighter unit if special requirements exist or organizationwide equipment problems occur beyond the scope and capability of the DS/GS maintenance unit. The bottom line is that the wholesale level of logistics in DOD should be transparent to the warfighter, who should care only that received repaired equipment or repair part was received without regard to how it occurred. The warfighter should be focused on fighting the war, not repairing equipment. The end result is that the person managing depot-level maintenance should have no negative impact on the warfighters, while reducing costs for services provided. Figure 2 depicts a notional interface between the JDMC and the respective service wholesale logistics structure.(Note 72)
Any effort to reduce outyear budgets must do so with the objective of achieving a balanced force, something the BRAC procedure was not designed to accomplish. The BRAC process is concerned with the closure or realignment of installations and have no authority over directing force structure changes. Any reductions to force structure as a result of BRAC were incidental and more a function of how the services interpreted and executed the BRAC Commission recommendations. It is the purview of the services, based on congressional budget authorizations, to determine the size and structure of their respective forces.
Are these the only possible solutions to the defense depot maintenance issue? No, and for good reason. DOD has been struggling with this issue for over 40 years and has made changes only at the margin during that period of time.(Note 73) For as many vested interests as there are in the process, each represented organization in the process believes that it has the "correct solution" to the issue and everyone else is wrong. Until there is one strong organization with control over all of the defense-depot maintenance assets, there will be no meaningful progress on this subject, and there will be no coordinated, effective planning on how to make such an organization work. As a result, when Congress directs DOD to develop and implement such an agency, the services will fight it until the flag is raised on a JDMC. The planning to put it together will be hurried and muddled through to meet a time limit rather than focused on developing the best possible organization to accomplish the defense depot maintenance mission. Someone must take the lead now to do the planning in order to implement an effective and efficient organization in the future, even if that plan temporarily resides on a shelf prior to implementation. The services will not accept that responsibility now because it is tantamount to admitting that there is a more efficient and effective manner in which to conduct depot maintenance. Therefore, it falls on the shoulders of Congress and OSD to make the changes for the future, and it appears the services will not be prepared when the future arrives.
Research conducted for the preparation of this paper and the collective experiences of over 22 years of military service reveal a simple, if unstartling, conclusion concerning the direction of defense depot maintenance in the 21st century: change to the current system will, most likely, be evolutionary and not revolutionary, and it will be instigated from sources external to the services. There is little incentive for the services to initiate changes that could result in substantial savings, since any savings realized are generally taken from the service by the Office of the Secretary of Defense or Congress to be applied to other programs or used as a means to reduce the outyear budget expenditures. If the services cannot use savings accrued as a result of efficiencies developed by their own initiatives, the ensuing result is maintenance of the status quo and continued squabbles with the other services for a larger piece of the budget.(Note 74)
With the emphasis on deficit reductions and balancing the Federal budget, it seems clear that the defense portion of the Federal budget will shrink in the outyears because it represents 50 percent of discretionary federal funds. In order to increase service programs, the services will be required to compete among themselves for a larger share of an increasingly smaller budget. It is not inconceivable that the outyear defense budget could fall to approximately $200 billion annually in execution year dollars by FY2002. In order to stay within limitations, the services would be placed in the unpleasant position of most likely reducing manpower and placing acquisition programs on hold. The probable end result will be the reduction of two more active Army divisions, five active Air Force wings, and at least 100 fewer ships for the active Navy. But these reductions by themselves will not achieve the overall savings required. In addition, there will be a required corresponding decrease in civilian manpower within DOD.
While reductions have occurred as a result of reorganizations and BRAC recommendations, the only significant opportunity for further reductions that do not threaten America's security in the DOD budget is in the area of logistics. As a result, Congress will be forced, sooner rather than later, to target the logistical structure of the armed services for substantial reductions in order to achieve desired savings. Since nearly two-thirds of the military (retail) logistical structure of the Army is in the reserve forces, and the Air Force and Navy logistical military manpower is small in relation to the balance of manpower in those services, the most reasonable target for additional reductions is in the civilian sector of DOD. It does not require a wide stretch of the imagination to visualize Congress requiring the Department of Defense to consolidate service depot maintenance functions after forcing privatization of the maximum possible amount of depot level maintenance workload. It is unrealistic to believe that every single piece of equipment in the defense inventory could be turned over to private industry for cradle-to-grave maintenance. There will undoubtedly be some commodities so low in volume or so economically unprofitable as to fail to attract private interest. These commodities would remain in the defense depot maintenance system by default.(Note 75)
The requirement for privatization could easily result in original equipment manufacturers (OEMs) conducting all repairs above intermediate maintenance level on ground and electronic/missile equipment, rotary aircraft, fixed-wing aircraft and naval vessels. However, since the acquisition process generally requires an open bidding process, it is possible for these contracts to go to the low bidder who may not be the OEM (best value contract award). Whether the contracted workload stays in the previous depot area or moves to the contractor location cannot be predicted. However, if the preponderance of workload is moved to the private sector, the resulting reductions to the current depot-maintenance structure would be substantial.
Four questions were asked in the first section:
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Last Update: October1, 2002