LOGISTICS AND MAINTENANCE

Should Defense Overhead Reduction Plans Consider Maintenance Depots?

10/1/2010
By Peter M. Steffes
As the Defense Department studies ways to squeeze more efficiency from the military’s overhead accounts, experts have suggested the maintenance and repair depots could be an obvious target. Observers agree that current depot-level maintenance and repair policies need a major overhaul. However, current legislation and congressional protections will be a major impediment to any changes in the status quo.  

One of the more contentious issues between the Defense Department and Congress each year concerns the current and long-term operation of maintenance and repair depots. With a few exceptions, the basic issues have not changed in 15 years. Congress has consistently declared its position on the need to retain an “organic” source of maintenance and repair. Section 2464 of Title 10, U.S. Code states: “It is essential for the national defense that the Department of Defense maintain a core logistics capability that is government-owned and government-operated to ensure a ready and controlled source of technical competence and resources necessary to ensure effective and timely response to a mobilization, national defense contingency situations, and other emergency requirements.”  

The Defense Department has argued that it must have the flexibility to manage its repair and maintenance requirements efficiently. The disagreements with Congress over the years have been centered on just how these facilities should be managed.

To better understand this issue, it may be useful to review the history. From World War II to the Korean War, military depot maintenance capabilities expanded dramatically. At the height of the Cold War, industrial capacity had surged to a three-shift, 24-hour-a-day operation. Although never required to surge, the Pentagon paid for this excess capacity as a justifiable cost of preparedness. With the end of the Cold War, the need to retain this excess capacity and its inherent costs disappeared. The U.S. defense industry found itself with a significant unused plant capacity.

As the downsizing began, Congress began to be concerned that depot capacity reductions would go too far. This was not a collective concern, but rather, a concern of individual members who strongly believed that the most important national defense maintenance and repair depot was in their districts, a position that the voters in each district expected. The members who were most concerned with this issue formed what is known today as the Congressional Depot Caucus.

Past Base Realignment and Closure actions have shuttered more than 100 major military facilities and 200 smaller installations. Included in these closings were six aviation depots, two shipyards and several combat vehicle maintenance facilities. Today, the government’s industrial capability includes seven aviation depots, (three Air Force, three Navy/Marine Corps, one Army), four Navy shipyards, four Army combat systems depots and two Marine Corps maintenance depots.

As a result of Afghanistan and Iraq operations and the requirement to reset equipment, maintenance depots are near capacity. But when these conditions diminish, and older legacy systems are retired, there will once again be significant unneeded capacity. The cost to retain this overcapacity should be a primary concern for the Defense Department. Industry, faced with similar realities, does not have the ability to continue to pay for unused excess capacity and has been forced to close many facilities, which has resulted in the loss of skilled workers.

One of the more controversial laws that Congress has enacted is commonly known as the “50-50 Rule.” This law (Section 2466 of Title 10) states that no more than 50 percent of depot maintenance funds provided to a military service or defense agency can be expended for private sector work.

Pentagon officials have said the 50-50 rule is a significant hindrance to the cost-effective management of its maintenance and repair requirements. They contend that the limitations imposed by the 50-50 rule preclude them from making best-value decisions and taking advantage of industry’s current capabilities, such as performance-based logistics. Today, the military services are having difficulty complying with the 50-50 rule and have begun moving some maintenance and repair workloads, currently accomplished in the private sector, into military depots. These actions are being taken with little regard for cost and military readiness. Moving established maintenance and repair workloads from the private sector to the public depots will be costly. The government will have to pay for the technical data packages owned by the original equipment manufacturers, and the plan also risks slowing down the delivery of needed combat equipment.

From a congressional point of view, the 50-50 rule is an “insurance policy” against the Defense Department closing the remaining depots. 

Section 2464 of Title 10 also requires that within four years of initial operational capability of a new weapon system, the Defense Department must have the capability to provide depot maintenance for it. This does not necessarily mean that every new weapon system will be maintained in government depots because the legislation requires only that the repair capability be established. For example, when the C-17 aircraft became operational, the Air Force stated it had the capability to repair large transport aircraft.  

One reality that may mean doom for military maintenance depots is that design improvements in modern weapon systems have changed the traditional concept of military depots. Using the C-17 again as a case in point, this new aircraft was designed from the beginning to not require long periods of heavy maintenance, such as the C-141 aircraft that it was replacing. The C-17 engines are a commercial derivative and establishing an organic capability to repair these engines was therefore not required.

Also, many new weapon systems are being purchased from manufacturers with pre-set agreements to provide long term/life-cycle maintenance after delivery. From the Pentagon’s point of view, these arrangements reduce the cost of the system. It does not have to pay the manufacturer for the technical data packages required for future organic maintenance, nor does it have to pay for its depots to retool and retrain workers. Without changes in current maintenance and repair management, there is a concern that the organic depots will “die on the vine.”

The perception within some congressional circles is that industry has been out to take over all depot maintenance work. Not only is this belief unsupported by facts, but it is something that industry could not accomplish, even if it wanted to. For many of the legacy systems that have been repaired in organic depots for years, without significant investments to retool and retrain the work force, industry would not have any interest in this work.

So where do we go from here? Currently, there is little to no chance that Congress will change any part of the 50-50 rule. Industry’s point about not being able to take over much if any of the government’s current depot maintenance workloads appears at times to be lost in the overall rhetoric on this contentious issue.

Congress may still have an opportunity to seriously address this problem. Section 322 of the National Defense Act for Fiscal Year 2009 requires the secretary of defense to submit to Congress an independent, quantitative assessment of the organic capability required to provide depot-level maintenance at the end of the current wars. The study will examine all active and reserve capability in the public and private sectors involved in the life-cycle sustainment of weapon systems. It also requires an examination of the Defense Department’s relevant guidance, regulations and applicable federal laws. Recommendations made by the study should include a requirement for an enduring organic depot capability, appropriate changes to law and incentives to achieve efficiency and cost-effectiveness.  It also is to include a proposed roadmap to meet materiel readiness goals of availability, reliability, total ownership cost and repair cycle time.

The Section 322 study is due by the end of this year and is the first comprehensive independent look at these issues. It will give Congress the opportunity to hold a series of hearings on the subject.  

From industry’s point of view, a significant increase in public-private partnerships is the only viable way to satisfy everyone’s needs. Public-private teaming arrangements offer the best option to ensure weapon systems are maintained effectively and affordably.

Peter M. Steffes is vice president for government policy at the National Defense Industrial Association. He can be reached at psteffes@ndia.org.


Topics: Defense Department, DOD Budget

Comments (0)

Retype the CAPTCHA code from the image
Change the CAPTCHA codeSpeak the CAPTCHA code
 
Please enter the text displayed in the image.