ARTICLE

July 2003

Military Depots: Politics Undermines Cooperation

Public-private partnering key to the long-term health of maintenance and repair depots

by Peter M. Steffes

One of the more contentious issues that the Defense Department and Congress regularly debate is the operation of maintenance and repair depots.

With just a few exceptions, the discussions in recent years have remained the same. Congress has legislatively declared its position on the need to retain an “organic” source of maintenance and repair nearly every year for the past 15 years.

The Department of Defense does not necessarily disagree with this legislative mandate, but has argued for a number of years that it needs more flexibility to manage its repair and maintenance requirements. Disagreements generally have centered on just how these facilities should be managed.

To better understand the issues involved, it may be useful to review some history. After World War II and the Korean wars, the depot maintenance capabilities of the Department of Defense expanded dramatically. At the height of the Cold War, the depots had the capacity to surge, if needed, to a three shift, 24 hour a day operation. Although never required to surge, the United States paid for this excess capacity as a justifiable cost of preparedness.

At the end of the Cold War, with a significant reduction in force structure and new weapon systems orders, the U.S. defense industry also found itself with a significant unused plant capacity.

As the inevitable downsizing of excess capacity began, Congress began to be concerned that those efforts could go too far and, ultimately, could undermine U.S. military readiness and capabilities. This was not a collective concern, but rather, a priority of several members of Congress who had defense depots in their districts. They formed what is known today as the Congressional Depot Caucus.

As a result of the last three Base Realignment and Closure actions, the Defense Department has closed 97 major military facilities and over 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, two Marine Corps maintenance depots, two manufacturing arsenals, two government-owned and operated ammunition manufacturing plants and approximately five other various repair facilities—with a combined civilian workforce of approximately 77,000 employees, a 56 percent reduction from 163,000 in 1987. The 2003 Defense Department budget for depot activities was $9.1 billion.

Despite the cutbacks, there still remains excess capacity in the depots. Industry, meanwhile, has closed many facilities and lost much of its highly trained and skilled workforce.

One of the most effective laws that Congress has enacted to ensure that the Defense Department retains sufficient depot maintenance capabilities is the “50-50 rule”. It requires that no more the 50 percent of the depot maintenance funds provided to a military service be expended for work done by the private sector. The Pentagon has argued for many years that the 50-50 rule is a hindrance to making best value decisions and taking advantage of industry’s current capabilities.

In recent years, the military services have had difficulty complying with the 50-50 rule and have sought waivers from Congress based on national security needs. From the congressional point of view, the 50-50 rule is an “insurance policy” that protects the depots.

Another law requires that, within four years of initial operational capability of a new weapon system, the Defense Department be able to provide depot maintenance for that system. This does not necessarily mean that every new weapon system will be maintained in government depots. The legislation requires only that the repair capability be established. For example, when the C-17 aircraft became operational, the Air Force stated that it already had the capability to repair large transport aircraft and therefore, no C-17 specific depot maintenance was required. Members of Congress have consistently argued that if new weapon systems are not maintained by organic depots, eventually they will be forced to close.

Design improvements in weapon systems are also working against the organic depots. In the case of the C-17, it was designed so it would require much less maintenance than the C-141 aircraft that it was replacing. The C-17 engines are a commercial derivative, so there was no need to establish an organic repair depot.

Another reality that may be working against the depots is that, under the terms in many new weapons systems contracts, the manufacturer becomes the maintenance provider. The Defense Department believes that arrangement saves money—it does not have to pay the manufacturer for the technical data packages required for future organic maintenance nor fund depots to re-tool and re-train their workforce. Congress continues to be concerned that these arrangements will cause the organic depots to die on the vine.”

Over the years, some members of Congress have come to believe that industry wants to take over all depot maintenance work. This is an unrealistic view, as industry has little capability to maintain many of the current legacy systems.

The perceived rivalry between government depots and private contractors has had somewhat of a chilling effect on what appears to be the most sensible course of action—partnering.

Recently, Congress passed several provisions designed to encourage partnering. These provisions allow the private sector to lease unneeded excess facilities and equipment to work on government-related projects or to work with government employees on military equipment repair projects.

Partnering could help ensure the long-term viability of depot maintenance capabilities. It not only takes advantage (and pays for) excess capacity at government facilities, but also helps the government workforce retain and learn new technology skills. This concept is attractive to industry, because it lowers the cost of establishing new facilities.

It is unclear what the future holds. In light of an inconsistent Defense Department depot maintenance road map, yearly depot modernization under-funding and several attempts by the Pentagon to dramatically change depot policy, Congress has enacted protectionist laws that usually are reactionary, based on the latest Defense Department reform proposal.

Unfortunately, these actions have led many members of Congress to conclude that the Department of Defense is not committed to retaining its depot capabilities. The fact that industry cannot take over all the depot maintenance requirements appears at times to be lost in the contentious rhetoric.

A fresh approach is needed, one that addresses the concerns of the Defense Department, Congress and industry, and ensures the long-term health of military depots.

Peter M. Steffes is vice president of government policy at the National Defense Industrial Association.

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