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Military Bases: Opportunities for Savings in Installation Support Costs Are Being Missed (Letter Report, 04/23/96, GAO/NSIAD-96-108).

--------------------------- Indexing Terms -----------------------------

 REPORTNUM:  NSIAD-96-108
     TITLE:  Military Bases: Opportunities for Savings in Installation 
             Support Costs Are Being Missed
      DATE:  04/23/96
   SUBJECT:  Military bases
             Base realignments
             Budget cuts
             Defense cost control
             Privatization
             Interagency relations
             Military downsizing
             Defense contracts
             Defense economic analysis
IDENTIFIER:  DOD Regional Interservice Support Program
             
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Cover
================================================================ COVER


Report to Congressional Requesters

April 1996

MILITARY BASES - OPPORTUNITIES FOR
SAVINGS IN INSTALLATION SUPPORT
COSTS ARE BEING MISSED

GAO/NSIAD-96-108

Military Bases

(709160)


Abbreviations
=============================================================== ABBREV

  AMC - Air Mobility Command
  DOD - Department of Defense
  FORSCOM - Forces Command
  JIRSG - Joint Interservice Resource Study Group/Joint Interservice
     Regional Support Group
  O&M - operations and maintenance
  OMB - Office of Management and Budget
  OSD - Office of the Secretary of Defense
  SACC - San Antonio Contracting Center
  SARPMA - San Antonio Real Property Maintenance Agency
  USARC - U.S.  Army Reserve Command

Letter
=============================================================== LETTER


B-271217

April 23, 1996

The Honorable Duncan Hunter
The Honorable James Saxton
House of Representatives

Your March 14, 1995, letter requested that we explore whether support
costs for military bases located in close proximity to one another
can be reduced.  This report addresses (1) the potential for cost
savings through increased reliance of one service on another for base
support services or functions, (2) the Department of Defense's (DOD)
past and current efforts to promote interservicing,\1 and (3)
impediments to interservicing identified by DOD and service
officials. 


--------------------
\1 While interservicing refers to reliance of one service on another
for support, intraservicing refers to greater reliance on
consolidated support within a service.  This report used the term
interservicing type arrangements to refer collectively to inter and
intraservicing. 


   BACKGROUND
------------------------------------------------------------ Letter :1

Even after several years of defense downsizing, DOD operates hundreds
of major military bases and many smaller facilities in the United
States.  These bases can range in size from less than 10 acres to
several hundred thousand acres.  There are bases, such as Fort Bragg
and Pope Air Force Base located in North Carolina, adjacent to each
other; and there are bases, while not adjacent, that are located
within a relatively short distance from each other.  Base supporting
services vary and can include property maintenance, logistics,
transportation and equipment maintenance, personnel and professional
support, and services to individuals, such as food, housing,
recreation, or education.  Appendix I provides a more detailed list
of common base support functions. 

Our analysis of the services' operations and maintenance (O&M)
budgets indicate that a significant portion of these budgets are
spent on maintaining facilities and delivering services to
installations.\2 DOD has long been concerned about and has sought
ways to reduce the cost of military base support, and DOD believes
that greater economies and savings could be achieved by consolidating
and eliminating duplicate support services for military bases located
close to one another, or where similar functions are performed at
multiple locations.  Over the years, DOD's concerns have led to some
large consolidation efforts, such as in the areas of logistics and
commissary services, as well as more recent consolidations involving
printing and finance. 

DOD has also supported efforts to foster greater cooperation and
interservicing among the services on regional and local levels. 
However, two of the most notable interservicing type efforts
initiated in the 1970s and 1980s were not successful, for reasons
that appeared to have more to do with how they were implemented than
with the merits of the concept.  They involved consolidating real
property management and contracting activities at Air Force and Army
bases in the San Antonio, Texas, area and consolidating management of
housing for each of the services in Oahu, Hawaii.  (See app.  II for
additional information regarding these two consolidation efforts and
circumstances contributing to their lack of success.) Meanwhile, on
an installation and regional basis, the services have continued
varying efforts, on a more limited basis, to develop interservice
support agreements where possible. 

Downsizing and reduced defense budgets in recent years are now
causing the services to take a renewed interest in trying to achieve
greater economies, efficiencies, and cost savings in base operations. 
This includes efforts to more vigorously examine the potential for
greater inter and intraservicing involving base support, as well as
partnership arrangements between military bases and local governments
and communities.\3 At the same time, DOD is advocating greater
reliance on outsourcing (contracting out) base support functions.\4


--------------------
\2 Based on funding associated with base operating program elements
identified in the Defense Finance and Accounting Service's Financial
Management Manual and numbers provided by the services' Office of
Financial Management, we calculated that about 30 and 32 percent of
the Air Force's and the Army's fiscal year 1995 O&M budgets were
devoted to base support activities; the percentage is smaller in the
Navy (17 percent), representing support for shore-based facilities
versus ships.  Total O&M budgets for the three services for fiscal
year 1995 were $16 billion. 

\3 These efforts are framed around the services continuing to control
their respective bases.  They do not include the concept of a single
service being responsible for overall base support for collocated
bases involving two or more services--a matter of interest to the
requesters. 

\4 We found the terms contracting out, outsourcing, and privatization
often used interchangeably.  However, the administration's
Reinventing Government Initiative, also known as the National
Performance Review differentiates between outsourcing and
privatization.  It describes outsourcing as reflecting a decision by
government to remain fully responsible for the provision of all
services and management decisions even though the private sector will
perform the service.  It says that privatization implies the
government is currently providing the service, but no longer sees the
need to be in direct control of its provision, operations, or
maintenance. 


   RESULTS IN BRIEF
------------------------------------------------------------ Letter :2

DOD has long recognized the potential for savings in base support
costs through interservicing, but the extent of both potential and
actual savings are not easily calculated.  Moreover, the services
have not taken sufficient advantage of potential opportunities to
achieve significant savings in base operating support costs through
greater reliance on interservicing type arrangements.  However, the
services recently have been considering a broad array of initiatives,
including interservicing, to achieve greater savings and economies in
support costs.  The Office of the Secretary of Defense's (OSD) recent
program initiative on contracting out base support operations could
have the most potential for changing the services' approach to
obtaining base operations support.  At the same time, the potential
exists for contracting out to be pursued without first maximizing
efficiencies through increased interservicing.  Consolidations
through interservicing agreements reached in advance of contracting
out could enhance the potential for greater efficiencies and cost
savings through contracting out. 

Despite the recognized potential for savings from interservicing,
differing service traditions and cultures, and concern over losing
direct control of support assets, often cause commanders to resist
interservicing.  Other factors, such as differences in service
standards and resource constraints, also affect commanders'
willingness to embrace interservicing.  While such impediments have
affected interservicing of base support functions on a limited scale,
comments by DOD and service officials suggest they could be even
greater impediments to interservicing on a larger scale, such as
having one base commander responsible for providing all base support
to collocated bases of two or more services. 


   POTENTIAL SAVINGS THROUGH
   INTERSERVICING ARE POSSIBLE BUT
   NOT WELL DOCUMENTED
------------------------------------------------------------ Letter :3

Numerous studies completed by DOD and the services have supported the
potential to save money in personnel, facilities, and operating costs
by consolidating various base support functions through
interservicing.  However, the amount of these savings are not clear
because some consolidations on which some projected savings were
based were either not implemented, not implemented as planned, or
terminated.  These include the San Antonio Real Property Maintenance
Agency and Contracting Center and the Oahu, Hawaii, housing programs. 
Both programs, operational for several years, were disestablished
after encountering various problems and concerns on the part of
affected military commanders about their effectiveness. 

DOD and the services have found it manpower intensive and often
difficult to track savings from interservicing agreements and
difficult to differentiate savings from cost avoidances;
consequently, DOD does not devote significant efforts to tracking
savings from projects that are implemented.  However, DOD officials
provided us with some ad hoc examples of multimillion dollar savings
spread over varying periods of years involving such support functions
as contracting, printing, training, recycling, teleconferencing,
personnel services, and others.  For example, service officials in
Charleston, South Carolina, reported a 1-year cost avoidance of over
$1 million in travel and per diem costs through shared use of video
teleconferencing capabilities.  In another example, service officials
in Colorado Springs, Colorado, reported that a consolidated regional
natural gas contract resulted in cost savings of $9.5 million over a
3-year period. 

In addition, potential savings today are clouded because the services
are increasingly looking for ways to consolidate and streamline
operations because of budget reductions.  Service officials stated
that they were reluctant to identify further savings as part of new
studies, fearing additional reductions would be taken on top of the
cuts that have already been made. 


   EFFORTS TO FACILITATE
   INTERSERVICING HAVE OFTEN
   PRODUCED LIMITED RESULTS
------------------------------------------------------------ Letter :4

In 1972, DOD established the Defense Regional Interservice Support
program as its principal program to help identify and eliminate
duplicative base support services for activities in close proximity
to each other.  The regulation governing the program, DOD Instruction
4000.19, required DOD activities to first consider using other DOD
and federal activity capabilities unless a commercial source or
developing an in-house capability constituted a better value.  DOD
reinforced its emphasis on interservicing and support consolidations
in 1978 by establishing Joint Interservice Resource Study Groups
(JIRSG).  These regional groups were expected to evaluate the
feasibility of savings through support service consolidations in
geographic areas where there were several relatively large military
installations within a 50-mile radius. 

DOD and service officials told us that between 1978 and 1992, JIRSGs
conducted a variety of studies that identified potential savings and
efficiencies through interservicing.  However, we were told that many
of these studies were ignored because no one, including local base
commanders, really wanted to implement them.\5 In April 1992, DOD
revised the JIRSG program so that its focus shifted from conducting
regional studies to providing interservice support.  The JIRSG
program ceased being mandatory and was no longer required to review
defined support service categories as before.  As a result of these
changes, JIRSGs are now tasked with facilitating communications among
DOD and other federal activities, sharing innovative ideas, and
seeking opportunities for improving mission quality, efficiency, and
effectiveness through the use of support agreements and other
cooperative efforts.\6 Although participation in the JIRSG program
remains voluntary, OSD officials continue to emphasize the program
through such means as conducting national workshops for JIRSG
representatives and disseminating JIRSG newsletters, including
information on successful agreements and partnerships. 

As of November 1995, there were 55 JIRSG regions throughout the
United States, Europe, the Pacific, and Panama.  We contacted JIRSG
officials from 21 of these regions and found that about 29 percent of
these regions had been inactive for the past several years, and many
program offices did not have personnel in key positions.  We were
told that the existence, effectiveness, and success of a JIRSG
program was often dependent on the interest of both the local
commander and the JIRSG program manager, if there was one.  Further,
we were told that command interest in the programs ebbed and flowed
with changes in commanders and their differing perspectives on the
desirability of the program. 

Despite fluctuations in program emphasis, we found a range of
interservicing agreements in place at the seven bases we visited. 
They included agreements pertaining to such support areas as morale,
welfare, and recreation activities; laundry services; and utilities. 
Most could be characterized as limited arrangements, pertaining to
portions of functions, such as a consolidated contract, rather than
large-scale reliance of one military base on another for support,
such as for overall contract administration.  While many agreements
were in place, OSD and service officials stated that many
interservicing opportunities remain.  We saw this at various
collocated bases we visited.  For example, both Fort Lewis and
McChord Air Force Base maintain separate airfield operations
facilities, and airfield operations was an area cited by Fort Lewis
personnel as having the potential for one facility to serve both
bases.  Likewise, both Fort Bragg and Pope Air Force Base maintained
separate contract administration, supply and engineering, and other
support areas, that an Army official suggested had the potential for
one service to provide to both bases.  Appendix III provides a more
detailed list of base support functions being performed at bases we
visited where base personnel cited at least portions of those
functions having the potential for consolidation and interservicing. 


--------------------
\5 We were unable to gauge the range of potential savings expected
from these studies since they were not retained on a centralized
basis. 

\6 Thus, after April 1992, JIRSG became an acronym for Joint
Interservice Regional Support Group. 


   RECENT INITIATIVES TO REDUCE
   BASE SUPPORT COSTS
------------------------------------------------------------ Letter :5

Defense downsizing and resource constraints in recent years have
reinforced the need to look for greater efficiencies and savings in
base support operations.  A major initiative now being spearheaded by
OSD involves examining the potential for contracting out base support
services.  Also, underway under service auspices, and initiated prior
to OSD's current emphasis on contracting out, are a variety of
initiatives ranging from a greater emphasis on interservicing to
broad regionalization of selected support functions, to privatization
of some functions, and contracting out.  These service initiatives go
beyond traditional interservicing with other DOD and federal
agencies, including forming partnerships with local governments and
communities.  The relationship of these efforts to OSD's current
contracting out initiative raises questions as to whether DOD's
strategy and approaches to reducing costs in these areas are likely
to achieve the maximum possible savings. 


      OSD
---------------------------------------------------------- Letter :5.1

Although DOD has historically placed some emphasis on contracting
out, that emphasis today is greater than ever before due to the
administration's Reinventing Government Initiative, otherwise known
as the National Performance Review, and to recommendations of two
recent DOD study groups--the May 1995 Roles and Missions study, and
the October 1995 Defense Science Board study on Quality of Life. 
Further, a provision in the fiscal year 1996 Defense authorization
legislation encourages DOD to look to the private sector to meet its
support needs.  The 1993 report of the National Performance Review
noted that every federal agency needs support services.  The report
advocated greater consideration of options in obtaining those
services and said that no agency should provide support services
in-house unless those services could compete with those of other
agencies and private companies.  That report has resulted in a
greater emphasis being given to contracting out and privatizing
support services. 

The 1995 report of the Chairman of the Joint Chiefs of Staff dealing
with Roles and Missions recommended that essentially all commercial
activities in DOD be outsourced and that all new needs be channeled
to the private sector from the beginning.  That recommendation
followed the study group's review of the full spectrum of central
support activities, including installations and facilities. 
Activities that were not dependent on specialized, defense-unique
equipment such as base security, facilities maintenance, and
installation management services, were designated as prime candidates
for early outsourcing.  According to the roles and missions report,
most of these nonspecialized or defense-unique services have little
direct association with combat forces and can be moved to
private-sector markets where competition ensures adequate cost
control.  The Roles and Missions' report also stated that the many
routine, nonmilitary infrastructure functions associated with
managing a military base were better left to the private sector to
manage. 

The 1995 Defense Science Board Task Force on the Quality of Life was
tasked with examining quality of life issues as they apply to all
military personnel, their families and civilian employees, and
recommending improvements that could be quickly implemented.  The
task force addressed housing, personnel tempo, and community and
family services.  In the area of housing, the task force recommended
that DOD achieve an effective housing delivery system over a 3-year
period by (1) using private venture capital initiatives to construct
new and revitalize existing housing; (2) reviewing and revising
housing policies, laws, standards, criteria and regulations and find
ways to improve ineffective and inefficient funding practices; and
(3) creating a nonprofit government corporation that could act as an
umbrella organization with the actual maintenance and operations
being executed through local private industry contracts.  DOD is
currently examining how it can implement these recommendations and is
working with the services to identify obstacles to their
implementation. 

Section 357 of the National Defense Authorization Act for Fiscal Year
1996 (P.L.  104-106) encourages reliance on private-sector sources
for commercial products or services.  It requires that not later than
April 15, 1996, ".  .  .  the Secretary shall transmit to the
congressional defense committees a report on opportunities for
increased use of private-sector sources to provide commercial
products and services to the Department."

In August 1995, DOD established a working group to determine which
military and civilian positions associated with base support
operations should be studied by each service for possible
outsourcing.  The services are studying the potential to outsource
work related to 60,000 full-time equivalent positions, most involving
DOD civilian personnel.  The services exempted another 323,000
positions from outsourcing consideration at this time because they
were considered as directly supporting the services' warfighting
missions.  However, one working group official told us that probably
half of these exempt positions could be studied for outsourcing. 
This official, however, acknowledged that with the 60,000 positions
selected for initial study, the military services have more than
enough work to review at the present time.  According to this
official, no completion date for this effort has been determined. 

The individual service initiatives that are outside the current OSD
outsourcing initiative are described below. 


      ARMY
---------------------------------------------------------- Letter :5.2

Among the military services, the Army appears to have been the most
aggressive in pursuing interservicing, partnering, and other efforts
to reduce base operating costs.  In fiscal year 1994, the Army
created a departmental level installation management office to
provide central oversight of installation support operations.  The
Army's installation management office serves as a focal point for the
many initiatives occurring within the Army, as well as, write policy
and integrate doctrine pertaining to the planning, programming,
execution, and operation of Army installations.  The installation
management office is encouraging Army commands to undertake a broad
range of initiatives that work toward operating more efficiently. 
For example, one initiative suggests that installations should become
less self-sufficient by encouraging more regionalizing,
consolidating, and contracting out of base support services and
facilities. 

The Army's major commands that operate bases in the United States
have the lead in examining options for achieving greater efficiencies
in base operations.  For example, Forces Command (FORSCOM) has been
examining a number of initiatives in the base operations area.  One
of these initiatives is known as Installation XXI.  Under this
initiative, FORSCOM has tasked its three garrison commanders at I,
III, and XVIII Airborne Corps, and the U.S.  Army Reserve Command
(USARC) with exploring options for more efficient base operations in
the future.  The commander of I Corps was tasked with reviewing the
possibility of multiservice base operations; the commander of III
Corps was tasked with exploring development of "centers of
excellence" for various base functions so that one base would become
expert in and assume responsibility for certain functions such as
contract management for multiple bases; the commander of the XVIIIth
Airborne Corps was tasked with examining community partnerships; and
the commander of USARC was tasked with examining options for reserve
component support apart from reliance on active duty bases. 

FORSCOM's goal is to test and evaluate these various initiatives and
implement them beginning October 1, 1996.  However, some initiatives
are being tested and implemented at the same time throughout FORSCOM. 
For example, an initiative to test the effect of consolidating
warehouses at one location was found to be successful, and is now
being expanded.  Another effort being implemented involves having a
regional contract administration office for contracts over $500,000. 
In this and other similar situations, we found service officials
reluctant to identify specific cost savings from these projects. 
They indicated that many of these efforts were necessitated by
previous budget reductions, and they were concerned that if savings
were identified their budgets would be further reduced.  We recognize
this as a real concern to the extent budget reductions have been made
in anticipation of future savings that are not achieved--a concern
that was recently publicly acknowledged by the Secretary of Defense
regarding some previous Defense Management Review studies within DOD. 
However, our work indicates that DOD has not been effective in
tracking savings for initiatives such as the Defense Management
Reviews.\7 Consequently, case-by-case analyses would be needed to
determine the validity of these concerns. 

In addition, FORSCOM's commander has been especially interested in
the interservicing concept, particularly between its I Corps
installation at Fort Lewis, Washington, and the nearby McChord Air
Force Base.  To facilitate this effort, the Commanding General of
FORSCOM wrote a letter to his counterpart at the Air Force Air
Mobility Command (AMC) on August 16, 1995, to get his support to
allow the commanders at Fort Lewis and McChord Air Force Base to
study the feasibility of consolidating base support functions that
were currently being performed by both installations.  He asked for
AMC's support so that both commanders could proceed beyond their
informal discussions of identifying potential areas, and overcome the
historic barriers to consolidation or partnering.  The AMC commander
responded on August 25, 1995, agreeing that feasibility and
cost-effectiveness of joint efforts might prove worthwhile, and
therefore gave the McChord wing commander his permission to study
joint actions.  However, he also made the following statement: 

     "Air Force philosophy has always been that our Commanders must
     have the tools both to accomplish their mission and take care of
     their people.  Every time in the past that we have deviated from
     this principle, especially in our rush to find efficiencies in
     base support operations, the results have been less than
     satisfactory.  That said, if cost savings or service
     improvements can be realized without infringing on these two
     basic Command responsibilities, then these opportunities should
     be explored."

As of February 1996, FORSCOM officials told us that Fort Lewis and
McChord officials had not reached a consensus on support issues and
that discussions had been discontinued at the installation level. 

In another case, we were told by Army officials that further
discussions beyond identifying potential base support operations at
Fort Dix, McGuire Air Force Base, and Lakehurst Naval Air Station had
not occurred.  An Air Force official at Pope Air Force Base told us
that they are examining cooperative support efforts with Fort Bragg
in the areas of recycling, medical training, and parachute rigging. 
FORSCOM officials told us that interservicing will be further
explored more broadly under another Army-wide initiative that is
being developed by FORSCOM. 


--------------------
\7 See Defense Management Review (GAO/NSIAD-94-17R, Oct.  7, 1993). 


      NAVY
---------------------------------------------------------- Letter :5.3

The Navy, with support from the Chief of Naval Operations, is also
emphasizing the need to reduce support costs.  In our review of Navy
activities, we found that the Navy is currently emphasizing
regionalization and consolidation of support functions involving its
own facilities more than interservicing.\8 Officials stated this is
because their installations, for the most part, are not closely
located to other service installations.  However, Navy officials told
us that in places where Navy activities are closely located to other
service installations, they will cooperate with the other services
where it makes sense. 

The Navy's regionalization efforts are being conducted by its
headquarters level shore installation management office, with the
support of the Chief of Naval Operations.  The Navy, like the Army,
created this office in fiscal year 1994 to oversee the operations of
its installations.  This office is conducting two pilot studies to
reduce Navy-wide infrastructure by regionalizing base support
functions under a one commander concept in place of the multiple
commanders now in place.  These two pilot studies are being conducted
in Jacksonville, Florida, and San Diego, California.  The
Jacksonville study began in September 1995, and the results are
expected to be reported out to the Chief of Naval Operations sometime
in April 1996.  The San Diego study began in February 1996, and
preliminary results are expected by mid-May 1996. 

The Navy estimates that $30 million a year could be saved through
regionalization of support functions of Navy bases in the
Jacksonville area.  Preliminary study results from Jacksonville
suggest the potential for partial to full regionalization involving
security, fire prevention, fuel services, procurement, supply and
data processing, resource management, education, personnel services,
environmental management, and meteorology functions.  Navy officials
told us that because the Jacksonville effort is the first to be
completed, its results and lessons learned will benefit their San
Diego effort, and additional efforts that the Navy plans to pursue,
including Pearl Harbor, Hawaii; Puget Sound, Washington; and Norfolk,
Virginia. 


--------------------
\8 The Navy's current efforts complement previously successful
regionalization efforts within the Navy such as their Public Works
Centers, which perform real property maintenance and repair, utility
management, transportation management, service contracting, and some
environmental services on a regional basis in fleet concentration
areas. 


      AIR FORCE
---------------------------------------------------------- Letter :5.4

As previously mentioned, we found, during our visits to selected
bases, that interservicing arrangements did exist between the Air
Force and the other services.  At the same time, we found less
emphasis within the Air Force at the headquarters and major command
level than in the other services in terms of emphasizing
regionalization or interservicing of base support functions. 
However, we did identify some recent efforts at the Air Force
headquarters level that could strengthen program emphasis in the
future.  For example, in December 1995, all Air Force major commands
were asked to gather information regarding the level of savings that
had been achieved through interservicing over the past 2 years; this
information is expected to be accumulated by April 1996.  A
headquarters official expressed hope that such information could be
used as a catalyst to expand interservicing efforts.  Also, the Air
Force has a computerized support agreement system that previously was
used to create interservice agreements, but which has recently been
upgraded to provide more of a management information capability. 
This system is being made available to the other military services. 


   VIEWS ON IMPEDIMENTS TO BASE
   SUPPORT CONSOLIDATIONS AND
   INTERSERVICING
------------------------------------------------------------ Letter :6

While interservicing of some common base support functions has
occurred, our discussions with DOD and service officials at all
levels pointed to a variety of problems and impediments that they
believed historically have limited base support consolidation and
interservicing efforts and can serve as impediments to such efforts
today.  These views cover a wide range of issues each requiring
individual analyses to confirm the extent of their validity.  Such an
analysis was beyond the scope of this review.  However, where we have
prior work relating to an issue, it is presented along with the views
of DOD and service officials.  Many service officials questioned the
effectiveness of large-scale DOD consolidation efforts in recent
years in such areas as finance and accounting and printing.  Many
personnel voiced concern that these functions, after consolidation,
appeared to be less responsive, less timely, and perhaps more costly
than when each of the services were separately responsible for these
functions.\9 These views, regardless of their validity, affect
consideration of related initiatives.  Also, many personnel were
familiar with the failed San Antonio real property maintenance and
contracting programs and the consolidated housing program in Hawaii
and saw these as additional reasons for caution and skepticism. 

Another broad concern that frequently surfaced in our discussions
involving base support functions was resistance to change and
commanders' concerns about losing direct control over their support
assets, and their inability to influence servicing priorities that
they deem important to supporting their military missions.  We were
told that if commanders perceive a problem, they want to have direct
control over the activity rather than have to go through another
service or activity.  Having one service provide large-scale base
support to another service also raised concern about the receiving
base losing its identity and appearing to be subsumed by the base
providing support.  We believe this suggests the need for stronger
OSD leadership to overcome such concerns where they related to
parochial interests, rather than valid mission concerns. 

Differences in traditions, cultures, practices, and standards among
the services also were often cited as inhibiting greater emphasis on
interservicing arrangements.  For example, various Air Force
personnel pointed out that their base support personnel are
organizationally aligned with an installation's combat forces and are
considered mission deployable.  On the other hand, Army base support
personnel are typically not organizationally aligned with their
combat forces and are not expected to deploy with them.  Also, the
Air Force, in contrast with the Army, depends more on military than
civilian personnel in meeting its base support requirements.  Another
example involves differences in the services' accounting systems,
including lack of standards in unit costing that can make it
difficult to reach agreement on costing of services.  While these do
represent real differences between the services, we do not believe
that they are insurmountable barriers to increased cooperation and
interservicing. 

Base housing was often cited as an area having the potential for
interservicing.  However, within the services, we found widely held
views about differences in quality of on-base housing provided to
service personnel among the services, with the Air Force being known
for providing a higher standard of housing than the other services. 
More generally, the perception often existed that the Air Force had a
higher quality of life standard and was willing or able to devote
more resources to maintaining that standard than the other services. 
These differences were seen as having significant implications for
interservicing arrangements and were factors in the failed Hawaii
housing consolidation effort.  While there are numerous examples of
one service's housing being used by the other, there are other
examples of one service sometimes not wanting to use another
service's housing because of its condition.  Further, for one service
to be fully dependent on another service for housing in a given area
could raise the specter of one service having to devote more money to
housing maintenance than it otherwise would or another service
perceiving itself having to settle for a lesser standard of housing
than it would otherwise expect.  Some service officials suggested
that overcoming these impediments may require OSD operational control
and funding.  As already indicated, DOD is currently examining
alternatives for providing military housing. 

Resource constraints in today's downsizing environment were also
cited as making commanders reluctant to pursue interservicing
arrangements, particularly where they would be assuming additional
responsibilities to provide services to another activity or service. 
Growing budget constraints were seen as complicating improvements in
the backlog of real property maintenance in the base operations area
and also adversely affecting the potential for interservicing.  Many
service officials believed that deep reductions in their funding and
authorized personnel, reductions that they perceive as being greater
than reductions in their workload requirements, have already
constrained their ability to do existing work.  Reducing funding and
personnel make it even more difficult to assume additional work,
knowing that additional personnel resources likely would not be
forthcoming.  Some service officials believe that there is a need for
financial incentives allowing commanders to retain some portion of
savings achieved to apply to other areas where they have unmet
requirements as an inducement to pursue greater interservicing. 

A number of service officials said that the relatively short tours of
duty of base commanders limits institutional knowledge and often
results in their focusing on short-term projects and not major
changes in base operations involving long-term planning and
implementation.  We were also told that differences in philosophy
from one commander to another can sometimes lead to a reversal of
previously initiated interservicing efforts.  Some service officials
suggested that these impediments could be overcome either through
greater reliance on civilian management of base operations and/or
basing a portion of an installation commander's proficiency
assessment on his or her efforts to foster greater efficiencies in
base operations.  Our general management review work has shown that
continuity of management is a key factor to ensuring the ultimate
success of major initiatives in other federal agencies. 

Finally, interservicing agreements reached in advance of outsourcing
could enhance the potential for greater efficiencies and cost
savings; however, a proposed change in Office of Management and
Budget's (OMB) guidance for contracting out could reduce the
potential for interservicing.  At the same time, some service
officials stated that with outsourcing and privatization appearing to
be such high priority within DOD, the current efforts to economize
base operations through inter and intraservicing efforts may receive
less emphasis.  At the time we completed our review, OMB was
considering a change to its Circular A-76 policy guidance supplement
on contracting out.  That change would require that agencies not ". 
.  .  retain, create or expand capacity for the purpose of providing
new or expanded levels of interservice support services, unless
justified by the cost comparison requirements of this Supplement."
Some DOD officials were concerned that the change could serve as a
significant disincentive to base commanders and smaller activities
being willing or having the capability to conduct the private sector
cost studies that would be required as a prerequisite to
interservicing type arrangements.  Such cost comparisons previously
were not required as a prerequisite to interservicing. 


--------------------
\9 Other GAO work examining finance and accounting and printing
consolidations while identifying some implementation problems found
that over time DOD expects to achieve significant infrastructure
reductions and savings from these efforts.  See DOD Infrastructure: 
DOD's Planned Finance and Accounting Structure Is Not Well Justified
(GAO/NSIAD-95-127, Sept.  18, 1995); Government Printing:  Comparison
of DOD and GPO Prices for Printing and Duplicating Work
(GAO/NSIAD-95-65, Feb.  1, 1995); and Government Printing:  Legal and
Regulatory Framework Is Outdated for New Technological Environment
(GAO/NSIAD-94-157, Apr.  15, 1994). 


   RECOMMENDATIONS
------------------------------------------------------------ Letter :7

Given the potential for significant savings in base support costs
through interservicing type arrangements, we recommend that the
Secretary of Defense (1) identify options and take steps to minimize
the impediments to interservicing and (2) emphasize interservicing as
part of contracting out deliberations to maximize potential savings
and efficiencies. 


   AGENCY COMMENTS AND OUR
   EVALUATION
------------------------------------------------------------ Letter :8

DOD concurred with our report and its recommendations.  In written
comments to our draft report, DOD stated that they had prevailed with
a request to OMB to remove from the draft Circular A-76 supplement a
requirement to conduct A-76 cost comparisons prior to initiating
interservice support agreements.  DOD also said that it was
implementing a policy directive to encourage first looking to
interservice support for needed base operations, unless a better
value is available from commercial sources.  DOD also indicated that
it would take other steps to minimize impediments to interservicing. 

DOD also expressed concern that our report did not adequately
recognize Air Force and Defense Logistics Agency efforts to achieve
major savings through interservice support.  It cited a couple of
initiatives recently undertaken by the Air Force and a variety of
interservicing agreements administered by the Defense Logistics
Agency.  Although our review focused primarily on the Army, the Navy,
and the Air Force, we recognize that Defense Logistics Agency
activities are active participants in interservicing.  We recognize
the efforts cited on behalf of the Air Force as having been recently
undertaken.  Those recent actions not withstanding, we believe our
report adequately captures the extent of Air Force activities
regarding interservicing relative to the other services.  Our scope
and methodology are discussed in appendix IV.  See appendix V for the
complete text of DOD's comments. 


---------------------------------------------------------- Letter :8.1

Unless you announce its contents earlier, we plan no further
distribution of this report until 15 days after its issue date.  At
that time, we will send copies to the Chairmen, Senate Committee on
Armed Services, Subcommittee on Defense, the Senate Committee on
Appropriations, the House Committee on National Security, and
Subcommittee on National Security, House Committee on Appropriations;
the Director, Office of Management and Budget; and the Secretaries of
Defense, the Air Force, the Army, and the Navy. 

Please contact me at (202) 512-8412 if you or your staff have any
questions concerning this report.  Major contributors to this report
were Barry W.  Holman, Assistant Director; Kevin B.  Perkins,
Evaluator-in-Charge; and Robert R.  Poetta, Evaluator. 

David R.  Warren
Director, Defense Management Issues


COMMON BASE SUPPORT FUNCTIONS
=========================================================== Appendix I

----------------------------------  ----------------------------------
Administrative services             Mail service

Audio and visual information        Mail postage service
services

Automated data processing and       Mail transportation overseas
automated services

Chapel & chaplain services          Military personnel support

Civilian personnel services         Mobilization support

Clubs                               Morale, welfare, and recreation
                                    activities

Command support                     Mortuary services

Common use facility construction,   Museums
operations, maintenance, and
repair

Communication services              Occupational and industrial health
                                    services

Community relations                 Police services

Community services                  Printing services

Custodial services                  Public affairs

Disaster preparedness               Purchasing and contracting
                                    services

Duplication services                Refuse collection & disposal

Education services                  Resource management

Environmental cleanup               Safety

Environmental compliance            Security services

Equipment maintenance, repair, and  Shuttle services
calibration

Explosive ordnance support          Social actions

Facility construction and major     Storage and warehousing
repair

Facility maintenance and minor      Supply services
repair

Finance and accounting              Technical and legal libraries

Fire protection                     Training services

Food services                       Transportation services

Health services                     Utilities

Housing and lodging services        Vehicle support

Laundry and dry cleaning            Weather services

Legal services
----------------------------------------------------------------------

EXAMPLES OF UNSUCCESSFUL
INTERSERVICE CONSOLIDATIONS
========================================================== Appendix II

Two of the most notable interservicing type efforts initiated in the
1970s and 1980s proved unsuccessful.  They involved consolidated
management of real property maintenance and contracting activities in
the San Antonio, Texas, area, and consolidated family housing for
military personnel in Oahu, Hawaii. 


   THE SAN ANTONIO REAL PROPERTY
   MAINTENANCE AGENCY AND THE SAN
   ANTONIO CONTRACTING CENTER
-------------------------------------------------------- Appendix II:1

In the mid-to-late 1970s, Air Force and Army installation real
property maintenance and contracting services in the San Antonio,
Texas, area, were consolidated, creating the San Antonio Real
Property Maintenance Agency (SARPMA) and the San Antonio Contracting
Center (SACC).  Both efforts, to be managed by the Air Force, were
expected to save $2.2 million annually in personnel, supplies, and
equipment, or $24 million over the 11-year life of the program.  The
Department of Defense (DOD) agreed to disestablish both efforts in
1989 at the Air Force's request.\1 By fall 1989, both efforts had
ceased operating and their functions were returned to the control of
individual base commanders. 

In a 1989 report\2 we stated that DOD approved the request to
dissolve the consolidation based on studies performed by it and the
Air Force that cited installation commanders' concern over lack of
command and control of their engineering support functions.  In its
justification, the Air Force cited a September 1986 DOD directive
giving installation commanders broad authority to decide how to
accomplish their engineering functions and made them accountable for
those resources, and stated that mandating SARPMA was at variance
with this authority.  One Air Force study questioned SARPMA's
customer responsiveness and productivity, yet concluded that it
provided services at about the same level as before the
consolidation.  However, it also noted that customers resented the
loss of direct control of the civil engineering work resulting in a
negative perception of SARPMA's performance.  In retrospect, various
service officials have suggested that this had been a situation in
which DOD had pushed the services toward a consolidation that the
services had not really bought into. 

A December 1990 Defense Management Report Decision concluded that
comparisons of SARPMA savings was not possible due to the dramatic
differences in program funding, environmental issues, hiring freezes,
and other factors that impacted DOD during the period the
consolidation existed.  Also, the original concepts of organization,
supply, personnel, procurement support, automated data processing,
and the client base SARPMA was to serve never materialized.  The
report went on to say that, considering the range of fundamental
management problems and mistakes, such as severe understaffing, an
inadequate computer system, and not promptly reimbursing vendors that
caused these vendors to refuse to deal with SARPMA, to blame its
failure on consolidation alone was unwarranted. 


--------------------
\1 Due to its significantly larger budget and number of employees,
SARPMA was the main focus of the disestablishment efforts.  SACC was
dissolved because its main customer was SARPMA. 

\2 Base Support Services:  Disestablishment of Two Consolidated
Organizations in San Antonio (GAO/NSIAD-89-97, Mar.  8, 1989). 


   THE OAHU, HAWAII, CONSOLIDATED
   FAMILY HOUSING OFFICE
-------------------------------------------------------- Appendix II:2

In July 1982, DOD directed the four services to consolidate family
housing operations and maintenance on Oahu, Hawaii, by October 1,
1983, under U.S.  Army, Pacific.  DOD based the decision on a
feasibility study performed by a contractor that concluded that a
consolidation would reduce personnel costs by about $737,000
annually.  However, on September 30, 1994, after operating for about
11 years, the Oahu Consolidated Family Housing Office closed and
control of this function was returned to each individual service.  We
were unable to determine the extent of savings realized from this
consolidation. 

According to DOD officials and the Army Audit Agency, the
consolidated family housing program failed because of funding
uncertainties and shortfalls, as well as the services' prejudice
toward retaining control over their own housing, a reluctance on the
part of the services from the beginning to fully participate, and
various problems associated with the Army's management of the
program.  Reluctance to participate was illustrated by the fact that
the other services continued to maintain their own housing
organizations to some extent while the Army was officially
responsible for managing the program and paying the bills. 

The quality of housing on Oahu at the time of the consolidation was
also a factor that affected future operations.  Various officials
pointed to significant differences in the condition of the housing
from each of the services with the Navy housing being in the worst
condition and requiring the highest maintenance priority.  Also,
several officials cited differences in the quality of housing
standards as a factor impeding the efforts of the consolidated office
because customers expected services provided to meet their own unique
criterion.  Further, given that the most senior military officials on
Oahu outranked the most senior Army officer raised some question
about the degree of real control that could be exerted by the Army in
managing the program.  A 1992 Army Audit Agency report\3 was critical
of DOD for not providing the Army any guidance on how to implement a
consolidated operation that it concluded led to some of the problems
encountered throughout the life of the effort.  Subsequently, the
Army manager of the consolidated housing office at the time the
program was terminated told us that a $33-million funding reduction
in fiscal
year 1994 (from $176 million to $143 million), and no funding for
military construction were the primary reasons for dissolving the
office.  The manager said that these shortfalls prevented his office
from making any housing repairs during that time.  He also said that
although the other services were aware of the funding problems, they
were unable to help because budgetary controls precluded any
transferring of funds to the Army. 


--------------------
\3 Family Housing Maintenance, Oahu, Hawaii (Report WR 92-7, 24 July
1992). 


BASE SUPPORT FUNCTIONS HAVING THE
POTENTIAL FOR INTERSERVICING
========================================================= Appendix III

Military personnel at the collocated military bases we visited cited
a range of base support functions being performed at their collocated
bases--ones where at least one of the services had identified at
least portions of those functions as having the potential for
consolidation and interservicing. 



                               Table 3.1
                
                   Base Support Functions Having the
                      Potential for Interservicing

----------------------------------  ----------------------------------
Accident investigation              Magistrate court

Airfield operations                 Management and maintenance of
                                    family housing

Biological assessments              Nonaircraft supply parts storage

Bulk fuel storage                   Official travel arrangements

Chaplain services                   Passports

Child care services                 Public works management

Civilian personnel services         Publishing and printing services

Communication systems maintenance   Recycling

Contracting services                Roads and grounds maintenance

Craft shops                         Safety

Dining facilities                   Small arms maintenance

Education centers                   Support services, facility
                                    maintenance,
                                    and construction contracting

Employment office/equal employment  Tactical vehicle maintenance
opportunity services

Environmental programs              Telephone services

Family advocacy services            Training services

Fire protection services            Transportation management office

Housing services                    Utility repairs

Identification cards                Vehicle transportation and
                                    maintenance

Legal assistance and claims         Water and sewage plant operations

Library services
----------------------------------------------------------------------

SCOPE AND METHODOLOGY
========================================================== Appendix IV

To obtain a historical perspective on interservicing, we held
discussions with cognizant Office of the Secretary of Defense (OSD),
Army, Navy, Air Force, and Defense Logistics Agency officials and
obtained and reviewed available reports completed by various audit
and DOD agencies dealing with prior consolidation efforts.  Likewise,
we held discussions with OSD and service officials regarding the
status of existing interservice efforts and to determine impediments
to such efforts.  A discussion was also held with an Office of
Management and Budget (OMB) official regarding OMB Circular A-76 in
relation to interservicing.  We made a limited telephone inquiry to a
judgment sample of Joint Interservice Regional Support Group (JIRSG)
regions to gauge the level of ongoing activity regarding interservice
support agreements and efforts to foster additional interservicing. 

We also had discussions with installation officials at seven
installations that were located in close proximity to one another to
determine the existing level of interservicing type arrangements, the
potential for additional ones, and any impediments to such efforts. 
Locations visited included:  Fort Dix, McGuire Air Force Base, and
Lakehurst Naval Air Station in New Jersey; Fort Bragg and Pope Air
Force Base in North Carolina; and Fort Lewis and McChord Air Force
Base in Washington.  Additional discussions were held with Army
officials at Headquarters Forces Command, Atlanta, Georgia, and
Training and Doctrine Command, Fort Monroe, Virginia.  We also
contacted officials of the Navy's Commander in Chief, Atlantic and
Pacific Fleets, and the Naval Air and Sea Systems Commands; and the
Air Force's Air Combat and Air Mobility Commands to discuss efforts
underway to foster inter and intraservicing of base support
operations.  Additionally, we observed a meeting of the Navy's Fleet
Support and Quality Management Board that discussed various base
support issues, and also attended a national JIRSG training workshop. 

We conducted our review between July 1995 and February 1996 in
accordance with generally accepted government auditing standards. 




(See figure in printed edition.)Appendix V
COMMENTS FROM THE DEPARTMENT OF
DEFENSE
========================================================== Appendix IV



(See figure in printed edition.)


*** End of document. ***