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Force Structure: Streamlining Plans Could Enable Navy to Reduce Personnel Below FY 1999 Goal (Chapter Report, 04/18/97, GAO/NSIAD-97-90).

GAO reviewed the: (1) size and composition of Navy active duty forces
between 1989 and 1999; (2) Navy's plans to achieve its fiscal year (FY)
1999 active duty force goal and initiatives that could further reduce
forces beyond the planned FY 1999 level; and (3) Navy's processes for
determining active military force requirements.

GAO noted that: (1) the Navy plans to reduce its active military forces
from 592,652 in FY 1989 to 394,900 in FY 1999; (2) by the end of FY
1999, infrastructure-related positions will have been reduced at a
slightly greater rate than mission-related positions; (3) during the
drawdown, the Navy plans to reduce the number of enlisted personnel at a
higher rate than officers and the number of junior officers and enlisted
personnel at higher rates than senior personnel; (4) while officers and
enlisted personnel in mission-related positions will decline by nearly
the same percentage, enlisted personnel will decline by a greater
percentage than officers in infrastructure positions; (5) as a result,
the proportion of officers in infrastructure positions will increase
from about 17 percent in FY 1989 to 21 percent in FY 1999; (6) the
effect is that costs will not decline in proportion to personnel; (7) as
of September 30, 1996, the Navy had reduced its active military
personnel by 164,700 primarily by decommissioning ships, submarines, and
aircraft squadrons and closing shore-based activities; (8) the Navy will
need to reduce its forces by another 33,100 to reach its end strength
goal by continuing to close bases, decommission ships, submarines, and
aircraft squadrons, plus reducing recruiting and associated training and
outsourcing some functions; (9) for 25 years, the Navy has not properly
assessed personnel requirements for its shore-based activities primarily
because of the low priority that the Navy traditionally gave to managing
the shore establishment, ineffective Navy management and oversight of
the shore requirements program, and changes in program direction; (10)
the Navy is instituting several measures to strengthen the shore
requirements program; (11) however, without continued high-level Navy
support and long-term commitment, there is no guarantee that the fate of
these proposals will be any different than those of earlier years; (12)
the Navy has little assurance that resources are being used efficiently
and that its shore establishment is appropriately sized without an
effective long-term program for determining personnel requirements; (13)
accordingly, GAO believes this represents a material weakness in the
Navy that should be reported under the Federal Managers' Financial
Integrity Act (FMFIA); and (14) GAO believes improving the requirements
process is particularly important as the Navy looks for savings and eff*

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

 REPORTNUM:  NSIAD-97-90
     TITLE:  Force Structure: Streamlining Plans Could Enable Navy to 
             Reduce Personnel Below FY 1999 Goal
      DATE:  04/18/97
   SUBJECT:  Human resources utilization
             Military cost control
             Military downsizing
             Personnel management
             Military officers
             Projections
             Reductions in force
             Naval personnel
             Enlisted personnel
IDENTIFIER:  DOD Bottom-Up Review
             Navy Shore Requirements, Standards, and Manpower Planning 
             System
             Navy Manpower Engineering Program
             Navy Total Force Manpower Management System
             DOD Future Years Defense Program
             
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Cover
================================================================ COVER


Report to Report to Congressional Committees

April 1997

FORCE STRUCTURE - STREAMLINING
PLANS COULD ENABLE NAVY TO REDUCE
PERSONNEL BELOW FISCAL YEAR 1999
GOAL

GAO/NSIAD-97-90

Force Structure

(701079)


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

  DOD - Department of Defense
  FMFIA - Federal Managers' Financial Integrity Act
  FYDP - Future Years Defense Program
  GAO - General Accounting Office
  MFT - Mission Function Task
  MRC - Major Regional Conflict
  NAVMAC - Navy Manpower Analysis Center
  O&M - operations and maintenance
  OSD - Office of the Secretary of Defense
  ROC/POE - Required Operational Capability/Projected Operational
     Environment
  SHORSTAMPS - Shore Requirements, Standards, and Manpower Planning
     System

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


B-272548

April 18, 1997

The Honorable Dirk Kempthorne
Chairman, Subcommittee on Personnel
Committee on Armed Services
United States Senate

The Honorable Stephen Buyer
Chairman, Subcommittee on Military Personnel
Committee on National Security
House of Representatives

This report discusses (1) the size and composition of Navy active
duty forces between 1989 and 1999, (2) the Navy's plans to achieve
its fiscal year 1999 active duty force goal and initiatives that
could further reduce forces beyond the planned fiscal year 1999
level, and (3) the Navy's processes for determining active military
force requirements.  Because of your expressed interest in oversight
of military personnel issues, we are addressing this report to you. 
This report should be useful to your Committees in deliberations on
the future size and composition of the Navy.  This report contains
two recommendations to the Secretary of the Navy and matters for
congressional consideration. 

We are sending copies of this report to the Secretaries of Defense
and the Navy and the Director, Office of Management and Budget. 
Copies will also be made available to others on request. 

If you or your staff have any questions on this report, please call
me on (202) 512-3504.  Major contributors to this report are listed
in appendix II. 

Richard Davis
Director, National Security
 Analysis


EXECUTIVE SUMMARY
============================================================ Chapter 0


   PURPOSE
---------------------------------------------------------- Chapter 0:1

Since the end of the Cold War, the U.S.  Navy has reduced its active
military forces by about 28 percent and has plans to further reduce
its personnel to help modernize a smaller but more capable force.  In
1996, pay and allowances for active duty Navy personnel was $17
billion, or about 25 percent of the Navy's total obligational
authority.  Because of congressional concerns about active duty
personnel levels, GAO examined (1) the size and composition of Navy
active duty forces between 1989 and 1999, (2) the Navy's plans to
achieve its fiscal year 1999 active duty force goal and initiatives
that could further reduce forces beyond the planned fiscal year 1999
level, and (3) the Navy's processes for determining active military
force requirements.  GAO has issued related reports on the Army and
the Air Force.\1


--------------------
\1 Force Structure:  Army Support Forces Can Meet Two-Conflict
Strategy With Some Risks (GAO/NSIAD-97-66, Feb.  28, 1997) and Force
Structure:  Potential Exists to Further Reduce Active Air Force
Personnel (GAO/NSIAD-97-78, Mar.  28, 1997). 


   BACKGROUND
---------------------------------------------------------- Chapter 0:2

The 1993 Department of Defense (DOD) Bottom-Up Review assessed the
security needs of the United States.  The review concluded that there
was a need for a naval force of 12 aircraft carriers, 11 air wings,
45 to 55 attack submarines, and 346 battle force ships to carry out
the national military strategy.  Although the review did not specify
the personnel force level needed to execute the strategy, defense
guidance subsequently specified that the Navy should reduce its
active duty personnel to 394,900.\2

In 1996, the Congress established minimum active end strengths for
each service.  The 1997 Defense Authorization Act gave the Secretary
of Defense limited flexibility to decrease each service's minimum end
strength by 1 percent.  The Navy's minimum end strength was set at
395,000. 

For defense planning purposes, DOD has divided force structure and
associated military and civilian personnel into two basic
categories--mission and infrastructure.  Mission programs include
those in combat; direct combat support; intelligence; research,
development, test, and evaluation; command, control, and
communications; and space.  The Navy's infrastructure programs
comprise activities that provide support services and primarily
operate from fixed locations.  Infrastructure activities include
acquisition infrastructure; installation support; central command,
control, and communications; central logistics; central medical;
central personnel; force management; and central training.  As of
September 30, 1996, about 55 percent of active duty personnel were in
mission-related positions, the remainder being in infrastructure
positions. 

The Navy uses different processes to determine personnel requirements
for its mission forces and its shore establishment.  The biggest
difference between the two processes is the top-down approach of the
process for determining mission-related personnel requirements and
the bottom-up approach of the shore process.  For most mission
forces, the Navy uses centrally established measurable criteria to
form the basis for its personnel requirement levels for specific
missions.  The Navy uses a decentralized "efficiency review" process
conducted by 22 separate commands to determine personnel requirements
for its infrastructure activities and a small portion of its mission
activities, such as intelligence, research and development, and
command and control--about half of the Navy's active duty personnel. 
Under this process, the Navy's major commands\3

identify personnel requirements for the shore-based activities.  The
Assistant Chief of Navy Personnel for Total Force Programming,
Manpower, and Information Resources Management is the Navy's policy
and program manager for determining shore personnel requirements. 
For the last 25 years, numerous audit reports by GAO and other
organizations have criticized the Navy's various processes to
determine shore personnel requirements. 

The Federal Managers' Financial Integrity Act (FMFIA) requires that
agency internal control systems be periodically evaluated and that
the heads of executive agencies report annually on their systems'
status.  FMFIA requires that a corrective action plan be devised and
that milestones be established to correct identified problems. 


--------------------
\2 The term "personnel" is used throughout this report to connote
positions for which funding has been requested or provided. 

\3 This report uses the term "major command" to refer to the major
commanders or bureaus that are authorized personnel resources
directly by the Chief of Naval Operations to accomplish assigned
missions and tasks. 


   RESULTS IN BRIEF
---------------------------------------------------------- Chapter 0:3

The Navy plans to reduce its active military forces from 592,652 in
fiscal year 1989 to 394,900 in fiscal year 1999.  By the end of
fiscal year 1999, infrastructure-related positions will have been
reduced at a slightly greater rate than mission-related positions. 
During the drawdown, the Navy plans to reduce the number of enlisted
personnel at a higher rate than officers and the number of junior
officers and enlisted personnel at higher rates than senior
personnel.  While officers and enlisted personnel in mission-related
positions will decline by nearly the same percentage, enlisted
personnel will decline by a greater percentage than officers in
infrastructure positions.  As a result, the proportion of officers in
infrastructure positions will increase from about 17 percent in
fiscal year 1989 to 21 percent in fiscal year 1999.  The effect is
that costs will not decline in proportion to personnel. 

As of September 30, 1996, the Navy had reduced its active military
personnel by 164,700 primarily by decommissioning ships, submarines,
and aircraft squadrons and closing shore-based activities.  The Navy
will need to reduce its forces by another 33,100 to reach its end
strength goal by continuing to close bases, decommission ships,
submarines, and aircraft squadrons, plus reducing recruiting and
associated training and outsourcing some functions.  In addition, the
Navy has ongoing initiatives that could eliminate thousands of
personnel positions (military and civilian) after the year 2000. 
Some initiatives, such as implementing labor-saving technologies and
changing existing policies, are expected to eliminate positions on
ships, submarines, and in aircraft squadrons.  The Navy will also
continue its efforts to reduce shore positions by regionalizing,
consolidating, and outsourcing various activities. 

For 25 years, the Navy has not properly assessed personnel
requirements for its shore-based activities primarily because of the
low priority that the Navy traditionally gave to managing the shore
establishment, ineffective Navy management and oversight of the shore
requirements program, and changes in program direction.  Neither Navy
headquarters nor most of the shore commands have devoted the
attention and resources to make the shore requirements program work. 
Past evaluations of the requirements process for mission-related
personnel have not surfaced similar or other major shortcomings. 
Therefore, GAO focused primarily on the shore requirements process. 
The Navy is instituting several measures to strengthen the shore
requirements program.  However, without continued high-level Navy
support and long-term commitment, there is no guarantee that the fate
of these proposals will be any different than those of earlier years. 
The Navy has little assurance that resources are being used
efficiently and that its shore establishment is appropriately sized
without an effective long-term program for determining personnel
requirements.  Accordingly, GAO believes this represents a material
weakness in the Navy that should be reported under the Federal
Managers' Financial Integrity Act.  GAO believes improving the
requirements process is particularly important as the Navy looks for
savings and efficiencies to modernize and recapitalize its operating
forces. 


   PRINCIPAL FINDINGS
---------------------------------------------------------- Chapter 0:4


      PERSONNEL ASSIGNED TO
      MISSION PROGRAMS REDUCED
      SLIGHTLY LESS THAN PERSONNEL
      ASSIGNED TO INFRASTRUCTURE
      PROGRAMS
-------------------------------------------------------- Chapter 0:4.1

Since 1989, the Navy has reduced active duty personnel assigned to
mission and infrastructure activities.  The Navy anticipates that by
fiscal year 1999, it will have cut mission-related active duty end
strength from about 319,800 in fiscal year 1989 to about 219,800 in
fiscal year 1999, or 31 percent; infrastructure-related end strength
will decrease from about 272,900 in fiscal year 1989 to about 175,100
in fiscal year 1999, or 36 percent, as seen in figure 1. 

   Figure 1:  Navy Downsizing
   Trends--Personnel Assigned to
   Mission and Infrastructure
   Programs for Fiscal
   Years 1989 to 1999

   (See figure in printed
   edition.)

Source:  GAO analyses of DOD Future Years Defense Program data. 

Note:  Fiscal year 1989-94 personnel numbers are actual figures,
while fiscal year 1995-99 personnel numbers are Navy estimates. 

By the end of 1999, the Navy will have reduced two key components
within each of these categories.  Within the mission category, the
Navy plans to reduce combat forces and direct support forces by
decommissioning ships, submarines, and air squadrons.  About 81
percent of the infrastructure cuts will be in training and personnel
functions.  To achieve these reductions, the Navy plans to close and
consolidate recruit and general skill training centers and to reduce
professional education programs.  It also plans to eliminate flight
training positions, as it decreases the total numbers of pilots and
naval flight officers.  Downsizing personnel administration and
recruiting activities will also help the Navy meet its end strength
goal by fiscal year 1999. 

The composition of the Navy's active duty force will also change
between fiscal year 1989 and 1999.  A larger percentage of enlisted
personnel positions will be reduced than is planned for officer
positions.  For example, the Navy plans to eliminate about 180,100
enlisted positions--about 35 percent--and 17,600 active duty officer
positions, or about 24 percent, by fiscal year 1999.  During the
drawdown, the Navy's personnel have grown more senior in rank because
the Navy has eliminated a higher percentage of personnel in its
junior ranks than its senior ranks, and the number of personnel
joining the force has declined.  Navy officials attribute this trend
primarily to the increased technical nature of the modern Navy, which
requires higher skilled personnel, and the need to fill positions on
the joint staff and DOD agencies, which require higher graded people. 


      NAVY HAS PLAN TO REACH FORCE
      GOAL, BUT INITIATIVES COULD
      LEAD TO FURTHER DECREASES
-------------------------------------------------------- Chapter 0:4.2

The Navy will need to eliminate about 33,100 military positions
during fiscal years 1997 through 1999 to meet its fiscal year 1999
goal of 394,900 active duty personnel.  Almost three quarters of the
cuts will be taken from four areas:  reducing the number of ships,
submarines, and aircraft; eliminating recruit and general skills
training positions; eliminating military base support positions,
largely through outsourcing; and reducing the number of temporary
positions needed for a smaller force.  Temporary positions include
those for personnel changing stations, patients, prisoners, and a
small number of positions that the Navy reserves to meet critical
short-term shortages. 

In addition to these planned cuts, the Navy has ongoing initiatives
that could further reduce active military force levels at shore
activities and aboard ships.  However, the Navy is unsure of both the
number of military positions that could be eliminated and when the
cuts could be achieved because many studies have not been completed. 
For example, analyses to regionalize and consolidate shore activities
are ongoing in San Diego, California; Jacksonville and Pensacola,
Florida; Pearl Harbor, Hawaii; Washington, D.C.; Norfolk, Virginia;
and Puget Sound, Washington.  While these studies have not been
completed, Navy officials believe regionalizing and consolidating
shore-based activities could save millions of dollars mainly by
improving business practices and eliminating civilian and military
positions. 

The Navy's Smart Ship program is designed to reduce the number of
military personnel aboard ships by incorporating labor-saving
technologies and changing crewing policies.  The Navy will not
quantify expected savings until it completes the tests on the U.S.S. 
Yorktown and issues its test report in June 1997.  Once these tests
are completed, the Navy hopes to apply the same principles and
technologies to other ships in the fleet, thus multiplying the
benefits.  In addition to the Smart Ship program, the Navy is
designing future ships--LPD-17, CVX, and SC-21 class ships--to
operate with reduced crews.  If these new ships are built and crewed
as currently envisioned, the Navy could further reduce personnel
requirements as it replaces older, more personnel-intensive ships. 


      SHORE PERSONNEL REQUIREMENTS
      PROGRAM HAS BEEN INEFFECTIVE
      FOR MORE THAN TWO DECADES
-------------------------------------------------------- Chapter 0:4.3

Over a period of many years, the Congress has expressed concern about
the Navy's shore personnel requirements program and has on several
occasions directed the Navy to develop a more rigorous system to
justify shore-based personnel needs.  The Navy has not resolved the
problems raised by the Congress.  Examples of problems cited are (1)
many of the major shore commands have not complied with one or more
program requirements, (2) reviews often have not used standards to
compare one function to another or between similar functions at
separate activities, and (3) the quality and consistency of reviews
differ from one command to another and often even between similar
activities.  In essence, few commands have devoted the attention and
resources necessary to make the program work.  In most cases, the
efficiency review program has become one of justifying existing
resource allocations rather than evaluating alternative combinations
of people, material, facilities, and organizational structures to
ensure that the most cost-effective combination of resources is used,
as Navy instructions specify. 

The various audit organizations that have reviewed this program
attribute its ineffectiveness primarily to weak Navy management and
oversight.  While the Assistant Chief of Navy Personnel for Total
Force Programming, Manpower, and Information Resources Management is
the Navy's policy and program manager for determining shore personnel
requirements, this office has not adequately overseen the
decentralized efficiency review program.  According to a Naval Audit
Service report, for example, the responsible office has made only
limited challenges to obvious efficiency review problems and did not
identify the serious problems discussed in previous audit reports. 
Other factors, such as the number of Navy organizations that provide
funding to the shore establishment, have also made the program
difficult to manage. 

The Navy has taken steps to strengthen the current shore requirements
program.  For example, it is changing the program to enable
comparative analyses of like functions and is working to standardize
base operating support functions to facilitate unit costing. 
However, without high-level, long-term Navy support and commitment,
and improved management oversight, there is no assurance that the
fate of these initiatives will be any different than those of earlier
years. 


   RECOMMENDATIONS
---------------------------------------------------------- Chapter 0:5

To improve the management and allocation of personnel resources to
the shore establishment, GAO recommends that the Secretary of the
Navy report to the Secretary of Defense the lack of an effective
shore requirements determination program as a material weakness under
FMFIA to maintain visibility of the issue and ensure action is taken. 
GAO also recommends that the Secretary of the Navy create an action
plan with milestones to resolve long-standing problems with the shore
personnel requirements program.  The plan should specifically explain
how the Navy will attempt to overcome the fundamental problems--such
as lack of senior Navy management commitment to effective management
of the shore establishment and ineffective management oversight and
accountability--that have plagued this program. 


   MATTERS FOR CONGRESSIONAL
   CONSIDERATION
---------------------------------------------------------- Chapter 0:6

Given the long history of congressional concern over the Navy's
ability to effectively determine the size and composition of its
shore establishment, the Congress may wish to require the Navy to
submit its plan of action, with milestones, to the Congress.  In
addition, as part of this plan, the Congress may also want the Navy
to demonstrate its progress and provide specific details on the steps
it has taken at headquarters and at the major command level to (1)
improve management oversight and accountability of the personnel
requirements determination process at all levels; (2) increasingly
utilize standardization and comparative analysis of like activities
as part of the requirements process; (3) improve staff training and
ensure that only technically qualified staff conduct efficiency
reviews; and (4) establish a link between the shore personnel
requirements process and the Navy's various initiatives to reduce its
shore infrastructure, many of which were discussed in chapter 3 of
this report. 


   AGENCY COMMENTS
---------------------------------------------------------- Chapter 0:7

DOD partially concurred with the recommendation in GAO's draft report
that the lack of a valid shore requirements determination program be
reported as a material weakness under the FMFIA.  While DOD agreed
that there have been weaknesses and inconsistencies in the execution
of the Navy's shore personnel requirements program, it believes the
Navy has a valid program and that improvements have been and continue
to be implemented.  For these reasons, DOD did not agree to report
this issue as a material weakness.  GAO acknowledges in this report
that the Navy has recently undertaken various initiatives to improve
its process for identifying shore personnel requirements.  This is
the same pattern the Navy has followed over the past 25 years--that
is, after a critical audit report, the Navy initiates changes and
promises improvements.  Unfortunately, the expected improvements have
not occurred.  Because of this long-standing pattern and the
importance of this issue, GAO continues to believe that the shore
personnel requirements program should be reported as a material
weakness under FMFIA.  We have modified the recommendation somewhat,
however, to focus on the effectiveness rather than the validity of
the program.  The Navy also provided technical comments on GAO's
draft report, which GAO considered in preparing the final report. 
DOD's comments on a draft of this report are reprinted in appendix I. 

DOD concurred with the recommendation that the Secretary of the Navy
develop an action plan with milestones to ensure that positive
results of ongoing initiatives are sustained. 


INTRODUCTION
============================================================ Chapter 1

The Department of Defense's (DOD) 1993 Bottom-Up Review determined
that the Navy would have 11 active and 1 reserve aircraft carriers,
11 air wings, 45 to 55 attack submarines, and 346 battle force ships
to carry out the national military strategy.  The review did not
specify the number of military personnel required to implement the
national strategy.  However, DOD later determined that the active
components would consist of about 1.4 million active duty personnel,
394,900 of which would be Navy personnel. 


   MILITARY PAY AND ALLOWANCES ARE
   A LARGE PART OF NAVY'S TOTAL
   OBLIGATIONAL AUTHORITY
---------------------------------------------------------- Chapter 1:1

Pay and allowances for active and reserve personnel are funded
through the military personnel appropriation, comprising 27 percent
of the Navy's total obligational authority of $66.7 billion for
fiscal year 1996.  A total of almost $18.3 billion was budgeted for
military personnel--$17 billion for active personnel and $1.3 billion
for reserves.  This amount was exceeded only by the Navy's operation
and maintenance (O&M) appropriation category, which totaled $22.1
billion.  The O&M appropriation includes salaries and benefits for
about 222,400 civilian personnel.  With military pay and allowances
encompassing a significant portion of the budget, the Navy is looking
to reduce this budget category, in part, to increase financing for
long-term force modernization and recapitalization programs. 


   NAVY WILL HAVE REDUCED ITS
   FORCE BY ONE-THIRD BY FISCAL
   YEAR 1999
---------------------------------------------------------- Chapter 1:2

The Navy reduced its active duty authorized force by about 28 percent
from the post-Cold War high of 592,692 personnel\1 in fiscal year
1989 to 428,000 in fiscal year 1996.  The Navy anticipates reducing
its forces by an additional 33,100 personnel to reach its goal of
394,900 active duty personnel by the end of fiscal year 1999.  This
amount represents a 33-percent reduction since fiscal year 1989, as
shown in figure 1.1. 

   Figure 1.1:  Changes in Active
   Duty Navy Personnel Between
   Fiscal Year 1989 and 1999

   (See figure in printed
   edition.)

Source:  GAO analysis of DOD Future Years Defense Program (FYDP)
data. 

Note:  Fiscal year 1989-94 personnel numbers are actual figures,
while fiscal year 1995-99 personnel numbers are Navy estimates. 


--------------------
\1 The term "personnel" is used throughout this report to connote
positions for which funding has been requested or provided. 


   CONGRESSIONAL ACTIONS STEM
   DRAWDOWN OF ACTIVE DUTY
   PERSONNEL
---------------------------------------------------------- Chapter 1:3

The Congress established minimum active duty personnel levels for
each military service as part of the National Defense Authorization
Act for Fiscal Year 1996.  The Navy's minimum end strength was set at
395,000.  In creating the personnel floors, the Congress sought to
(1) ensure the services had an adequate number of personnel to carry
out the national military strategy and (2) show that the drawdown of
active forces was over to avoid future recruiting and retention
problems.  The Congress believed the personnel floors would assist
the services to manage the effects of high operations and personnel
tempo. 

The National Defense Authorization Act for Fiscal Year 1997 allows
the Secretary of Defense limited flexibility to decrease personnel by
1 percent of the floors.  For the Navy, this means the active duty
force cannot drop below 391,050 personnel.  The legislation requires
the services to obtain statutory authority for decreases below 1
percent of the floors. 


   ACTIVE DUTY FORCE CONSISTS OF
   MISSION AND INFRASTRUCTURE
   FORCES
---------------------------------------------------------- Chapter 1:4

For defense planning purposes, DOD has divided its forces into two
basic categories--mission and infrastructure.\2 Navy mission programs
consist of the aircraft carriers, air wings, submarines, and battle
force ships (as defined in the Bottom-Up Review) and the forces that
provide direct combat support; intelligence; and command, control and
communications in wartime.  Activities that provide support to the
mission forces and primarily operate from fixed locations, such as
installations, bases, and shipyards, are classified as infrastructure
programs.  Infrastructure programs are divided into the following
eight categories:  acquisition infrastructure; installation support;
central command, control, and communications; central logistics;
central medical; central personnel; force management; and central
training.  Since fiscal year 1989, personnel assigned to mission
programs have ranged between 54 to 57 percent of the Navy's total
active duty forces, while personnel assigned to infrastructure
programs have comprised the balance, ranging between 43 to 46 percent
of the force structure. 

More than 90 percent of the Navy's total mission forces is comprised
of combat and direct support forces.  Combat forces consist of all
tactical naval forces--tactical air forces, sea based antisubmarine
warfare forces, surface combatant ships and submarines, maritime
patrol and undersea surveillance forces, amphibious, and mine warfare
forces.  Direct support forces provide support to various segments of
naval tactical forces.  Examples include fleet communications,
destroyer tenders, and intermediate aircraft maintenance. 

Four infrastructure categories--installation support, central
medical, central personnel, and central training--comprised
approximately 85 percent of the Navy's total infrastructure force in
fiscal year 1996.  Central training and central medical were the two
largest Navy infrastructure categories that year, with combined
forces totaling
106,756 personnel, or almost 55 percent of the personnel assigned to
infrastructure-related activities.  Central training consists of
activities that furnish funding, equipment, and personnel to provide
nonunit training of new personnel and multiple types of skill and
proficiency training.  Central medical consists of all hospitals and
other medical activities that directly support the medical care
system, including medical training, management of the medical system,
and support of medical installations. 


--------------------
\2 In June 1995, the Institute for Defense Analysis issued a manual
and mapping scheme that categorizes each of the FYDP program elements
as either mission or infrastructure programs.  The FYDP is an
authoritative record of current and projected force structure, costs,
and personnel levels that have been approved by the Secretary of
Defense. 


   MILITARY PERSONNEL AND O&M
   APPROPRIATIONS FUND A SIZEABLE
   PORTION OF NAVY INFRASTRUCTURE
   ACTIVITIES
---------------------------------------------------------- Chapter 1:5

As shown in figure 1.2, most of the Navy's direct infrastructure
activities in fiscal year 1996 are funded by two appropriations--O&M,
about 42 percent, and military personnel, about 33 percent.  The O&M
appropriation provided $11.7 billion for Navy infrastructure
activities, while the military personnel appropriation provided $9
billion.  In April 1996, we reported\3 that these appropriations were
closely associated with the force's readiness and
quality-of-life--priority areas of the Secretary of Defense for the
last few years. 

   Figure 1.2:  Direct
   Infrastructure Funding by Navy
   Appropriation for Fiscal Year
   1996

   (See figure in printed
   edition.)

Source:  GAO analysis of DOD FYDP data. 


--------------------
\3 An analysis of DOD's direct infrastructure funding by
appropriation for fiscal years 1996-2001 is included in Defense
Infrastructure:  Budget Estimates for 1996-2001 Offer Little Savings
for Modernization (GAO/NSIAD-96-131, Apr.  4, 1996). 


   OBJECTIVES, SCOPE, AND
   METHODOLOGY
---------------------------------------------------------- Chapter 1:6

Because of congressional concerns about active duty personnel levels,
we examined (1) the changes in size and composition of Navy active
duty forces between fiscal year 1989 and 1999, (2) the Navy's plans
to reduce forces to mandated minimum levels by fiscal year 1999 and
initiatives that could further reduce forces beyond these levels, and
(3) the Navy's processes for determining active force requirements. 
Companion reports on the Army and the Air Force have also been
published.\4

To determine how the size and composition of Navy active duty forces
have changed since the end of the Cold War, we analyzed end strength
and funding level data contained in the historical FYDP database and
the fiscal year 1996 FYDP.  We used DOD's Office of Program and
Evaluation definition of mission and infrastructure program elements
and analyzed changes between fiscal year 1989 and 1999.  We used
these years because 1989 represents the most recent peak for active
duty Navy personnel, at the end of the Cold War, and 1999 is the year
the Navy is expected to reach its goal of 394,900 personnel.  We
discussed changes and apparent trends with responsible Navy officials
from the Office of the Deputy Chief of Naval Operations (Manpower and
Personnel). 

To determine how the Navy plans to reduce forces by fiscal year 1999,
we reviewed the historical FYDP and 1996 FYDP forecasts and discussed
areas that were projected to decline significantly with responsible
personnel from the Deputy Chief of Naval Operation's Total Force
Programming/Manpower Directorate.  To determine the effect current
cost saving initiatives could have on personnel levels, we met with
cognizant officials from the offices directing the initiatives.  We
also met with headquarters manpower and personnel officials; manpower
officials at the Commander in Chief, Atlantic Fleet, in Norfolk,
Virginia; and the Commander in Chief, Pacific Fleet, in Pearl Harbor,
Hawaii.  We had numerous discussions with responsible officials at
the Navy Manpower Analysis Center (NAVMAC) in Millington, Tennessee. 
Finally, we visited four ships from different classes and discussed
their current and projected end strength levels with senior officer
and enlisted personnel.  Due to the nature of this review, we did not
do a detailed analysis of each cost savings initiative.  We currently
have other work underway to specifically examine DOD's outsourcing,
consolidation, and regional maintenance efforts. 

To determine how the Navy establishes its active force requirements,
we interviewed manpower and personnel officials from Navy
headquarters, NAVMAC officials, fleet manpower specialists, and
contractor officials who help develop requirements documents for Navy
ships.  We also interviewed the heads of the manpower analysis teams
of the Atlantic and Pacific Commanders in Chief and officials from
some of the Navy's other major shore commands who identify personnel
requirements for these commands.  We reviewed pertinent
documentation, as well as prior reports issued by the Naval Audit
Service, the Navy Inspector General's office, and us, and met with
officials from the Naval Audit Service in Falls Church, Virginia.  We
focused our efforts primarily on the Navy's process for determining
shore personnel requirements and on improvements that are being made
to the process, since this is where the Navy has encountered the
greatest criticism.  Because past evaluations have not identified
major shortcomings in mission-related personnel requirements, we did
not review this process in detail.  Nor did we evaluate whether the
process yields accurate mission requirements. 

Our review was performed from October 1995 to February 1997 in
accordance with generally accepted government auditing standards. 


--------------------
\4 Force Structure:  Army Support Forces Can Meet Two-Conflict
Strategy With Some Risks (GAO/NSIAD-97-66, Feb.  28, 1997) and Force
Structure:  Potential Exists to Further Reduce Active Air Force
Personnel (GAO/NSIAD-97-78, Mar.  28, 1997). 


NAVY WILL HAVE A SMALLER, MORE
SENIOR FORCE BY FISCAL YEAR 1999
============================================================ Chapter 2

The Navy expects to reduce its active duty forces by about 197,800
personnel between fiscal year 1989 and 1999.  Infrastructure-related
program forces will be reduced at a slightly higher rate than
mission-related program forces.  The Navy's active duty force of
fiscal year 1999 will be more senior and experienced than the fiscal
year 1989 force because the Navy plans to reduce the number of (1)
enlisted personnel at a higher rate than officers and (2) junior
officers and enlisted personnel at higher rates than senior
personnel.  Although several factors limit the Navy's flexibility in
managing the forces during the downsizing process, such as the large
number of officer positions controlled by legislation rather than
Navy policy, the Navy anticipates meeting its 394,900-personnel goal
by the end of fiscal year 1999. 


   NAVY HAS PROPORTIONATELY
   REDUCED FORCES ASSIGNED TO
   MISSION AND INFRASTRUCTURE
   PROGRAMS
---------------------------------------------------------- Chapter 2:1

The Navy has significantly reduced the number of forces assigned to
both mission and infrastructure-related programs and further
reductions are planned.  Through fiscal year 1996, the Navy reduced
mission program forces by about 86,600 positions, or approximately 27
percent, and infrastructure program forces by about 78,100 positions,
or approximately 29 percent, below the fiscal year 1989 personnel
levels.  During the remainder of the drawdown period--fiscal years
1997 to 1999--infrastructure program forces will be reduced more than
mission-related program forces.  The Navy's plans show infrastructure
program forces will decline by another 19,700 personnel, while
mission-related program forces will decline by about 13,400
personnel.  As shown in figure 2.1, the Navy plans to reduce
mission-related program forces by about 100,000 positions, or
approximately 31 percent, and infrastructure-related program forces
by about 97,800 positions, or 36 percent, between fiscal year 1989
and 1999.  Navy officials believe that it is important to continue
reducing the size of its infrastructure past fiscal year 1999;
however, due to the uncertainty about what savings might be achieved
and when, current FYDP projections do not show active duty military
personnel in the infrastructure-related forces decreasing beyond
fiscal year 2000. 

   Figure 2.1:  Navy Downsizing
   Trends--Personnel Assigned to
   Mission and Infrastructure
   Programs for Fiscal Years 1989
   to 1999

   (See figure in printed
   edition.)

Source:  GAO analysis of DOD FYDP data. 


      NAVY WILL REDUCE FORCES BY
      ELIMINATING COMBAT AND
      DIRECT SUPPORT FORCES
-------------------------------------------------------- Chapter 2:1.1

The Navy's plans show that two key components within the
mission-related categories will sustain most of the personnel
drawdown.  For example, between fiscal year 1989 and 1999, about 95
percent of the total reductions earmarked for mission forces will
occur in two major components:  combat forces and direct support
forces.  Combined, these two mission-related categories will decrease
by about 95,000 personnel by the end of fiscal year 1999.  The
changes in Navy personnel requirements for mission-related force
structure categories are shown in table 2.1. 



                               Table 2.1
                
                Changes in Active Duty Forces by Mission
                 Category Between Fiscal Year 1989 and
                                  1999

                                                               Percent
Mission category                 FY 1989   FY 1999    Change    change
------------------------------  --------  --------  --------  --------
Combat forces                    198,502   141,404  (57,098)      (29)
Direct support forces            101,178    63,261  (37,917)      (37)
All other mission forces\a        20,092    15,116   (4,976)      (25)
======================================================================
Total                            319,772   219,781  (99,991)      (31)
----------------------------------------------------------------------
\a Other mission forces include intelligence; research, development,
test, and evaluation; command, control and communication; and space
programs. 

Source:  GAO analysis of DOD FYDP data. 

The Navy accelerated its drawdown in fiscal year 1992 after
completing its involvement in Operation Desert Storm.  By
decommissioning many ships, submarines, and air squadrons, and
eliminating associated direct support forces, the Navy was able to
reduce a major portion of its mission-related personnel requirements. 
Between fiscal year 1989 and 1996, decommissioning actions resulted
in net decreases in the force structure: 
3 aircraft carriers; 8 cruisers; 73 surface combatants--battleships,
cruisers, destroyers, and frigates; 39 submarines; 206 F-14A
aircraft; and 229 A-6E aircraft. 

According to Navy officials and FYDP data, the Navy is taking the
following actions to reduce combat forces between fiscal year 1989
and 1999: 

  -- decommissioning nonmissile frigates, thereby eliminating 12,098
     positions;

  -- reducing the force structure assigned to submarine-launched
     ballistic missiles, eliminating 8,563 positions;

  -- reducing the number of steam driven cruisers and destroyers in
     the active fleet while building 18 Arleigh Burke class
     destroyers, eliminating
     5,718 positions;

  -- decommissioning all 4 battleships, eliminating 5,246 positions;

  -- reducing the force structure assigned to attack submarines,
     eliminating 5,272 positions;

  -- decommissioning most of its A-6 squadrons, eliminating 3,623
     positions; and

  -- decommissioning all of its A-7 air squadrons, resulting in the
     loss of
     1,699 positions. 

Along with its combat forces, the Navy is also reducing its active
duty direct support forces.  For example, the Navy is

  -- eliminating 7,662 positions assigned to underway replenishment
     ships;

  -- decreasing the number of attack submarines, thereby eliminating
     5,731 other positions assigned to submarine support functions;

  -- decommissioning support ships, thereby eliminating 5,562
     positions;

  -- reducing its active duty P-3 fleet, thereby eliminating 4,119
     active duty positions assigned to antisubmarine warfare patrol
     squadrons; and

  -- reducing the number of active aircraft carriers and associated
     air wings, thereby eliminating 434 E-2 squadron positions. 


      MAJORITY OF
      INFRASTRUCTURE-RELATED CUTS
      WILL OCCUR IN CENTRAL
      TRAINING AND CENTRAL
      PERSONNEL
-------------------------------------------------------- Chapter 2:1.2

The Navy will reduce infrastructure-related active duty forces by
about 97,800 personnel between fiscal year 1989 and 1999.  The
reductions in personnel for each of the eight infrastructure-related
force structure categories are shown in table 2.2. 



                               Table 2.2
                
                    Changes in Active Duty Forces by
                 Infrastructure Category Between Fiscal
                           Year 1989 and 1999

                                                               Percent
Infrastructure category          FY 1989   FY 1999    Change    change
------------------------------  --------  --------  --------  --------
Central training                 129,775    63,662  (66,113)      (51)
Central personnel                 40,226    27,078  (13,148)      (33)
Installation support              34,037    25,401   (8,636)      (25)
Force management                  21,973    17,598   (4,375)      (20)
Central logistics                  9,713     7,704   (2,009)      (21)
Central command, control, and      3,482     1,480   (2,002)      (58)
 communications
Central medical                   32,782    31,420   (1,362)       (4)
Acquisition infrastructure           892       776     (116)      (13)
======================================================================
Total                            272,880   175,119  (97,761)      (36)
----------------------------------------------------------------------
Source:  GAO analysis of DOD FYDP data. 

The greatest number of personnel decreases in infrastructure-related
program forces are expected to occur in central training and central
personnel activities.  The decline in central training is caused
primarily by the large decrease in the Navy's mission force
structure.  As the mission program force structure declines, the
number of students also declines, and requirements for instructors
likewise diminish.  According to a Navy official, most of the central
training drawdown is attributed to (1) closing the two recruit
training centers at San Diego, California, and Orlando, Florida, and
consolidating the remaining recruit training functions at the Great
Lakes Training Center, Illinois, and (2) closing general skill
training centers.  Declining requirements for flight training and
other professional education programs--including reducing enrollment
in the Naval Academy and preparatory schools--also contribute to the
drawdown of personnel in central training functions. 

The drawdown experienced by the central personnel function is also
associated with a smaller active duty mission force structure.  As
the force structure declined, requirements for recruiting activities
were reduced, and the requirement for accessions also declined.  The
single largest drawdown in central personnel activities has been in
the number of transients--those on travel, leave in route, or
temporary duty status (except for training) while on permanent change
of station orders.  The number of transients is expected to decline
from 24,712 to 16,053 personnel, or 35 percent, between fiscal year
1989 and 1999. 


   ENLISTED PERSONNEL WILL BE
   REDUCED MORE THAN OFFICERS
---------------------------------------------------------- Chapter 2:2

During this downsizing process, the size and composition of active
duty naval forces have changed and will continue to change.  A higher
rate of junior grade enlisted personnel and junior grade officers
will be released from active duty than their senior grade
counterparts.  A larger proportion of enlisted personnel will be
eliminated from infrastructure-related activities when compared to
the percentage of officers eliminated from similar activities.  Navy
enlisted personnel will experience a larger percentage of the overall
reductions than is planned for the officer corps.  For example, the
number of enlisted personnel will decline by about 180,100 positions,
or about 35 percent; however, the number of officers will decline by
only 17,600 positions, or about 24 percent, by fiscal year 1999, as
shown in figure 2.2.  According to Navy officials, the greater
decline in enlisted personnel is due primarily to the increased
technical nature of the modern Navy and the number of officers
assigned to positions over which the Navy has no control, such as
joint/DOD positions. 

   Figure 2.2:  Decline in the
   Number of Officers and Enlisted
   Personnel between Fiscal Year
   1989 and 1999

   (See figure in printed
   edition.)

Source:  GAO analysis of DOD FYDP data. 


      MILITARY PERSONNEL WILL GROW
      MORE SENIOR IN RANK DURING
      DOWNSIZING
-------------------------------------------------------- Chapter 2:2.1

The gradual "grade creep" experienced by both officers and enlisted
personnel is another change in the composition of the active duty
force.  Officers and enlisted personnel will grow more senior in rank
during the downsizing because more personnel in junior ranks will
leave the force compared to those in senior ranks.  For example, our
analysis shows that senior officer ranks--commander through
admiral--will decline by about 12 percent between fiscal year 1989
and 1997.  However, the junior officers--ensign through lieutenant
commander--will decline by about 23 percent during the same period. 
A similar trend also exists at the senior enlisted grades.  Senior
enlisted personnel--second class petty officer (E-5) to master chief
petty officer (E-9)--will decline by about 29 percent between fiscal
year 1989 and 1997.  However, junior enlisted personnel--seaman
recruit (E-1) to 3rd-class petty officer (E-4)--will decline by 35
percent during the same period.  Also, fewer personnel have joined
the force. 

An analysis of the top six enlisted pay grades provides another
example of changes in the active duty force structure.  In fiscal
year 1989, about 70 percent of enlisted personnel occupied the top
six pay grades--E-4 to E-9.  However, Navy requirements call for the
top six enlisted pay grades to increase slightly--reaching 73 percent
by fiscal year 1998--because of the significant personnel downsizing
within the enlisted personnel ranks.  According to Navy officials,
strength planners will limit this number to 69.9 percent.  These
changes substantiate the direction of the post-Cold War era Navy.  In
recent congressional testimony, the Chief of Naval Personnel stated
that the Navy's personnel goal is "to grow a more senior and
experienced force, to reduce our recruiting burden and stockpile
needed skills and experience."


      GREATER PERCENTAGE OF
      ENLISTED PERSONNEL WILL BE
      REDUCED IN INFRASTRUCTURE
      CATEGORIES
-------------------------------------------------------- Chapter 2:2.2

The mix of officers and enlisted personnel assigned to mission and
infrastructure-related programs will also change during the
downsizing period.  Our analysis shows a parallel decline in officer
and enlisted personnel assigned to mission programs.  However,
officers will experience a smaller percentage decrease in
infrastructure-related activities.  Between fiscal year 1989 and
1999, officers and enlisted personnel assigned to mission-related
activities will decline by about 30 percent.  However, in
infrastructure-related activities, the officer corps will experience
a 21-percent decrease, while enlisted personnel will decline by 39
percent, as shown in table 2.3. 



                               Table 2.3
                
                    Changes in Officer and Enlisted
                Personnel in Mission and Infrastructure
                 Programs between Fiscal Year 1989 and
                                  1999

                                                     Infrastructure
                              Mission programs          programs
                            --------------------  --------------------
                             Officers   Enlisted   Officers   Enlisted
--------------------------  ---------  ---------  ---------  ---------
FY 1989                        26,512    293,260     45,641    227,239
FY 1999                        18,502    201,279     36,048    139,071
Percent change                   (30)       (31)       (21)       (39)
----------------------------------------------------------------------
Source:  GAO analysis of DOD and FYDP data. 

According to Navy officials, one reason for the smaller percentage
decrease of officers versus enlisted personnel in infrastructure
forces can be attributed to the relatively large number of Navy
officers assigned to medical and joint/DOD positions.  These
positions are classified as infrastructure and generally have a high
number of officers.  For example, in fiscal year 1996, about 10,800
Navy officers were assigned to such positions. 


      MEDICAL AND JOINT/DOD
      POSITIONS HAVE REMAINED
      STABLE
-------------------------------------------------------- Chapter 2:2.3

The Navy does not determine requirements for some personnel because
the positions are determined by law or controlled by other agencies. 
For example, the National Defense Authorization Act of 1991 restricts
the Secretary of Defense from reducing military medical personnel
unless DOD certifies the number of personnel being reduced is excess
to current or projected needs and does not increase the cost of
services provided under the Civilian Health and Medical Program of
the Uniformed Services.  Also, under the Goldwater-Nichols Defense
Reorganization Act of 1986, the Secretary of Defense specifies the
number of officer joint duty assignment positions that each service
must fill.  Further, DOD cannot increase or decrease the number of
personnel that support the National Foreign Intelligence Program
without approval from the Director of Central Intelligence. 
Likewise, the number of military positions within the Special
Operations Command cannot be adjusted unless directed by the Deputy
Secretary of Defense. 

Navy officials noted that medical and joint/DOD duty positions, which
have a high number of officers, account for most of the positions
outside the direct control of the Navy.  In fiscal year 1996, 20
percent of the Navy's active duty officer positions and about 9
percent of the active duty enlisted positions were beyond Navy
control.  Navy data show that the combined number of medical and
joint duty DOD positions will remain relatively stable through fiscal
year 1999, despite a 33-percent decline in the active duty force.  As
a result, the number of officer positions that the Navy cannot
unilaterally reduce has increased from 10,244, or 14 percent, in
fiscal year 1990 to 11,703, or 20 percent, in fiscal year 1996, as
seen in figure 2.3. 

   Figure 2.3:  Increase in the
   Percentage of Navy Officers
   Assigned to DOD Positions
   Beyond Navy Control--Fiscal
   Years 1990 and 1996

   (See figure in printed
   edition.)

Note:  Navy database for fiscal year 1989 was incomplete; therefore,
our basis of comparison is limited to fiscal year 1990. 

Source:  Navy Total Force Manpower Management System database. 

In November 1995, the DOD Inspector General reported that although
the services have reduced the number of active duty personnel, there
has been no corresponding decrease in the number of joint positions. 
The report noted the services must still give priority to joint
staffing, with a substantially smaller pool.  The Inspector General
also reported there was no standard methodology or criteria for
determining and validating personnel requirements.  The National
Defense Authorization Act for Fiscal Year 1997 requires us to review
DOD's actions in response to the Inspector General's report.  This
review will be conducted in calendar year 1997. 


   CONCLUSIONS
---------------------------------------------------------- Chapter 2:3

Reduced Navy force structure and related support activities since the
Gulf War have allowed the Navy to also significantly reduce the
number of active duty personnel.  These reductions are in keeping
with the direction established in the Bottom-Up Review for shifting
the focus from a national security strategy designed to meet a global
Soviet threat to one oriented toward the post-Cold War era.  So far,
mission and infrastructure-related forces have been proportionately
reduced.  However, within these two broad categories, key components
have sustained most of the drawdown.  These components include the
combat and direct support categories for mission programs and the
central training and central personnel categories of the
infrastructure.  The number of personnel in other categories, such as
intelligence and medical personnel, are beyond the Navy's control
because the number of positions are limited by legislation or
controlled by other agencies.  Overall, however, the reductions have
been more focused toward junior enlisted and officer personnel as
less complex and technologically sophisticated platforms have been
retired.  Based on these trends, the Navy will move toward a more
senior and experienced force, and as a result, pay-related costs will
not decline in proportion to personnel. 


ONGOING INITIATIVES COULD ENABLE
NAVY TO REDUCE PERSONNEL BELOW ITS
FISCAL YEAR 1999 GOAL
============================================================ Chapter 3

In addition to plans for drawing down active military forces to
394,900 by fiscal year 1999, the Navy is working on ways to reduce
the force further at shore activities and aboard ships.  For example,
the Navy is evaluating ways to regionalize and consolidate shore
activities at many locations, which could save millions of dollars by
employing better business practices and eliminating civilian and
military positions.  Initiatives that could further reduce at sea
requirements include the Smart Ship program and future ship
acquisition programs that emphasize smaller crews. 


   NAVY PLANS TO ACHIEVE DRAWDOWN
   GOAL BY FISCAL YEAR 1999
---------------------------------------------------------- Chapter 3:1

The 1996 FYDP shows that the Navy plans to eliminate 33,100 active
military requirements in moving from 428,000 personnel in fiscal year
1996 to 394,900 personnel in fiscal year 1999.  Navy plans show that
forces will be reduced in both mission and infrastructure categories. 
Table 3.1 shows the cuts that are programmed to occur as the Navy
continues to close bases and decommission ships, submarines, and air
squadrons; reduces recruiting, training, transient, and temporary
positions; and eliminates or outsources base support positions. 



                               Table 3.1
                
                  Planned Navy Force Cuts From Fiscal
                           Years 1996 to 1999

                                     Planned force
Category                                    cuts\a
------------------------------  ------------------  ------------------
Mission                                                         13,400
Combat and direct support                    9,600
 (sea)
Combat and direct support                    3,000
 (shore)
Other mission forces                         800\b
Infrastructure                                                  19,700
Recruit and general skills                   8,300
 training
Base operation support\c                     4,900
Transient and holding accounts               2,000
Recruiting                                     400
Other infrastructure forces                4,100\b
======================================================================
Total                                                           33,100
----------------------------------------------------------------------
\a All figures are rounded to the nearest hundred. 

\b These reductions will be spread across numerous categories with
the requirements for most categories being cut by 100 positions or
less. 

\c Includes positions at surface, subsurface, air, and training
bases, and other base support positions. 

Source:  GAO analysis of DOD FYDP data. 


      PLANNED CUTS IN MISSION
      FORCES
-------------------------------------------------------- Chapter 3:1.1

Although the Navy plans to commission 18 ships, 3 submarines, and
2 aircraft squadrons by September 30, 1999, it will continue to
decommission more ships, submarines, and air squadrons than it
commissions.  The net effect is that the Navy will eliminate about
9,600 sea duty requirements from its combat and direct support forces
by that date.  Table 3.2 shows planned changes in force levels for
certain ships, submarines, and aircraft squadrons between September
30, 1996, and September 30, 1999. 



                               Table 3.2
                
                 Expected Changes in the Number of Navy
                 Platforms Between Fiscal Year 1996 and
                                  1999

                                As of    Leaving    Joining      As of
Platforms                     9/30/96  the fleet  the fleet    9/30/99
--------------------------  ---------  ---------  ---------  ---------
Aircraft carriers                  12          1          1         12
Cruisers                           31          2          0         29
Destroyers                         51          0         15         66
Frigates                           43         12          0         31
Submarines                         97         27          3       73\a
Amphibious assault ships           22          2          2         22
Submarine                           4          1          0          3
 tenders
Ammunition ships                    4          4          0          0
Aircraft squadrons                155          6          2        151
----------------------------------------------------------------------
\a This number includes 55 attack submarines and 18 ballistic missile
submarines. 

Source:  Chief of Naval Operations Manpower Resources Branch. 

The Navy also plans to eliminate about 3,000 shore requirements from
its combat and direct support forces.  In all, the Navy will
eliminate about 12,600 requirements from these two mission categories
between fiscal year 1996 and 1999. 


      PLANNED CUTS IN
      INFRASTRUCTURE FORCES
-------------------------------------------------------- Chapter 3:1.2

As shown by table 3.1, the Navy plans to eliminate about 19,700
positions from its infrastructure forces between fiscal year 1996 and
1999.  Cuts in recruit and general skills training will account for
about 8,300 of these positions.  Some of these positions will be
eliminated because the Navy will have fewer recruits to train, but
several other factors will contribute to the cuts.  For example,
recruit training has been shortened by 2 weeks; therefore, the Navy
needs fewer recruit training positions.  Also, the Navy has
eliminated several of its career fields, thus eliminating the need
for some general skills training positions.  Some general skills
schools have had their terms shortened, and the number of positions
reduced as the Navy shifts from equipment specific training to more
general training.  Finally, the Navy is eliminating training
positions as it shifts training from schools to operational units. 

The Navy also plans to eliminate (1) more than 4,900 base operations
support positions, primarily through outsourcing and base closures;
(2) about 400 military recruiting positions due to reduced recruiting
efforts and civilian substitution; and (3) about 2,000 positions from
its transient and holding accounts\1 due to the decline in the Navy's
total end strength and efforts to reduce the time people spend
between duty stations. 


--------------------
\1 The transient account includes positions for patients, prisoners,
and personnel changing duty stations.  Positions in the holding
account are used to fill critical short-term shortages.  The holding
account comprises about 0.5 percent of the Navy's end strength. 


   INITIATIVES MAY ENABLE THE NAVY
   TO REDUCE PERSONNEL BELOW ITS
   GOAL
---------------------------------------------------------- Chapter 3:2

Concurrent with its implementation of plans to downsize the active
force level to 394,900, the Navy has begun a series of cost-saving
initiatives designed to provide funds for modernization and
recapitalization.  The Navy expects these initiatives to achieve a
portion of their cost savings by reducing active military personnel
requirements on shore and at sea.  However, it is less certain about
the exact savings that it can achieve and when it will be able to
eliminate the associated positions.  As a result, the Navy did not
fully program these anticipated personnel savings into its 1996 FYDP. 
Short-term efforts to regionalize and consolidate activities, and
longer term efforts to improve base efficiency could reduce the
number of shore positions.  Initiatives that could reduce sea
requirements include the Smart Ship program and future ship designs
that emphasize reduced crew sizes.  The Navy's regional maintenance
initiative has already reduced both shore and sea requirements, and
the Navy expects this initiative to achieve further personnel
savings. 


      SHORE-BASED INITIATIVES
-------------------------------------------------------- Chapter 3:2.1

The Navy is evaluating opportunities to regionalize and consolidate
shore-based activities so that redundant functions and overhead can
be eliminated and management layers reduced.  The evaluations are
based on the fundamental principle that no individual organization
should perform a function that a regional organization or the private
sector can do more cost effectively.  Evaluations of different
locations are in various stages of implementation or planning.  The
initial analysis at San Diego is nearly complete, and the Navy
expects to save about $40 million by reducing overhead and
eliminating about 450 civilian and 265 military positions.  The
initial analyses at Jacksonville and Pearl Harbor are awaiting final
approval, but the cuts are expected to be somewhat smaller than those
at San Diego.  The Navy recently began collecting and analyzing data
to determine ways to regionalize and consolidate activities in
several areas with large active duty populations--Norfolk, Pensacola,
Puget Sound, and the National Capital regions.  However, it is too
early to project personnel savings from these initiatives.  In
addition, the Navy plans to begin initiatives at the remaining shore
concentration areas, including Guam, Japan, Europe, Texas, New
Orleans, and the Great Lake and Northeast regions, in the near
future.  According to Navy officials, these initiatives may eliminate
hundreds of military positions at each location, but improved
business practices and eliminated civilian positions are expected to
produce the greatest savings. 

Outsourcing/privatization\2 is one of the Navy's primary initiatives
that is expected to yield savings.  The Navy expects savings to begin
accruing in fiscal year 2000 and increase to $1.3 billion per year by
the end of fiscal year 2003.  To achieve these savings, the Navy
projects that it will need to open about 80,000 positions (50,000
civilian and 30,000 military) to outsourcing competition.  In January
1997, the Navy announced plans to ask the private sector to submit
bids to perform selected functions that Navy civilian and military
personnel now perform in Guam, Puerto Rico, and throughout the United
States.  The Navy will then determine which functions can be
performed less expensively by the private sector.  Since only about
2,300 of the approximately 10,700 announced positions are military,
it is likely that most of the savings from these initial outsourcing
efforts will come from the Navy's civilian workforce.  We recently
issued a report that focused on DOD's outsourcing efforts.\3

Navy officials believe that the installation management accounting
project is a key to efficient shore infrastructure and could lead to
further personnel streamlining.  This project is aimed at
standardizing the methods individual installations use to collect
costs for their core business areas and key functions and
sub-functions.  Historically, cost collection methods varied among
installations, and information was not always available to help Navy
managers determine the true costs of performing certain functions. 
For example, they often did not know the cost of providing bachelor
enlisted and officer quarters because utility and military personnel
costs were not tracked for these facilities.  Utility and military
personnel costs were often tracked at the base level or higher.  By
December 1996, the Navy had identified its core business areas and
key functions and had developed cost and coding schemes that it is
continuing to refine.  The Navy hopes to implement this project
during the last quarter of fiscal year 1997 and to have reliable cost
data for individual functions and activities by fiscal year 1998. 
The data will enable local managers to use personnel and other assets
more efficiently on their bases and will also provide the information
necessary for headquarter organizations to compare the costs of
performing similar functions at different locations.  According to
Navy officials, this project is expected to achieve personnel and
other cost savings as improved information leads to better decisions
and "best practices" are shared among locations. 

Another shore initiative that could reduce military positions is the
Smart Base project.  This project's goal is to increase shore
installation efficiency through the use of commercially available
technologies and/or management methods.  Promising applications will
be tested at Naval Station Pascagoula, Mississippi, or Naval Shipyard
Portsmouth, New Hampshire, and installation could begin as early as
March 1997.  No personnel savings have been projected yet. 


--------------------
\2 Under both outsourcing and privatization, private firms provide
services the Navy previously performed.  Under outsourcing, the Navy
retains ownership of facilities and maintains a significant degree of
participation and control of operations.  Under privatization, the
Navy divests ownership of certain assets.  For simplification, we use
the term outsourcing to refer to both outsourcing and privatization. 

\3 Base Operations:  Challenges Confronting DOD as It Renews Emphasis
on Outsourcing (GAO/NSIAD-97-86, Mar.  11, 1997). 


      SEA-BASED INITIATIVES
-------------------------------------------------------- Chapter 3:2.2

In addition to potential shore duty cuts, the Navy expects to reduce
military personnel by eliminating some sea duty requirements,
primarily as a result of the Smart Ship program.  This program was
begun in December 1995 to reexamine the way the Navy crews surface
ships.  Its goal is to reduce workloads by implementing labor-saving
technology and changing crewing policies.  The Navy solicited
proposals from commercial, academic, and Navy technical experts and
approved more than
90 proposals for evaluation on 1 of its Aegis cruisers, U.S.S. 
Yorktown.  Tests are being conducted during the ship's December 1996
through April 1997 deployment, and the final report is scheduled to
be issued by June 30, 1997.  The Navy will reduce the size of the
U.S.S.  Yorktown's crew if the report shows that workload has been
reduced sufficiently. 

The Navy will not project personnel savings for the Smart Ship
program until it completes deployment testing aboard the U.S.S. 
Yorktown and proves that the ship can meet its mission requirements
with a smaller crew without compromising ship or crew safety. 
Although the U.S.S.  Yorktown was expected to leave up to 50
personnel ashore during its deployment testing, final personnel
savings could be much smaller.  Previous sea trials that tested
innovative concepts were not all successful.  However, if current
tests are successful, the Navy hopes to apply the findings to other
ships in the fleet and new ship designs, thereby multiplying any
identified personnel savings. 

Some savings could come from changes in the basic assumptions about
the way the Navy operates.  For example, the Navy is testing a
"reliability centered maintenance concept" on the U.S.S.  Yorktown. 
Under this concept, the crew operates relatively inexpensive
equipment until it fails and then replaces it, rather than using the
Navy's standard manpower-intensive, preventive maintenance
procedures.  The Navy is also testing a new watch organization on the
ship.  This organization is based on a core team that will be
supplemented by response or reaction teams.  Because the Navy could
easily transfer these concepts to other ships, it could quickly
achieve personnel savings if the new maintenance concept and
shipboard watch organization are successfully demonstrated on the
U.S.S.  Yorktown.  However, it may take years to achieve some other
Smart Ship savings that require the installation of new computers and
other labor-saving equipment as ships are overhauled and modernized. 

The Navy had also hoped to achieve savings by eliminating sea duty
requirements through "optimum manning" proposals.  Between December
1995 and November 1996, the Navy issued 25 proposals to reduce
workload and training costs for ships, submarines, and aviation
squadrons through requirements, policy, and equipment changes. 
According to Navy estimates, these proposals could have saved up to
$203 million a year.  However, by December 1996, only one proposal
had been accepted.  Most of the other proposals met with opposition,
but a few are being tested under the Smart Ship program for later
consideration. 

The associated personnel savings of some sea-based initiatives are
not expected to accrue until after fiscal year 1999.  For example,
new classes of ships requiring smaller crews, such as the CVX,
LPD-17, and SC-21, will not reach the fleet until after the turn of
the century.  However, if these future ships are built and crewed as
currently envisioned, they could reduce military personnel
requirements in the next decade and beyond, as they replace older,
more personnel-intensive ships. 


      REGIONAL MAINTENANCE
-------------------------------------------------------- Chapter 3:2.3

The Navy expects its regional maintenance initiative to enable it to
reduce personnel requirements at sea and on shore by eliminating
excess infrastructure, integrating maintenance and supply functions,
providing customers with a single accountable provider of
maintenance, and evenly distributing workload between maintenance
facilities.\4 However, it is difficult to assign specific personnel
savings to this initiative because it is closely linked with base
closures and ship decommissionings.  For example, Navy plans to
decommission several destroyer and submarine tenders were accelerated
due to the initiative, which resulted in this initiative eliminating
7,395 sea duty repair requirements in fiscal years 1995 and 1996. 
However, requirements that were eliminated outside the repair
departments were not attributed to this initiative.  The same type of
uncertainty exists when tabulating shore personnel savings associated
with this initiative.  For example, some maintenance facilities were
recommended for consolidation and closure under both this initiative
and the last base realignment and closure process.  Between fiscal
year 1996 and 2003, the Navy expects to eliminate about 3,200
additional military requirements as a result of this initiative. 
About 800 of these requirements will be eliminated from the planned
decommissioning of the submarine tender U.S.S.  Simon Lake in fiscal
year 1999. 


--------------------
\4 The Navy plans to implement this initiative in three overlapping
phases.  The first phase, which began in fiscal year 1995, integrated
and consolidated the intermediate maintenance facilities that perform
minor repairs, such as calibrating, repairing, or replacing damaged
equipment, parts, or components.  The second phase, begun in fiscal
year 1996, integrates and consolidates intermediate maintenance
facilities with depot level maintenance facilities, which perform
major repairs.  The third phase will improve business practices and
integrate maintenance processes and information management systems,
beginning in fiscal year 1997. 


      PROTECTED POSITIONS AND NAVY
      ROTATION POLICIES COULD
      INHIBIT NAVY FROM MAKING
      SOME CUTS
-------------------------------------------------------- Chapter 3:2.4

The Navy cannot consider reducing certain parts of its force due to
protective legislation.  For example, regionalization and
consolidation studies could not recommend cuts in medical positions
as a result of consolidations if the recommended cuts would push
medical levels below the floors provided in the National Defense
Authorization Act for Fiscal Year 1996.  Legislation also protects
some foreign intelligence positions. 

In addition, it is questionable whether the Navy would eliminate or
outsource shore positions if the specific cuts would adversely affect
sea/shore rotation.  Because the Navy found that retention suffers as
sea duty and family separation increase, it established equitable
sea/shore rotation as a goal for all career enlisted personnel--E-5
through E-9.  The goal states that personnel should have a minimum of
3 years of shore duty for every 3 years of sea duty.  While the Navy
does not create shore positions just to meet the rotation goal, it
considers military sea/shore rotation in deciding whether to shift
military shore positions to civilians or contractors. 

Despite attempts to balance rotation, more than half of the Navy's
career enlisted personnel are exceeding the sea duty goal. 
Therefore, Navy officials are closely evaluating prospective shore
duty cuts from the standpoint of how they would affect rotation. 
However, if sea duty requirements continue to decline as a result of
decommissionings, implementation of Smart Ship concepts and
technologies, and the introduction of new ship designs, fewer shore
positions will be needed to balance sea/shore rotation.  Therefore,
more shore positions could be filled with civilians or contractors,
if they are less costly. 


   CONCLUSIONS
---------------------------------------------------------- Chapter 3:3

Due to uncertainties about the number of requirements that would be
affected, the Navy did not use any substantial savings from the Smart
Ship and Smart Base projects, the regionalization and consolidation
initiative, or the installation management accounting project when
projecting future personnel requirements in the 1996 FYDP. 
Therefore, although the Navy has not officially expressed a desire to
go below its personnel goal of 394,900, it is possible that these
ongoing initiatives could push personnel levels below that goal by
the end of fiscal year 1999.  Depending on the success of these
initiatives, outsourcing, and the introduction of new ships with
reduced crews, the Navy could reduce its military personnel even
further in the future. 


PROBLEMS STILL EXIST WITH NAVY'S
SHORE PERSONNEL REQUIREMENTS
PROGRAM
============================================================ Chapter 4

The Navy has had a long-standing problem quantifying the size of its
shore infrastructure needed to support its operating forces.  Despite
concerns raised by the Congress and various audit organizations for
more than 20 years, many of the same problems continue with the
current program.  Problems continue primarily because of the low
priority the Navy has traditionally given to managing the shore
establishment and the ineffective oversight of the shore requirements
program.  Without an effective requirements program, the Navy has
little assurance that resources directed at personnel requirements
are being used in the most efficient way possible and that its shore
establishment is appropriately sized.  Having an effective program is
particularly important as the Navy looks for savings and efficiencies
to modernize and recapitalize its operating forces. 


   NAVY USES SEPARATE PROCESSES TO
   DETERMINE PERSONNEL
   REQUIREMENTS FOR FORCES AT SEA
   AND ON SHORE
---------------------------------------------------------- Chapter 4:1

The Navy uses separate processes to determine personnel requirements
for its operating forces and its shore-based personnel who support
the operating forces.  Traditionally, the Navy has devoted its
greatest attention to its operating forces--its ships, submarines,
and squadrons that form the basis of its contribution to U.S. 
national security.  As such, according to Navy officials, the
management and funding of these forces have received the Navy's
highest priority and attention, while the management of the shore
infrastructure has been secondary.  These priorities are reflected in
the processes the Navy uses to establish personnel requirements for
its forces at sea and on shore and the extent to which the processes
have been implemented as intended. 


      REQUIREMENTS PROCESS FOR
      MISSION-RELATED PERSONNEL
-------------------------------------------------------- Chapter 4:1.1

The Navy's process to determine personnel requirements for its
operating forces is a centralized top-down approach that is based on
measurable criteria and involves close cooperation between
headquarters and the fleets.  The process begins when the Navy's
warfare sponsors\1 use the national military strategy and the Navy's
war plans to draft the required operational capability/projected
operational environment (ROC/POE) statement for individual
operational units.  In these documents, the warfare sponsors identify
the primary missions the units must be fully capable of performing
during wartime and the secondary warfare missions that the units are
also expected to perform, but which are not essential to carrying out
the wartime mission.  The ROC/POE statements also list specific
capabilities to support the assigned missions under various operating
conditions.  Warfare sponsors are responsible for ensuring that
assigned missions and required capabilities in the ROC/POE statements
are consistent for similar units. 

After an operational unit's ROC/POE has been drafted, NAVMAC reviews
it and develops a personnel requirements document for the unit.  The
warfare sponsor then combines the personnel requirements document
with the draft ROC/POE statement and forwards the package to both
fleet and headquarter units for review and comment.  Before the final
versions of these documents are signed and issued, the Deputy Chief
of Naval Operations for Plans, Policy, and Operations reviews them to
ensure they comply with established naval policies and doctrines. 
Finally, the warfare sponsor signs the ROC/POE and the Assistant
Chief of Naval Personnel for Total Force Programming, Manpower, and
Information Resources Management approves the manpower documents. 

Because past evaluations of the Navy's process for determining
personnel requirements for the operating forces have not surfaced
major shortcomings in the process, we did not review this process in
detail.  NAVMAC officials consider this process to yield accurate
mission requirements and attribute the success of the fleet
requirements process to three factors: 

  -- Well-defined workload.  ROC/POE statements provide the means for
     defining the measurable workloads necessary to accomplish the
     Navy's missions.  They list the types of equipment that must be
     operated and the training that must be conducted for a unit to
     meet its mission requirement, under each condition of readiness
     (general quarters, wartime cruising, peacetime cruising, and
     peacetime in port). 

  -- Centralized requirements determination.  Although the
     requirements determination process for operating forces is
     driven from the top down, it has active involvement from the
     Navy's operating forces and technical experts.  ROC/POE
     statements and personnel requirements documents are not
     finalized until everyone from the Navy's manpower organizations
     to the fleet commanders in chief have had a chance to review and
     comment on the package. 

  -- Direct linkage to the Navy's planning, programming, and
     budgeting system.  The fact that the warfare sponsors draft a
     ROC/POE statement and are required to fund a high percentage
     (approximately 90 percent) of operational units' personnel
     requirements ensures their active participation throughout this
     process.  According to the Navy, this active participation,
     motivated by fiscal discipline, forces warfare sponsors to make
     risk assessments and trade-offs when developing their ROC/POE
     statements. 


--------------------
\1 Warfare sponsors are responsible for the planning, programming,
and procuring of resources and for resource assessments.  They also
fund resources and set policy and are often referred to as resource
sponsors. 


      REQUIREMENTS PROCESS FOR
      INFRASTRUCTURE-RELATED
      PERSONNEL
-------------------------------------------------------- Chapter 4:1.2

The Navy uses an "efficiency review" process to determine personnel
requirements for its shore establishment.  This process determines
personnel requirements for all infrastructure activities and a small
portion of the Navy's mission activities, such as intelligence,
research and development, and command and control--about half the
Navy's active personnel.  The process was established to determine
and document the minimum quantitative and qualitative personnel
requirements to perform the Navy's support missions ashore.  If
carried out as intended, the efficiency review process identifies the
best method by which work can be performed and the most efficient
resource mix (e.g., military personnel, civilians, and contractors)
to accomplish this work.  In most cases, however, the process has not
been carried out as intended and has become one of justifying
existing resource allocations rather than evaluating alternative
combinations of people, material, facilities, and organizational
structures to ensure that the most cost-effective combination of
resources is used, as Navy instructions specify.  The Assistant
Secretary of the Navy (Manpower and Reserve Affairs) and the Chief of
Naval Personnel are to provide policy guidance and program oversight
to ensure that integrity is maintained; expected benefits are
realized; and policy, standards, and criteria are being adhered to. 
The Assistant Chief of Naval Personnel for Total Force Programming,
Manpower, and Information Resources Management is the Navy's policy
and program manager for determining shore personnel requirements. 
NAVMAC supports this office by providing technical assistance,
supporting program management, providing manpower management
training, and performing other related tasks. 

The shore establishment's personnel requirements process differs in
several ways from the process for the operating forces.  The biggest
difference between the two is the bottom-up approach of the shore
process versus the top-down approach of the requirements
determination process for operating forces.  Personnel requirements
for the shore establishment are determined by the Navy's 22 major
shore commands,\2 rather than by Navy headquarters, as is the case
with the Navy's operating forces.  Table 4.1 shows the distribution
of active military positions within the Navy's 22 shore commands as
of December 1996. 



                               Table 4.1
                
                Authorized Military Positions Within the
                Major Shore Commands as of December 1996

                                                             Number of
Shore Command                                                personnel
--------------------------------------------------  ------------------
Chief, Bureau of Medicine and Surgery                           30,094
Commander-in-Chief, U.S. Atlantic Fleet                         25,953
Commander-in-Chief, U.S. Pacific Fleet                          23,548
Chief of Naval Education and Training                           18,309
Chief of Naval Personnel                                         8,311
Commander, Naval Reserve Forces                                  8,669
Chief of Naval Operations                                        6,528
Commander, Naval Security Group Command                          5,860
Naval Computer and Telecommunications Command                    5,123
Commander, Naval Sea Systems Command                             3,536
Commander, Naval Air Systems Command                             3,647
Commander-in-Chief, U.S. Naval Forces Europe                     3,759
Commander, Naval Special Warfare Command                         1,481
Commander, Naval Oceanography Command                            1,180
Assistant for Administration/Under Secretary of                  1,014
 the Navy
Commander, Naval Facilities Engineering Command                  1,014
Commander, Naval Supply Systems Command                            911
Commander, Naval Intelligence Command                              890
Commander, Space and Naval Warfare Systems Command                 656
Director, Strategic Systems Programs Office                        525
Commander, Military Sealift Command                                276
Office of the Chief of Naval Research                              172
----------------------------------------------------------------------
The process to determine shore requirements begins with a mission,
function, task (MFT) statement, or document, that is written by an
activity or by the parent shore command and identifies the mission of
the organizational component or work center and the work tasked or
required of that component.  From the MFT statement, efficiency
review analysts then develop a performance work statement that
identifies authorized work to be done and authorized products or
services from individual departments, divisions, or the activity as a
whole and establishes standards for quantity of output.  It serves as
a basis for work measurement, methods improvement, and other
industrial engineering and management tools both within and outside
the efficiency review process.  We found in our review that MFT
statements often served as the baseline for performance work
statements.  While MFTs are a critical part of the shore requirements
process, we found that many of the shore commands we reviewed did not
devote much time or attention to developing these statements or
ensuring they complied with requirements.  An official from one
command's efficiency review team told us that MFTs sometimes had to
be redone because the activities had written very general statements
without the specificity needed for an efficiency review.  In many
cases, MFTs had not even been prepared at the time of the efficiency
reviews or they were out of date.  MFTs generally are written without
coordination between one shore command and another or with Navy
headquarters, even for similar activities.  As a result, MFTs for
similar activities at different commands can vary widely.  According
to the Navy, however, this may change as a result of a proposal to
standardize MFTs for base operating support functions. 

After establishing MFT statements and doing other planning, shore
commands conduct efficiency reviews to determine the number of
personnel that are needed in their various activities.  The Navy
allows each command to establish its own procedures to do this as
long as the methodology to determine personnel requirements is
defendable.  According to a NAVMAC official, 4 of the 22 shore
commands have centralized teams who conduct efficiency reviews and
identify personnel requirements for the various activities within
their commands.  The other commands have varying structures ranging
from very decentralized, where the responsibility for conducting
efficiency reviews is left up to each individual activity, to a
structure where the parent command provides some guidance and
assistance to the activities performing the efficiency reviews. 

The process of funding personnel requirements is another difference
between the shore establishment and the operating forces.  Whereas
the Navy's ships, submarines, and aircraft squadrons are funded to at
least 90 percent of their identified personnel requirements,\3 the
Navy has no such requirement for its shore establishment.  Funding is
dependent on what the resource sponsors\4 decide they can provide for
each of their activities.  While the Navy established a funding floor
for its operating forces, it did not do this for the shore
establishment because it did not believe it could always fund shore
requirements at a particular level, according to Navy officials. 
Therefore, while "minimum requirements" are supposedly identified for
specific shore activities, less than 70 percent of the identified
requirements for some activities are actually funded, according to a
Navy official. 


--------------------
\2 This report uses the term "major command" to refer to the major
commanders or bureaus that are authorized personnel resources
directly by the Chief of Naval Operations to accomplish assigned
missions and tasks. 

\3 The remaining 10 percent of the requirement, if needed during a
contingency operation, is filled with active duty personnel from the
shore establishment. 

\4 A resource sponsor is responsible for a group of programs and
resources constituting certain warfare and supporting warfare tasks. 
In liaison with other Navy offices, the resource sponsor prepares and
justifies a Navy position on resource allocation to ensure a fiscally
effective and balanced program. 


   SHORE PROGRAM CRITICIZED BY THE
   CONGRESS AND AUDIT
   ORGANIZATIONS FOR 25 YEARS
---------------------------------------------------------- Chapter 4:2

Congressional questions about the credibility of the Navy's
requirements for its shore-based personnel have been raised over many
years.  Since the early 1970s, the Congress has expressed concern
about the various processes the Navy has used to determine personnel
requirements for the shore establishment and on several occasions
directed the Navy to develop a more rigorous system to justify
shore-based personnel needs.  In addition, we, as well as other audit
organizations, have issued numerous reports identifying weaknesses in
the shore requirements processes and the overall shore requirements
program.  According to Navy officials, the number of changes to the
shore requirements program, directed by both internal and external
forces, has contributed significantly to the problems the program has
experienced throughout the years. 


      CHANGES TO THE SHORE
      PERSONNEL REQUIREMENTS
      PROGRAM
-------------------------------------------------------- Chapter 4:2.1

The Navy has had a number of shore requirements programs over the
past 25 years.  In 1972, in response to congressional concerns, the
Navy began developing the Shore Requirements, Standards, and Manpower
Planning System (SHORSTAMPS).  This system was to apply work
measurement techniques to develop staffing and work measurement
standards that could quantify total personnel requirements for
military, civilian, and contractor personnel supporting the shore
establishment.  Seven years later, unsatisfied with the Navy's slow
progress in developing staffing standards and quantifying shore-based
personnel requirements under the SHORSTAMPS program, the Congress
directed that a new implementation plan be developed.  In the new
plan, the Navy stated that it would be 8 more years before at least
70 percent of the shore population was under staffing standards.  In
1983, the Navy incorporated the SHORSTAMPS program, as well as other
Navy requirements programs such as the Efficiency Review and
Commercial Activities Programs into the new Navy Manpower Engineering
Program.  The Navy Manpower Engineering Center was created to
centrally manage this program. 

In 1986, the Secretary of the Navy decided to decentralize the shore
manpower requirements program because he did not believe the Navy's
investment in overhead personnel at the Manpower Engineering Center
and its detachments had proven cost-effective compared with
alternative, less costly methods of determining requirements.  As a
result, the Navy transferred responsibility for shore personnel
requirements from the Manpower Engineering Center to the major shore
commands.  According to a Naval Audit Service report, the Secretary
of the Navy assured the Congress that the Navy would maintain strong
centralized control of the requirements determination process while
decentralizing execution of the program.  The Navy operates under
this decentralized process today.  Each command is responsible for
ensuring that efficiency reviews are conducted using trained analysts
under the command's direction.  The Assistant Chief of Naval
Personnel for Total Force Programming, Manpower, and Information
Resources Management provides overall program management. 


      SIMILAR CONCERNS RAISED
      THROUGHOUT THE YEARS BY
      AUDIT ORGANIZATIONS
-------------------------------------------------------- Chapter 4:2.2

Over the years, reports from us, the Naval Audit Service, and the
Naval Inspector General have raised similar concerns about the Navy's
process and overall program for determining shore personnel
requirements.  Many of the same problems have continued to arise, as
shown in table 4.2.  Our 1985 report, for example, states in the
initial pages that the report's findings are many of the same ones
highlighted in our 1980 report on the Navy's shore requirements
program.\5 The reports attribute the Navy's difficulty in eliminating
these problems to the lack of effective Navy oversight and the lack
of senior Navy management commitment to the shore requirements
program. 



                                    Table 4.2
                     
                     Audit Findings of Select Reports on the
                       Navy's Shore Personnel Requirements
                                     Program

                                        Ineffective
                                        management
                                        oversight                   Lack of top
            Slow program                and           Reviews not   Navy
Audit       implementati  Non-use of    accountabili  properly      management
reports     on            standards     ty            conducted     commitment
----------  ------------  ------------  ------------  ------------  ------------
Report of   X             X             X
Command
Inspection
of Bureau
of Naval
Personnel
(Naval
Inspector
General,
1994)

Department  X             X             X             X             X
of the
Navy
Efficiency
Review
Program
(Naval
Audit
Service,
1992)

Department  X                           X
of the
Navy
Management
Control
Program,
Accounting
Systems
Review
Process,
and the
Efficiency
Review
Program
(Naval
Audit
Service,
1991)

Navy Shore                              X             X
Manpower
Program:
Decision
to
Decentrali
ze Needs
to Be
Rethought
(GAO,
1987)

Navy        X             X             X             X             X
Manpower
Management
:
Continuing
Problems
Impair the
Credibilit
y of Shore
Establishm
ent
Requiremen
ts (GAO,
1985)

The Navy's  X             X             X             X             X
Shore
Requiremen
ts,
Standards,
and
Manpower
Planning
System
(SHORSTAMP
S)--Does
the Navy
Really
Want It?
(GAO,
1980)
--------------------------------------------------------------------------------

--------------------
\5 Navy Manpower Management:  Continuing Problems Impair the
Credibility of Shore Establishment Requirements (GAO/NSIAD-85-43,
Mar.  7, 1985) and The Navy's Shore Requirements, Standards, and
Manpower Planning System (SHORSTAMPS)--Does the Navy Really Want It? 
(GAO/FPCD-80-29,
Feb.  7, 1980). 


   CONTINUED PROBLEMS AFFECT
   NAVY'S ABILITY TO MANAGE SHORE
   ESTABLISHMENT
---------------------------------------------------------- Chapter 4:3

Many of the problems identified in previous audit reports still exist
today.  For example, major shore commands are still slow to comply
with or are not complying with various program requirements, there is
still a lack of standards to enable a comparison of one function to
another, and efficiency review quality differs from one command to
another and often from one activity to another.  Few of the shore
commands, as well as Navy headquarters, have devoted the attention
and resources to make the efficiency review program work as specified
in Navy instructions.  For most commands, according to a NAVMAC
official, the process has become one of justifying existing resource
allocation rather than evaluating alternative combinations of
manpower, material, facilities, and organizational structures and
ensuring that the most cost-effective combination of resources is
used, as required. 


      COMPLIANCE WITH PROGRAM
      REQUIREMENTS
-------------------------------------------------------- Chapter 4:3.1

In January 1988, the Secretary of the Navy directed the Chief of
Naval Operations to establish a requirements baseline for shore
requirements and to complete the first 5-year review cycle of all
Navy shore activities by the end of fiscal year 1994.  The major
shore commands were charged with conducting the efficiency reviews
that would establish the baseline, and the Director of the Total
Force Programming and Manpower Division was designated the program
manager, providing overall program oversight.  By the end of fiscal
year 1994, none of the major shore commands had completed their
efficiency reviews.  According to a NAVMAC official, this may have
been due to a misunderstanding about the required completion date. 
The deadline was later extended to September 30, 1995.  By the end of
fiscal year 1995, about 73 percent of the commands had completed
their efficiency reviews, but less than 35 percent of them had
submitted the results for inclusion in the Navy's Total Force
Manpower Management System, the single authoritative source for
personnel authorizations data.  In a 1995 memorandum to Navy shore
commands, the Director, Total Force Programming and Manpower Division
stated that the absence of requirements data in this system would be
considered evidence that no process was used to determine personnel
requirements.  As of March 1996, one of the biggest shore
commands--U.S.  Atlantic Fleet--still had not begun efficiency
reviews on 10 percent of its activities and still had a number of
other reviews ongoing.  Officials estimated needing another year to
finish all its work.  As of February 1997, Atlantic Fleet officials
said just one efficiency review remained to be completed. 

Shore commands generally attributed the delay in completing and
implementing the efficiency reviews to a lack of resources.  In
addition, officials responsible for conducting efficiency reviews
stated that they often have to respond to other personnel-related
taskings from their commands, which takes them away from conducting
efficiency reviews.  NAVMAC officials stated that strong leadership
and command management support enabled some commands, such as the
U.S.  Pacific Fleet, to respond to efficiency review program
requirements. 


      STAFF TRAINING
-------------------------------------------------------- Chapter 4:3.2

The qualifications of the staff that perform efficiency reviews has
been another area of concern for many years and has affected a
command's ability to complete its efficiency reviews in accordance
with program requirements.  The veteran analysts we talked with
during this review, who had been involved with the shore requirements
program for nearly 20 years, told us it takes a combination of
training and about 1 1/2 years of experience working with a trained
analyst before someone can effectively conduct efficiency reviews. 

In our 1980 and 1985 reports, we recommended that the Navy establish
personnel management career fields, such as the Air Force has had for
its military and civilian personnel for many years.  While the Navy
included a manpower, personnel, and training core competency in one
of its new officer career fields (Fleet Support Officer), it has not
taken similar steps for its civilian employees.  Navy instructions
require shore commands to ensure that efficiency reviews are
conducted using trained analysts.  According to a NAVMAC official,
usually it is left up to the activity to pursue such training.  We
found in some cases that the individuals conducting efficiency
reviews were low-ranking civilians or military personnel who were
doing the reviews as a collateral duty, with little or no training. 
During our initial visits, we found that only two of the six commands
we reviewed consistently pursued efficiency review training for their
staff.  Recently, one other added efficiency review training for some
staff. 

NAVMAC used to provide efficiency review training for the Navy but
recently canceled the course because of budget concerns.  NAVMAC
officials told us that similar training is available from the other
services and that the type of training NAVMAC provides in the future
will focus on more Navy-unique systems. 


      EFFICIENCY REVIEW QUALITY
-------------------------------------------------------- Chapter 4:3.3

Under the current decentralized efficiency review program, each
command is responsible for designing and implementing its own
program.  This includes developing an appropriate methodology,
identifying staff to perform the reviews, and providing appropriate
training.  A number of past audit reports have noted that efficiency
review quality differs from one shore command to another.  This
conclusion was verified by NAVMAC and by findings in a 1994 Navy
Inspector General report.\6 The Inspector General report states that
efficiency reviews of similar activities performed by different
commands are not necessarily consistent or comparable.  For example,
security, administrative operations, and food services were found
within most shore commands and yet no up-to-date standards existed to
facilitate comparison from one command to another.  In 1996, NAVMAC
completed a series of comparative analyses of personnel requirements
at various naval air stations.  The analyses, while rudimentary,
showed variances in the number of personnel at similar activities. 
According to Navy officials, comparative analyses have become an
important part of the Navy's efforts to regionalize and consolidate
base operations.  In addition, the new shore requirements concept
will also stress standardization and comparative analyses. 

In August 1995, as part of the Navy's comparative analysis work, the
Director, Total Force Programming and Manpower Division, tasked
NAVMAC to ensure that (1) shore commands' validated requirements are
fully justified; (2) efficiency reviews are a thorough evaluation of
alternative combinations of manpower, material, facilities, and
organizational structures; and (3) the most cost-effective
combination of resources is used.  The Director further added that
NAVMAC should return efficiency reviews for further analysis if
NAVMAC considers the shore commands' reviews inadequate.  Likewise,
NAVMAC should endorse efficiency reviews that set the best standard. 
While NAVMAC officials acknowledge that many efficiency reviews have
not met the requirements, they have not returned any of these reports
to the commands to be redone.  Ensuring this level of compliance can
only be accomplished through on-site validation visits, according to
these officials, and due to NAVMAC's limited staff, this is not
possible. 

According to NAVMAC officials, some commands devote more resources,
provide more training, and place a greater priority on conducting
efficiency reviews than do others.  As a result, a command's ability
to produce quality reviews is affected.  For example, according to
Pacific Fleet officials, the Pacific Fleet had 57 civilians as of
February 1997, many of whom were veteran manpower specialists, and a
budget of about $4.4 million to conduct efficiency reviews.  The
Atlantic Fleet, with a similar population base, had 3 officers, 21
enlisted, and 17 civilians and a budget of about $1.1 million at the
same time period to conduct its program, according to Atlantic Fleet
officials.\7 The Pacific Fleet was able to complete its efficiency
reviews in 1995, but as of February 1997, the Atlantic Fleet was
still working on its reviews.  Officials at several shore commands
told us that the reviews are time-consuming and costly and that the
commands would not place a high priority on conducting the reviews
unless the commands' resources were threatened for not doing so. 


--------------------
\6 Report of Command Inspection of Bureau of Naval Personnel, Naval
Inspector General, (Mar.  14-25, 1994). 

\7 This does not include funding for military personnel. 


      PROPOSALS AIM TO IMPROVE
      NAVY'S ABILITY TO QUANTIFY
      SHORE REQUIREMENTS
-------------------------------------------------------- Chapter 4:3.4

During this review, Navy officials stressed that they are aware of
and are addressing many of the concerns raised during our review and
in past audit reports.  For example, Navy officials said they
recognize the importance of being able to compare like functions,
from one command to the next, and the personnel numbers associated
with each function.  In 1996, the Navy completed a study of 18 naval
air stations to identify common core functions and the commensurate
personnel allocated to these functions.  The Director, Total Force
Programming and Manpower Division, believed that comparative
efficiency review analysis was the best way to execute shore
requirements oversight responsibilities.  According to a NAVMAC
official, this comparative analysis effort was incorporated into
other shore initiatives discussed in chapter 3, and by the Single
Shore process, discussed below. 

The Navy has begun work on a revised personnel requirements
determination concept called the Single Shore Methodology.  According
to the Navy, it will take about 1 to 2 years before this process is
fully implemented throughout the shore establishment.  The process
employs a common format for both peacetime and wartime conditions and
emphasizes mission, function, and task statements; associated
outputs; and allocated personnel assets to accommodate comparative
analyses of like functions performed at a variety of commands and
under various conditions of readiness.  According to Navy officials,
the evolving methodology sets the framework for standardization,
analysis of like activities, accountability, and management
oversight.  They believe the development of standardized manpower
statements and workload indicators will allow the Navy to more
efficiently manage personnel requirements and authorizations. 

The Navy believes that the installation management accounting
project, described in chapter 3, will also contribute to greater
standardization for the shore establishment.  With this project, the
Navy is working to standardize base operating support functions
performed within installations.  The focus of this effort is to
develop core business functions, establish uniform output measures,
and capture all expenses related to those functions to facilitate
unit costing. 

While these two efforts address long-standing
problems--standardization and management oversight--so have past
shore requirement proposals.  To be successful, the Single Shore
process will require significant and sustained up-front labor in the
designing of standardized workload indicators and will require
continued oversight to ensure that shore commands understand and use
the new process.  Most important, the new initiatives will require
continued support from Navy leadership to strengthen the shore
personnel requirements program and to prevent the problems that
occurred in the past. 

In its 1994 Bureau of Naval Personnel inspection report, the Naval
Inspector General noted that infrastructure end strength reductions
are difficult to achieve when the funding of these activities comes
from so many different sources.  Currently, 17 different entities
contribute to the funding of the Navy's shore establishment.  In
1994, the Navy consolidated its base operating support functions
under the Director of Shore Installation Management.  While many of
the other shore functions are still split among numerous entities,
the Navy believes this recent consolidation will allow greater
control over base operating support requirements and facilitate
standardization and a comparative analysis of like functions. 


   IMPROVED NAVY MANAGEMENT AND
   OVERSIGHT ARE KEY TO RESOLVING
   PROBLEMS WITH SHORE
   REQUIREMENTS PROGRAM
---------------------------------------------------------- Chapter 4:4

In the audit reports issued since the early 1980s, the issue of
ineffective management oversight and accountability has been
identified as the primary reason why the various shore personnel
requirements programs have not been successful.  The lack of
effective oversight and leadership has prevented the Navy from
reconciling long-standing problems.  For example, our 1985 report
states that although SHORSTAMPS (the requirements program at the
time) had a number of defects, the key problem was the absence of
monitoring and enforcement to ensure the use of staffing standards
and to manage the shore requirements program in accordance with
implementation instructions.  Yet, 7 years later, the Naval Audit
Service's 1992 report states that major shore commands did not
provide the quality control oversight required by Navy instructions
and that they generally assigned only one or two persons to oversee
their entire efficiency review program, which could involve dozens of
reviews.  Similarly, the report noted that Navy headquarters was not
performing on-site reviews as required and was making only limited
challenges to obvious efficiency review problems.  As of August 1991,
Navy headquarters had only one individual assigned to review and
approve efficiency review reports, and NAVMAC had just three people
assigned, according to the Naval Audit Service report. 


      INADEQUATE NAVY OVERSIGHT
      AND ACCOUNTABILITY FOSTERS
      MATERIAL MANAGEMENT
      WEAKNESSES
-------------------------------------------------------- Chapter 4:4.1

The Federal Managers' Financial Integrity Act (FMFIA) requires
ongoing evaluations of internal agency management controls and
accounting systems and annual reports to the President and the
Congress on the condition of those systems.  FMFIA is not limited to
accounting or administrative matters.  Rather, it is intended to
address the entire range of policies and procedures that management
employs to perform its mission efficiently and effectively.  In
February 1994, the Secretary of Defense directed all Assistant
Secretaries of Defense to improve implementation of FMFIA. 

Numerous audits by us and DOD organizations have linked the Navy's
problems with its shore personnel requirements program to a lack of
management oversight and inadequate internal controls.  In its March
1992 report, the Naval Audit Service concluded that the internal
control system for managing the efficiency review program was not
adequate to prevent or promptly detect material errors and
irregularities in operations.  The findings in this report disclosed
numerous material internal control weaknesses; yet, none of the
deficiencies were identified through the Management Control Program
prescribed by Navy instructions or reported to the Chief of Naval
Operations in the annual certification statement regarding compliance
with the FMFIA.  Seven of the 8 commands in the review did not
designate the efficiency review program as an assessable unit. 
Consequently, they did not perform vulnerability assessments or
management control reviews specifically related to the program. 

In the past, the Navy has demonstrated that it recognizes the
importance of a credible requirements determination process.  In its
FMFIA Statements of Assurance, the Navy has identified deficiencies
in the area of requirements determination for equipment, supplies,
materials, training, and systems acquisition.  In many instances,
according to the Navy, the requirements have been overstated,
understated, unrealistic, inadequately supported, or invalid,
resulting in unnecessary funding and purchases or hindering fleet
readiness because not enough material is available to meet
requirements. 


   CONCLUSIONS
---------------------------------------------------------- Chapter 4:5

The Navy has several programs underway in various stages of
implementation that are intended to further define both ship- and
shore-based personnel requirements.  Some of these programs could
result in substantial reductions in personnel.  However, without
continued high-level Navy support and long-term commitment, there is
no assurance that the fate of these proposals will be any different
than those of earlier years.  While the Navy has traditionally placed
the greatest priority and management attention on its operating
forces, given the current budget environment, when the Navy must find
billions of dollars in savings to apply to force modernization, shore
personnel requirements must come under continued scrutiny.  Without
an effective shore requirements program, the Navy has no assurance
that the resources it is applying to the shore establishment are
properly sized to support the operating forces. 


   RECOMMENDATIONS
---------------------------------------------------------- Chapter 4:6

To improve the management and allocation of personnel resources to
the shore establishment, we recommend that the Secretary of the Navy
report to the Secretary of Defense the lack of an effective shore
requirements determination program as a material weakness under FMFIA
to maintain visibility of the issue and ensure action is taken.  We
also recommend that the Secretary of the Navy create an action plan
with milestones to resolve long-standing problems with the shore
personnel requirements program.  The plan should specifically explain
how the Navy will attempt to overcome the fundamental problems--such
as lack of senior Navy management commitment to effective management
of the shore establishment and ineffective management oversight and
accountability--that have plagued this program. 


   MATTERS FOR CONGRESSIONAL
   CONSIDERATION
---------------------------------------------------------- Chapter 4:7

Given the long history of congressional concern over the Navy's
ability to effectively determine the size and composition of its
shore establishment, the Congress may wish to require the Navy to
submit its plan of action, with milestones, to the Congress.  In
addition, as part of this plan, the Congress may also want the Navy
to demonstrate its progress and provide specific details on the steps
it has taken at headquarters and at the major command level to (1)
improve management oversight and accountability of the personnel
requirements determination process at all levels; (2) increasingly
utilize standardization and comparative analysis of like activities
as part of the requirements process; (3) improve staff training and
ensure that only technically qualified staff conduct efficiency
reviews; and (4) establish a link between the shore personnel
requirements process and the Navy's various initiatives to reduce its
shore infrastructure, many of which were discussed in chapter 3 of
our report. 


   AGENCY COMMENTS AND OUR
   EVALUATION
---------------------------------------------------------- Chapter 4:8

DOD concurred with our recommendation that the Secretary of the Navy
develop an action plan with milestones to ensure that positive
results of ongoing initiatives to improve the shore requirements
process are sustained.  But DOD only partially concurred with our
recommendation that the Secretary of the Navy report the lack of a
valid shore requirements determination program as a material weakness
under FMFIA.  DOD agrees that there have been weaknesses and
inconsistencies in the execution of the shore manpower requirements
program, but it believes a credible shore requirements program exists
in the Navy and that improvements have been and continue to be
implemented.  DOD believes that the Navy's current initiatives to
improve shore infrastructure management are a positive trend toward
recognizing past problems and developing solutions to improve
oversight and requirements determination.  For these reasons, DOD did
not agree to report this issue as a material weakness. 

While we acknowledge that the Navy has recently undertaken various
initiatives to improve the management of its shore establishment and
the identification of shore personnel requirements, the Navy has yet
to identify how these initiatives will be any different from the many
programs and initiatives introduced by the Navy over the past 25
years, which failed to correct long-standing problems with the shore
requirements program.  We are skeptical, therefore, that these
initiatives, however well-intended, will be any more
successful--particularly since few have been implemented.  Therefore,
we continue to believe that the shore personnel requirements program
should be reported as a material weakness under FMFIA.  We have
modified the recommendation somewhat, however, to focus on the
effectiveness rather than the validity of the program. 

In its comments, DOD stated that the Navy has evaluated this issue in
the past.  For example, the Navy's Management Control Reviews
conducted in July 1993 identified no significant material weaknesses
with the program.  But, the Navy could not produce any documentation
to indicate the basis upon which these decisions were made.  We find
it difficult to understand how a thorough review of this issue in
July 1993 would have identified no significant material weaknesses,
particularly because these reviews were conducted immediately after
the issuance of numerous audit reports that were critical of the
Navy's efficiency review process and shore requirements program,
suggesting the presence of numerous potential material weaknesses. 
Navy headquarters officials did not know whether previous Management
Control Reviews had been conducted at the major command level.  We
believe it is important to assess the efficiency review program at
this level, as well as at headquarters, since the commands are
responsible for running their own programs and conducting the
efficiency reviews. 

The Navy also provided technical comments to this report.  While we
took issue with some of these comments, we incorporated others where
appropriate. 




(See figure in printed edition.)Appendix I
COMMENTS FROM THE DEPARTMENT OF
DEFENSE
============================================================ Chapter 4



(See figure in printed edition.)



(See figure in printed edition.)



(See figure in printed edition.)



(See figure in printed edition.)


MAJOR CONTRIBUTORS TO THIS REPORT
========================================================== Appendix II


   NATIONAL SECURITY AND
   INTERNATIONAL AFFAIRS DIVISION,
   WASHINGTON, D.C. 
-------------------------------------------------------- Appendix II:1

Carol R.  Schuster, Associate Director
Richard J.  Herley, Assistant Director
M.  Elizabeth Guran, Evaluator-in-Charge
Michael J.  Ferren, Senior Evaluator
Ronald D.  Leporati, Senior Evaluator

*** End of document. ***




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