Defense depots likely to increase privatization

Defense depot maintenance work will increasingly be outsourced to the private sector in the next five years, particularly at the Air Force, according to a new General Accounting Office report.

Funding estimates for 1999-2005 reveal an incremental increase in funding for depot maintenance work performed by the private sector, GAO said in its report, "Depot Maintenance: Future Year Estimates of Public and Private Workloads Are Likely to Change" (NSIAD-00-69).

"The percentage of funding for depot maintenance work assigned to the private sector has increased," the report said. "Data for fiscal years 1999-2005 indicates that the trend will continue."

Military departments, by law, cannot outsource more than 50 percent of depot maintenance work to the private sector in any given year. Army and Navy outsourcing estimates for the next five years hover in the 40 percent range. But the Air Force is at risk of exceeding its limit, the report said.

Although the Air Force did not report on its estimated private sector depot work for 1999-2005, early data reveals that the service will likely go over the limit.

Recent examples from the Air Force indicate the potential variance between estimated and actual funding. The Air Force underestimated the amount of private depot work by $74 million in the first month of fiscal 2000, for example. That same month, the service overerestimated public-sector workload funding by $175 million, GAO found.

Given that early estimates predict that outsourced Air Force depot work could exceed the 50 percent limit, Air Force Secretary F. Whitten Peters notified Congress in January that he had waived the ceiling for this year. Waivers are permitted on a year-by-year basis if particular workloads cannot otherwise be completed and may affect national security.

The Air Force is devoting more attention to depot work assignments to try to swing the balance back towards the public sector, the report said.

The other armed services' estimates should be eyed warily as "estimated data may vary significantly from actual experience because the data are developed from budget estimates and future years' defense requirements change over time," GAO noted.

Defense initiatives for the past several years have plotted a trend towards increased private sector depot work and the estimates provided do not take such plans into account, GAO said.

In addition, the data the Army and Navy provided contained errors and inconsistencies that make them rough estimates at best. Finally, actual workloads often change with budget plans.

Despite these inadequacies in the data, "given the available information, the likely changes reflect a greater use of the private sector, GAO said.