Military depots may be underestimating depot work contracted out

The military services may not be complying with a federal law that limits them to outsourcing no more than half of all depot maintenance work, according to a new Government Accountability Office report.

"Recurring weaknesses in DoD's data gathering, reporting processes and financial systems prevented us from determining with precision if the military services complied with the 50-50 requirement in fiscal years 2002 and 2003," stated the report (GAO-04-871).

Federal law requires that the military services contract out no more than half of the $23 billion in annual weapon repair work done at Army, Navy, Air Force and Marine Corps depots. Congress enacted the "50-50 rule" to protect thousands of civilian jobs at depots across the nation.

All the services said they complied with the law in the past two fiscal years and expect to meet its mandates through fiscal 2008. In the past, only the Air Force has broken the threshold. It received a congressional waiver to do so.

GAO said the services' data for reporting on maintenance work is flawed, and found that correcting the information would push each of the services closer to the 50-50 threshold. For example, the Navy did not include $410 million in private-sector maintenance work in its calculations, which would move the percentage of its depot work contracted out from 44.5 percent to 47.9 percent in fiscal 2003. If carried over into fiscal 2004, the service would break the threshold, auditors found.

GAO also noted that services have sharply increased funding for maintenance, mainly on equipment that has worn out in Iraq, but there has not been a similar increase in workload at depots. As a result, GAO suggests the services are likely increasing their reliance on the private sector.

"Increasing contractor maintenance operations supporting the Army in Iraq could result in the Army's exceeding the 50 percent threshold," the reports stated.

GAO recommended Defense take several steps to improve reporting on 50-50 compliance, including: requiring that if the military services are within 2 percentage points of the threshold that they have plans for not crossing it; mandating better training for military and civilian personnel who collect and manage depot maintenance data; and having all the services use in-house audit agencies or third parties to verify their 50-50 data.

The Defense Department has agreed to follow the recommendations.