DoD materiel maintenance program is estimated at nearly 100B. In addition to defining depot maintenance, statues provides guidance on accounting for depot maintenance by listing exceptions to the definition.
The existing exclusions are confusing. For example, any modification designed to “improve performance” is not considered depot maintenance. The installation of parts for modifications is depot maintenance, but not the acquisition of those parts.
Current acquisition guidance does not provide any emphasis/direction for core assessments. Major programmes failed to identify core requirements within the required timeframe. Half did not identify core requirements until either the production/deployment phase or the sustainment phase of the acquisition process.
Depot Maintenance Core Capabilities Determination Process, addresses only tasked or fielded systems. It does not cover those systems still in the acquisition process. There also is little, if any, core workload focus on jointly developed systems, resulting in capabilities determinations not up to par.
Core legislation directs the military services to sustain an organic industrial base to meet future contingency operational requirements. Works to ensure core maintenance requirements are identified in weapon system development and modernisation plans, Depot maintenance workload is prioritised in budgeting, lining up capital investment to support current and emerging core capabilities.
Some Depot maintenance is performed by contractors with special access programme designation means transferring this work to core results in choices, such as recreating and buying tooling and equipment or extensively training and transferring workforce to the DoD plant location.
Scope of work is an important consideration as well. Should DoD create a specialised public maintenance capability for low-density item? It may make sense to appear to be inefficient in the short-term if it has long-term plans to develop an organic capability to work on composite, low observable components if it expects to acquire more of same fleet type in the future. The unique aspects of a particular item or type of work can uncover gray areas in spelling out core capability and put decision makers in a difficult position.
Depot Maintenance core statute directs DoD to be capable of repairing all Joint Chiefs of Staff–tasked systems, but the military services have the flexibility to make substantive tradeoffs in putting this seemingly straightforward directive into actual practice. Cost, practicality, feasibility, and timing are some of the considerations that factor into the military’s maintenance decisions.
Some Depot maintenance is performed by DoD-owned, contractor operated facility. Special access programme designation means transferring this work to core would have meant unpopular choices, such as recreating and buying tooling and equipment or extensively training and transferring a government workforce to the DoD depot location.
Refined budgeting processes are example of prototype for compiling core requirements to create a floor for the depot base programme account, assign the appropriate funding priority to the core requirement & inform capital investment priorities.
Reporting of expenditures instead of obligations by DoD depots presents an inaccurate picture of depot maintenance allocations since the amounts differ. For the most part, the allocation percentages for budgeted funds represent obligation amounts obtained from DoD financial accounting systems.
However, in reporting the amount of depot maintenance funds allocated to the private sector, some reporting organisations used expenditures rather than obligations as required by official guidance.
For example, several depots we visited reported their subcontracted depot-level maintenance work as expenditures rather than obligations. Reasons given by depot officials for reporting expenditures rather than obligations include :
Workload against obligated funds may not have been fully performed during the fiscal year, so the depot believed reporting expenditures was a better reflection of the actual workload.
Depot did not know obligations were to be reported instead of expenditures; and many work orders can be associated with a multiyear contract, so the depot believed that reporting expenditures would be a better representation of the costs associated with multiyear contracts for the fiscal year in question.
Depots said producing types of information we suggested would require a massive undertaking and may be of limited value. We disagreed and, on the basis of the response, and assigned the matter for oversight consideration.
Because DoD has limited visibility over the allocation of private/public funds in some interservice agreements and direct sales agreements, inaccurate reporting of the depot maintenance workload allocation may result.
Interservice workload agreements refer to work that is performed by one DoD component for another. Official guidance requires that the service departments establish measures to ensure correct accounting of interservice workloads; however the allocation of these funds may not always be accurately reported. We found instances where a service awarded depot maintenance work to another military service, which then contracted out a portion of that workload to the private sector.
The military service awarding the work, as principal owner of the funds, inaccurately reported this as public workload because it had not inquired whether all the awarded work was performed at the DoD depot.
While we were unable to fully evaluate the extent of inaccurate reporting associated with interservice agreements, until the service departments establish sufficient measures to accurately account for and report their distribution of depot maintenance workload reporting information will continue to be inaccurate.
Limited visibility over direct sales agreements is another reason why the depot maintenance workload allocation may be inaccurately reported. A direct sales agreement involves private vendors contracting back to DoD maintenance facility for labor to be performed by depot employees.
We found that the reporting of the distribution of private/DoD sector workload for direct sales agreements may not be accurate. With a direct sales agreement, there is no requirement for the *private vendor to identify and break out the contract costs, such as materials and other factors of production, and allocate them to expenses performed by the private vendor or the DoD depot.
We found the use of direct sales agreements may have resulted in an overstatement of private-sector funds, and understatement of DoD sector funds. In addition, we found similar instances where work performed by DoD sector under a direct sales agreement with a private vendor may have been misreported as being performed by the private sector.
Although we were unable to fully evaluate the extent to which costs associated with these types of contract agreements were misreported, until private vendors break out direct sales agreement costs by the private and DoD sectors, DoD reporting of funding allocations to maintain a 50/50 workload between private and DoD job sites may remain inaccurate.
Strategic cooperation with contractors is very important, and with the combined fleet support contracts, we enter into a phase where we need to stretch ourselves as a joint team to be innovative to meet the demanding requirements of adequate and affordable support for the transition into a more modern force with current, upgraded and new fleets being part of it.”
We think there’s a lot of headroom in this area. Our services business is an area that obviously we have invested in and we continue to invest. We’re still finding those areas where we can bring that cooperation to bear. We’re looking for growth going forward.”
While there are too many examples of specific support service work orders that get fixed by the depots, the following descriptions represent a sampling of functional deficits in materiel conditions of the fleet that must be repaired before returning to service.
Ship has two reversible controllable pitch propellers damaged to point where they are not functional. Divers have also discovered at least one of the two propeller hubs was damaged in the grounding. Controllable pitch propellers are highly complex hydraulic systems used to position the propeller blades to change the speed and direction of a ship without changing the rotation of the ship’s shafts.
Ford Aircraft Carrier: problems with voltage regulators on its four Main Turbine Generators. One regulator reportedly malfunctioned badly enough to damage the number two turbine's rotors.
LCS: seawater leak in its hydraulic cooling system and lube oil system flood, also damage to one of its gas turbine engines.
DDG 1000 Destroyer: seawater leak in the propulsion motor drive lube oil auxiliary system for one of the ship’s shafts. During its transit, Destroyer lube oil coolers failed resulting in water leaking into the propulsion system several times – once resulting in loss of power. The seawater lube oil coolers prevent the lubrication of rotating shafts from breaking down due to heat and friction.
This questionnaire asks about the shipyard workforce, and the policies and processes used to run it. We will visit your shipyard after we have received your completed form to review the questionnaire to ensure we understand your responses and to give you an opportunity to submit additional comments.
1. What is the difference between operations/support O&S and operating/maintenance O&M?
Operating and Support O&S is typically used when talking about the cost estimate for sustainment – operating and support cost. Operations and Support is used to refer to the sustainment phase of the life cycle – Operations and Support phase. Operations and Maintenance O&M is most commonly used to refer to a funding appropriation.
2. What phases of the life cycle offer the most opportunities to influence O&S cost?
O&S costs are most easily influenced early in the design phase, before the system is built. The opportunities decrease as the life cycle progresses. The phases listed from greatest to least influence are: Technology Maturity and Risk Reduction, Engineering and Manufacturing Development, Production and Deployment, Operations and Support.
3. How does program manager know if program is affordable?
Program is affordable if the expected yearly costs to acquire and sustain the program are less than or equal to the funding the Service has available for that program. Programs must work with their service and programming communities to understand how their program fits among the capability portfolio resource priorities.
4. How are the O&S Affordability Goal and Cap documented? Should it be part of the Life Cycle Sustainment Plan LCSP?
Affordability Goals and Caps are documented in the milestone A and B Acquisition Decision Memos. The goals and caps are also recorded in the Defense Acquisition Management Information Retrieval system.
5. What is the difference between Will Cost and Should Cost?
Will Cost estimate is a historically informed independent cost estimate used to establish budgets. A Should Cost estimate includes the impact of specific cost control initiatives the program plans to use to keep its cost at or below the Will Cost.
6. How does program manager know what areas should be the focus of Should Cost initiatives?
Should Cost initiatives can focus on any cost drivers impacting the program’s total cost. Methods program can use to develop O&S Should Cost initiatives include an iterative process of progressively increasing the accuracy and precision of the O&S cost information through assessment of the design factors that influence cost, and analyzing historical costs for similar systems in order to understand cost-driving elements.
7. What types of costs fall outside of the program’s control and how should a program deal with these costs if they are significant?
Examples of costs that fall outside the program’s control include infrastructure factors and regulations. Costs that fall outside of the program’s control should be treated as assumptions or constraints in sustainment planning. These costs may be partially offset through internally controlled Should Cost initiatives.
8. Product support manager uses the Integrated Product Support elements and the cost estimators use the CAPE O&S Cost Element Structure, but everything is paid through appropriations. How do these different structures align and complement one another?
Understanding how these elements work together is an important aspect of the produce support manager job and will assist in any communication with the cost estimating team. Mapping the cost estimates into the product support elements allows the product support manager to understand where cost drivers exist and where the focus of Should Cost initiatives should be. Mapping the product support elements into the CAPE cost element structure allows the cost estimator to assist the budgeters in requesting the right type of funds.
9. Does OSD have an O&S model that program manager can use to develop O&S Cost estimates and conduct what-if drills if requirements are not funded?
CAPE is the OSD organization responsible for cost estimating guidance and does not advocate the use of any specific O&S cost estimating tool because it would be difficult to find a single tool that would be applicable to all the different types of DoD systems. Product Support Managers should work with the program’s cost estimating team to perform cost focused sensitivity analysis, excursions, or other what-if analyses.
10. Does OSD have any tools for comparing O&S cost estimates to actuals, which would help in defending budgets in the out years?
The Visibility and Management of Operating and Support Costs databases exist to capture O&S cost actuals. Product support managers can compare their estimate to these actuals but should work with the cost estimators