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Page 1
Executive Summary
The Department of the Navy wants to improve shore installation
operations, readiness, and management by skillfully leveraging
state-of-the-market technologies and business methods such as
outsourcing, privatization, and partnerships with state and local
governments, with a goal of reduced cost of infrastructure. For the
Navy itself, where all forces float1 or fly, the shore establishment is
synonymous with infrastructure, which includes “all
activities that provide support or control of forces from fixed
bases of operation.”2
In response to a Navy request, the Committee on Shore
Installation Readiness and Management, operating under the auspices
of the Naval Studies Board, was created to offer advice on how to
accomplish the goal of providing quality infrastructure support at
significantly less overall cost to the fleet. The committee was
asked to (1) identify business practices (or enterprise processes)
and technology applications that could materially enhance the
efficiency and effectiveness of operations; (2) recommend a plan
for implementing the changes needed and provide approximate
estimates of the efficiencies that might be gained from
implementing that plan; and (3) develop estimates of the potential
Navy-wide savings that could result from extending the committee's
recommendations to other areas. Against these objectives, it also
was requested that the committee examine the Navy's Smart Base
project.
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Page 1
Executive Summary
The Department of the Navy wants to improve shore installation
operations, readiness, and management by skillfully leveraging
state-of-the-market technologies and business methods such as
outsourcing, privatization, and partnerships with state and local
governments, with a goal of reduced cost of infrastructure. For the
Navy itself, where all forces float1 or fly, the shore establishment is
synonymous with infrastructure, which includes “all
activities that provide support or control of forces from fixed
bases of operation.”2
In response to a Navy request, the Committee on Shore
Installation Readiness and Management, operating under the auspices
of the Naval Studies Board, was created to offer advice on how to
accomplish the goal of providing quality infrastructure support at
significantly less overall cost to the fleet. The committee was
asked to (1) identify business practices (or enterprise processes)
and technology applications that could materially enhance the
efficiency and effectiveness of operations; (2) recommend a plan
for implementing the changes needed and provide approximate
estimates of the efficiencies that might be gained from
implementing that plan; and (3) develop estimates of the potential
Navy-wide savings that could result from extending the committee's
recommendations to other areas. Against these objectives, it also
was requested that the committee examine the Navy's Smart Base
project.
1The term
“float” includes submarines.
2Graves,
T.J., D. Drake, P. Forsyth, and J.L Wilson. 1995. A Reference
Manual for Defense Mission Categories, Infrastructure Categories,
and Program Elements, Paper P-3133, Institute for Defense
Analyses, Alexandria, Va., June.
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Page 2
The Challenge Facing The U.S.
Navy
To accommodate lower post-Cold War budget levels, the Navy
significantly reduced its modernization funding. The Navy
leadership now needs about an additional $3.5 billion to $5.0
billion per year to recapitalize and modernize for the future while
maintaining fleet readiness, and the Department of Defense (DOD)
has identified infrastructure savings as the source for funding
this short-fall.3 If the Navy is
to maintain its current fleet size and recent levels of peace-time
deployment and peacekeeping operational activity with constant or
declining budgets, the only available source of funds for
modernization is the infrastructure.4 Currently, infrastructure activities
account for $28 billion (or 40 percent) of the annual Navy budget
of about $70 billion. This is an increase from about 37 percent in
FY 1991.
The Need For A Corporate Strategy And
Leadership
Past performance and the committee's review of ongoing
initiatives indicate that reallocating $3.5 billion to $5.0 billion
annually from Navy infrastructure activities for recapitalization
and modernization will require a more extensive effort than is
currently underway. Current initiatives such as regional
consolidation of installation management functions, designation of
regional maintenance coordinators, and the Smart Base project are a
good start, but they will not provide the desired savings. There
are two primary reasons for this conclusion:
• First, ongoing initiatives are focused on only about
one-third of the infrastructure and are projected to result in a
maximum of about $750 million in annual infrastructure cost
reductions—well short of the $3.5 billion to $5.0 billion
annual goal. Thus, there is little likelihood that today's
initiatives could by themselves solve the problem at hand.
• Second, and perhaps more important, is the fact that the
committee could not identify an overall corporate Navy strategy for
solving the problem. The important changes that are underway are
being led by individual staff activities and support elements that
lack the authority to change the requirements for or the methods of
providing goods and services to the fleet. Moreover, many of the
reductions made thus far appear to be pro rata cuts rather than
being based on solid research, analyses, and assessments of
risk.
3U.S. General
Accounting Office. 1997. Defense Infrastructure,
GAO/HR-97-7, Washington, D.C., February.
4If defense
and Navy budget levels were not determined in large part by
domestic and political considerations, the linkage between
modernization needs and infrastructure efficiencies could be
broken, but that is unlikely in the current national security
environment.
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Page 3
Major Recommendation: To achieve its recapitalization
funding goal, the Navy should develop and implement a
corporate-wide strategy to improve the business operations of the
entire Navy infrastructure. The senior leadership of the Navy, led
by the Secretary of the Navy and the Chief of Naval Operations
(CNO), should establish a clear vision and a corporate-wide
strategy for conducting the future operations of the entire naval
system within the budget constraints projected. The strategy must
be clear on what is to be achieved, in concrete terms, how it is to
be achieved, with what means it is to be achieved, and when it is
to be achieved. The strategy, of necessity, must address all
portions of the Navy infrastructure, not just a few isolated
portions thereof. A compelling case for major change in the way
business is conducted must be made by the CNO and communicated to
all elements of the Navy. Responsibilities and authorities to
implement change must be made clear and issued by the CNO.
Experience in both the public and private sector shows that such
“enterprise reengineering” cannot be implemented
easily. The required efforts go far beyond the authority of
individual staff elements in the Office of Naval Operations (OPNAV)
or the Secretariat (e.g., Shore Installation Management Division
(OPNAV-N46), Deputy Chief of Naval Operations for Logistics (N4),
Assistant Secretary of the Navy, Financial Management and
Comptroller (ASN/FM)), as the committee understands these
activities today.
Additional insights and recommendations on what is needed to
achieve change across the entire Navy system are provided in the
body of this report. In developing its corporate-wide strategy the
Navy should aggressively reexamine long-standing business practices
that are deeply ingrained in its culture. The committee believes
that, to provide visibility, foster innovative solutions to
to-day's complex problems, and measure progress, the Navy's efforts
should focus on implementing three key interrelated enablers.
Navy-Wide Enablers
Three enablers—performance metrics, information systems
technology, and competition—are singularly important to
implementing a cohesive strategy and plan that will achieve the
degree of change required in this instance.
Performance Measures, Cost Management,
and Allocation of Resources
Cost visibility and performance measurement to gauge progress
toward meeting mission goals are critical to good decision making
and allocation of resources. Traditionally, DOD and Navy resource
allocation processes have, for the most part, focused on input cost
figures that amount to planning factors. With regard to
infrastructure, for example, the requirement for funding real
prop-
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Page 4
erty maintenance is often expressed as a percentage of the
current plant value (e.g., real property maintenance “should
be funded” at 2 percent of the current plant value). Such
requirements do not result from analysis of actual needs; they do
not identify the consequences of funding at higher or lower levels,
nor do they describe the consequences or loss in capability
associated with not funding to meet the
“requirement.”
To improve management of the infrastructure, particularly from a
business perspective, the Navy will have to develop and use
performance measures that are important to the operational forces.
Such measures must facilitate assessments of infrastructure support
outputs as they affect force readiness to carry out fleet missions.
Output measures are also essential to making more informed
judgments regarding alternative infrastructure investments and the
consequences of those alternatives. To facilitate implementation,
the committee provides a suggested seven-step process for
developing performance measures that involve both service providers
and service users.5 The process
will allow decision makers, from the program manager to the Chief
of Naval Operations, to evaluate what is required to support the
user and what level of performance should be expected by the
user.
The Navy Working Capital Fund (NWCF), which currently provides
more than $20 billion in goods and services annually to Department
of the Navy customers, lacks cost visibility and output measures
for assessing performance. NWCF operations are overseen by
financial managers rather than line managers, and there is no
single individual or chief operating officer who is dedicated to
overseeing and improving management of the total system.
Major Recommendation: The Navy should establish a
management information system to track support-system performance
and costs. This system should be based on an integrated set of cost
and performance metrics that are developed using fleet user inputs
as well as those of service providers.
More detailed information and recommendations related to the
components of a management information system are included in
Chapter 3 of this report.
In addition, accurate vision statements are important when
formulating long-range plans and measuring progress. The committee
believes that the motto in the current 21st Century Shore
Support Infrastructure: Navy Infrastructure Vision and Strategic
Plan,6 “Equal to or
better service at equal to or less cost,” is inconsistent
with the goal of reducing the infrastructure to the minimum
essential necessary to meet users' requirements.
5See Appendix
C and discussion in Chapter 3.
6Hancock,
VADM W.J., USN, Deputy Chief of Naval Operations for Logistics
(N4). 1997. 21st Century Shore Support Infrastructure: Navy
Infrastructure Vision and Strategic Plan, Washington, D.C.,
June 14.
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Major Recommendation: The Navy should change its
statement of infrastructure vision to “Essential service at
minimum cost.”
Information Technology for
Infrastructure Management
Information technology, when used creatively, can enable
organizations to provide services in ways not previously possible.
It can also assist managers to better align lower-level
responsibilities and authorities, and thus can save money by
eliminating work. Numerous private-sector firms have significantly
improved their global competitiveness by reengineering their
business processes and management structures. Improved
competitiveness in this regard has typically involved adopting a
customer-oriented focus and skillfully leveraging information
management and communications in order to reduce the overall costs
of operations. To succeed, this approach requires an
enterprise-wide perspective of “what is” and
“what needs to be.” A clear vision of the desired
management structure, and how it needs to function, is central to
any such reengineering effort.
To improve the efficiency and effectiveness of its
infrastructure operations, the Navy must fully identify both the
individuals and the organizations that will be responsible and
accountable for specific infrastructure outputs and the content of
the associated management information. A substantial effort must be
made to develop and maintain networked information systems,
including World Wide Web-based tools, databases, and applications
that will enable integrated management of the Navy infrastructure.
The basic task is to provide all essential users in the
infrastructure and the fleet with desk-to-desk connectivity and
sufficient bandwidth such that they will be able to share data and
services as they can now share voice communication.
Connectivity and access to shared information increase the value
of services to users. With total connectivity, information
technology has the potential for integrating ship and shore
operations and enabling the infrastructure to supply services in
ways not possible before. Information posted on the World Wide Web
could replace most hard-copy manuals and general information
materials. Providing services via a Navy-wide information space
(infospace) rather than physically co-locating services and
customers can effectively move the services from “down the
street” to “on the desk.” The concept of a
Navy-wide infospace is that of an adaptive system defined at any
time by a set of performance standards for timely and effective
information delivery throughout the Department of the Navy. Used
well, information technology saves money by eliminating work, not
by moving it or automating it. Information technology can also help
to conserve physical resources by providing ways to model the
consequences of alternative decisions. A simple example is the
electronic tool for ship berthing and movement developed and used
at Naval Base, San Diego. It is cheaper to move ships on screens
than under real power.
The Navy has spent billions of dollars on obtaining
connectivity, but the
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primary focus is on the operational users, while the needs of
infrastructure users are not being fully addressed. The result is
that the benefits of full Navy-wide connectivity are not being
realized even though the major portion of the costs are being
incurred.
Major Recommendation: The Navy should define and
implement the concept of a Department of the Navy-wide information
space (infospace) using a set of standards—some of which are
now being partially implemented by the Information Technology for
the 21st Century (IT-21) initiative—to serve both shore and
afloat activities. The infospace should be defined by performance
standards for timely and effective delivery of information and
services throughout the Department of the Navy, including the fleet
and its support. It should include a network infrastructure and a
standard information workstation for every responsible information
worker in the Navy, not just those in the operating forces. The
infospace should be used as the primary vehicle for delivery and
integration of information about the entire Navy infrastructure to
include the following functions: acquisition, central logistics,
central personnel, communications, force management, installations,
medical functions, quality of life, science and technology, and
training. Funding for this effort, including funding for essential
technology upgrades and related training, should be identified and
protected within the Department of the Navy.
More detailed information and recommendations related to the
components of a future Navy-wide infospace, with specific
discussion of its importance for reducing infrastructure costs, are
included in Chapter 3 of this report.
Competition
Competition can reduce the costs of providing services. In
addition to achieving greater efficiencies, there are numerous
advantages to competition.7 From
1978 to 1994, the DOD held more than 2,000 public-private
competitions that resulted in an average savings of 30 percent, or
about $1.5 billion annually.8
Within the Department of the Navy, competitive sourcing (i.e.,
competitive bidding among service providers) following Office of
Management and Budget Circular A-76 procedures was used to conduct
large numbers of detailed bottom-
7(1)
Competition forces public (or private) monopolies to respond to the
needs of their customers; (2) competition rewards
innovation—monopoly stifles it; (3) competition boosts the
pride and morale of public employees (Osborne, David, and Ted
Gaebler. 1992. Reinventing Government, Addison-Wesley
Longman, Inc., Reading, Mass., pp. 80–84).
8Trunkey, R.
Derek, Benjamin P. Scafidi, Francis P. Clark, Cheryl Kandaras,
Andrew M. Seamans, LCDR Carolyn M. Kresek, USN, Robert P. Trost,
Angela L. King, Christine H. Baxter, Kerensa E. Riordan, Steven
Smith, and Michael Ye. 1998. Moving Forward with A-76 in the
Navy, Research Memorandum 98-9.10, Center for Naval Analyses,
Alexandria, Va., May.
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Page 7
up reviews, with each competition involving small numbers of
positions. The A-76 procedures, in and of themselves, discouraged
managers from taking action. In addition to this constraint,
competition for many infrastructure functions was also limited by
Navy policies, particularly those regarding the definition of
positions as inherently governmental and those reserved for
sea-shore rotation. The end result of these constraints and
policies is that competitive sourcing, as it has been implemented,
is not likely to be a major contributor to reducing infrastructure
costs. This is unfortunate because the committee's review clearly
suggests that the Navy could reduce its future infrastructure costs
considerably by adopting a top-down rather than a bottom-up
approach, and by readdressing long-standing management practices
and policies with regard to an objective definition of billets
suitable for competition (civilian and military), given the costs
of infrastructure personnel.
The rotation of the career enlisted force between sea and shore
billets is an integral part of the Navy's overall personnel
management system. The sea-shore rotation policy has fundamentally
been implemented by reserving many shore jobs for military
personnel. In recent years, however, sea-shore rotation objectives
increasingly have come into conflict with Navy objectives to reduce
the number of support personnel ashore.
The metric used by the Navy to monitor sea-shore rotation is the
sea-shore ratio. This ratio is based primarily on considerations of
morale and retention, with planning factors based on “past
experience” and conventional wisdom—rather than any
direct cause-and-effect relationships—used as a guide. The
ratio is not based on the kinds of analyses that major modern
enterprises use to maximize the efficiency and effectiveness of
their personnel management.
Major Recommendation: The Navy should use competitive
sourcing as a preferred approach to selecting the best providers of
all support. In this regard, the Navy should establish a
cross-functional team under the Assistant Secretary of the
Navy/Installation and Environment (ASN/I&E) and the Assistant
Secretary of the Navy/Research, Development, and Acquisition
(ASN/RDA) to be responsible for overseeing the execution of
competitive sourcing in business operation areas approved by Navy
leadership.
In addition, the Navy should address all existing constraints
on sea-shore rotation. The CNO should broaden the objective to
managing seagoing personnel as a part of total naval personnel
management and should direct relevant elements of the Office of
Naval Operations (OPNAV) and second-echelon commands to search for
innovative ways to satisfy the morale and retention needs that
allow greater flexibility in reducing the cost of the
infrastructure.
More detailed information and recommendations related to
competition are included in Chapter 3 of this report.
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Closing Comment
In seeking to prepare now for the future, the Navy must assume
that its budgets will at best remain nearly flat in constant-dollar
terms. Thus, in order to free resources to fund essential
modernization requirements, the Navy should aggressively seek to
significantly reduce the cost of infrastructure operations, because
closing additional bases is an option that the Congress will not
support at this juncture. Failure to act quickly and
comprehensively will most likely result in an inability to acquire
sufficient combat platforms, weapons, and supporting systems to
maintain the current force structure and keep the Navy preeminent
in the future.
Representative terms from entire chapter:
naval operations
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