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Page 16
2
Selected Navy Initiatives
The Office of the Chief of Naval Operations for Logistics
(OPNAV-N4) is responsible for staff oversight for all facilities
and installations of the Navy's shore establishment regardless of
mission, and is the functional or mission sponsor for logistics
(supply, maintenance, transportation) and base support (family
housing, fire, and safety). Because this office sponsors a number
of programs specifically with the aim of infrastructure cost
reduction, the committee began its deliberations using this
office's agenda as a roadmap. This chapter summarizes most of these
initiatives and comments on progress in applying innovation in
organization, technology, and management to the infrastructure as
viewed in the first half of 1998.
Regionalization
Most Navy bases and facilities are clustered in a few regions
around the country. Before regionalization, each facility was
managed as a subordinate unit of a parent command and was supported
independently of the other activities in the region, often
providing all of its own infrastructure support. Over the years,
the Navy has attempted to coordinate support activities in a
region, but in general, these efforts have been limited. The Navy
is now consolidating support in its larger U.S. regions, and it has
termed that program “facility claimant consolidation”
and “regionalization.”1 This section reviews regionalization
and considers ways to improve the success of that initiative.
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Page 16
2
Selected Navy Initiatives
The Office of the Chief of Naval Operations for Logistics
(OPNAV-N4) is responsible for staff oversight for all facilities
and installations of the Navy's shore establishment regardless of
mission, and is the functional or mission sponsor for logistics
(supply, maintenance, transportation) and base support (family
housing, fire, and safety). Because this office sponsors a number
of programs specifically with the aim of infrastructure cost
reduction, the committee began its deliberations using this
office's agenda as a roadmap. This chapter summarizes most of these
initiatives and comments on progress in applying innovation in
organization, technology, and management to the infrastructure as
viewed in the first half of 1998.
Regionalization
Most Navy bases and facilities are clustered in a few regions
around the country. Before regionalization, each facility was
managed as a subordinate unit of a parent command and was supported
independently of the other activities in the region, often
providing all of its own infrastructure support. Over the years,
the Navy has attempted to coordinate support activities in a
region, but in general, these efforts have been limited. The Navy
is now consolidating support in its larger U.S. regions, and it has
termed that program “facility claimant consolidation”
and “regionalization.”1 This section reviews regionalization
and considers ways to improve the success of that initiative.
1In part this
is due to base realignment and closure (BRAC).
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Page 17
Current Status
To understand the regionalization initiative and its
implementation challenges, the committee visited San Diego naval
bases reporting to the Commander in Chief, Pacific Fleet
(CINCPACFLT). The San Diego region has the second largest
concentration of Navy personnel and units, and it is home port to
56 ships. Given base closings elsewhere, it appears that the Navy
presence in the region will increase over the next few years.
Although most of the bases participating in this regionalization
effort are in the immediate San Diego area, some bases, such as
Fallon, Nevada, and El Centro, California, are further away. To
capture this wider consolidation, the new region is called the
Southwest Region, and it covers three states.
As part of the regionalization process, ten San Diego bases are
first being restructured into three megabases. Most of the money to
operate and maintain the bases will come through one claimant
(CINCPACFLT). Several other claimants have transferred money and
control of property to CINCPACFLT as part of the process to
simplify the flow of funds, and most of the installation support
money comes to CINCPACFLT under the sponsorship of OPNAV-N4. The
committee did not obtain a full understanding of all the planned
savings because regionalization was still in the early stages of
development and implementation.
Regionalization will consolidate the support of the three new
megabases. The regional command will have consolidated departments
headed by program managers (or assistant chiefs of staff [ACOS]).
The departments will provide a range of services to the three
megabases, such as facility management, security, port operations,
and air operations. There is a regional advisory board consisting
of the megabase commanding officers and department managers.
Based on the study of seven functional areas, the initial
consolidation should save at least $20 million when fully
implemented. The goal is to achieve savings of $40 million a year.
Most of the savings from regionalization will come from reducing
the number of middle management civil service employees and
overhead features. Prior to the consolidation, bases in the region
had reduced costs by $30 million. This was a 10 percent reduction
in their base operating support budgets. The cuts were the result
of overall budget reductions—some were met through
efficiencies and others through reductions in service. From
1997–1998, 500 civilian workers were displaced by these
cuts.
It was very difficult to account for the total cost of the
infrastructure resident in the San Diego region. Excluding
personnel assigned to ships and to deployable aircraft squadrons,
there are 36,000 military personnel and 20,000 Navy civilians in
the region. The personnel cost alone is $2.5 billion. This estimate
excludes construction costs, contractors, and utilities. As far as
the committee could determine, the regional commander will have
control over only $500 million. Thus the identified savings ($20
million) and the savings goal ($40 mil-
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lion) only begin to touch on total Navy expenditures in the
region. Additional savings may be forthcoming, but as yet have not
been identified or targeted.
The committee was also briefed on the Hampton Roads, Virginia,
regionalization effort, which reports to the Commander in Chief,
Atlantic Fleet (CINCLANTFLT), and has an organization and
management matrix similar to those in the San Diego region.
Consolidation of the Hampton Roads region, the largest naval
concentration, involves 12 installations with 17 claimants, 25
property managers, and more than 500 tenants, with an inventory of
$10 billion in buildings and 56 square miles of land. Although most
of the examples below are drawn from the Southwest Region, the
strengths and concerns with consolidation also apply to the Hampton
Roads region. Figure 2.1 and Table 2.1 summarize the current status
and projected annual savings for the Navy concentration areas in
which regionalization and consolidation are to take place.
Rationale
Regionalization is a form of consolidation. In theory,
consolidation can either improve or degrade the use of resources.
However, there are many reasons to expect lower costs, i.e., scale
economies, scope economies, redundancy elimination, and market
leverage.
Figure 2.1
Navy concentration areas.
SOURCE: Adapted from Wennergren, David M. 1998.“Navy
Concentration Areas
—Host Activities,” Navy Infrastructure Cost
ReductionInitiative, Office of the
Chief of Naval Operations (N464), Washington, D.C., briefing
to the committee, February 4.
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Table 2.1 Current Status of
Regionalization
Navy Concentration Area
Projected Annual Savings
Current Status
San Diego
$40 million
Analysis complete; PACFLT implementation in
progress. Consolidating 10 hosts with regional base operating
support (BOS) service delivery
Hampton Roads
$83 million
Analysis complete; LANTFLT implementation in
progress. Consolidating 11 hosts with regional BOS service
delivery
Pearl Harbor
$18 million
Analysis complete; PACFLT implementation in
progress. Consolidating 8 hosts with regional BOS service
delivery
Pensacola
$15 million
Analysis complete; CNET implementation in
progress. Consolidating 4 hosts with regional BOS service
delivery
Pacific Northwest
TBD
Analysis in progress
Jacksonville
TBD
Analysis in progress
Washington, D.C.
TBD
Analysis in progress with N464 support
Guam
TBD
PACFLT regionalizing as part of regional A-76
competition. Consolidating COMNAVMARIANAS and NAVACTS Guam,
regionalizing BOS functions
Japan
TBD
Analysis in progress with N464 support
Port Hueneme
TBD
Analysis in progress; some functions being
implemented
New Orleans
TBD
Analysis in progress with N464 support
South Texas
TBD
Analysis in progress with N464 support
New England
TBD
Analysis in progress with N464 support
SOURCE: Adapted from Wennergren, David M. 1998.
“Regionalization: Current Status,” Navy
Infrastructure Cost Reduction Initiative, Office of the Chief
of Naval Operations (N464), Washington, D.C., briefing to the
committee, February 4. TBD, to be determined.
Scale economies come from consolidating common workloads.
Basically, when the workload doubles, something less than double
the amount of resources is needed. There could also be scale
diseconomies, which would make it more costly to provide services
in larger organizations. This could be caused by additional
oversight to coordinate the work. For the type of work consolidated
in the Southwest Region and the size of the workload, it is
unlikely that there are scale diseconomies.
Scope economies are efficiencies gained from merging different
types of workload. For example, there are scope economies from
naval aviation depots (NADEPs) working on both airframes and
components. These workloads may
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use common management or inventories. The two workloads may also
complement each other. For example, warehousing and configuration
management may be collectively less costly if they have a common
provider of the services.
When each facility has its own supporting unit, there could be
redundancy in the support. As an example, a public affairs officer
at each base may be responding to the same question from the same
community representatives. Because smaller bases have often
reported to different higher-level organizations (claimants), there
was limited consideration of joint provision of these redundant
services.
Many apparent redundancies are probably scale economies that
show an excess only after consolidation. For example, finance and
accounting personnel collectively may be able to manage accounts
with fewer people than the sum of the individual departments. There
is no redundancy because all of the people are necessary to meet
the needs of the individual bases. The point is that classifying
the source of savings is somewhat arbitrary—although the gains
are very real.
Sometimes, consolidation can improve the purchasing power of the
new unit. This is often termed market leverage. Private firms may
offer discounts to larger customers, in this case the regional
service providers, and this would reduce the cost to the
consolidated units. The saving derives from the outside service
provider's own scale economy.
Regionalization need not mean that one central organization
provides all the support in a geographic area. For example, it
could be agreed that one base in an area would operate the bachelor
quarters, another facility would handle security, and still a third
facility could handle personnel and pay support services. In this
case, the region would take advantage of scale economies in the
individual services. However, there could be significant drawbacks
to such a consolidation. First, it would be very difficult to trade
off across support areas (i.e., it would be hard to move resources
across support areas when there are unforeseen problems or
unexpected changes in the demands for the services). Also, there
would be no gain from scope economies. Any gains in consolidating
management oversight across services would be lost. For the San
Diego and Hampton Roads regions, the service providers would be
part of a larger organization, and this should allow the shifting
of funds.
Some Concerns and Suggestions
Understandably, some reluctance exists at local bases and
facilities to participate fully in regionalization. In part, it is
a feeling that commanders and department heads would lose control
over the quality and level of service support.2 There are many reasons for the Navy,
regional commanders, and bases to be concerned with the outcome
when consolidating service delivery. The newly consolidated
organization could grow over time, particularly its indirect
labor
2Also, the
BRAC process may not be over, and if so, further adjustments will
have to be made.
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component, and the consolidated organization would have the
challenge of properly prioritizing and sizing services at
individual facilities. All of these potential problems can be
addressed beforehand, but they cannot be ignored.
The committee identified several ways to improve the
regionalization initiative, make it more responsive to the
customers served, and guarantee that the savings are realized.
These improvements are listed below and discussed in the following
paragraphs:
• Simplify the organization.
• Charge fees for service.
• Establish full cost visibility.
• Integrate competitive sourcing.
• Fully integrate all bases in a region.
• Seek customer input, and measure customer
satisfaction.
• Establish metrics jointly with customers.
• Institutionalize success.
• Better train and assign shore managers.
Some of the recommended changes would directly address local
concerns of bases. Having customers pay for additional services
would give them some control over the quality of services. Also,
clearly defined metrics provide both customers and regional service
providers with performance standards to identify performance
problems and gaps.
Simplify the Organization
In the San Diego region the new organization appears to have
been superimposed on the previous organization, which in turn
appears to have been superimposed on previous organizations. The
new program managers, or ACOSs, are base commanders or former base
commanders. There are 20 proposed functional departments. Some may
be merged into common departments, but a large number are still
likely to report directly to the regional commander. A large
regional advisory board was established to make major budget shifts
across functional areas. Although all of this seemed to be
necessary to achieve buy-in from the current organizations, this
new organization may be hard to manage, making it difficult to make
decisions and forcing customers to work with many departments to
solve problems that cut across the 20 areas.
Experiences of other large complex organizations indicate that
with the support of higher leadership, organizations can be
streamlined and made more customer friendly. The number of
departments should be relatively small, preferably between five and
ten. A reasonable set of departments in the region would be ship
support, aircraft support, personnel support, facility support, and
safety.
Regionalization might be an opportunity to realign previously
constructed
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regions. Although there is no reason to believe that the
optimally sized regions are the same for all types of services,
having different-sized and overlapping regions is not customer
friendly and may hinder future consolidations. Previously
regionalized activities that should be reexamined are maintenance,
personnel support detachments (PSDs), NAVFAC's Southwest division,
and housing.
In general, those in charge of facilities (or bases) should not
run departments that are intended to serve many facilities. As
currently envisioned in the Southwest Region, base commanding
officers (including those at bases being merged into the larger
units) will head the departments. This means that the commanding
officer must allocate support across his/her base and other bases.
As objective as they try to be, those in charge of facilities or
bases have conflicting incentives and goals—keeping up service
at their own base and properly allocating resources to other bases.
This is an unnecessary tension in the system that can never be
satisfactorily resolved. In some cases, such as port operations,
for which only one or two bases currently perform the functions,
the issue is less pressing. However, separating the jobs should be
an objective.
Charge Fees for Service
Two methods exist for funding infrastructure-related goods and
services: (1) fees for services paid by the customer, and (2)
funding directly by the service provider. To control demand for
support services, units could be charged for some additional
services beyond those provided by existing Navy Working Capital
Fund (NWCF) activities. This would enable the internal
“customers” to signal which work and services are worth
the costs. As currently planned in the San Diego region, only a few
units will pay for facility services. This issue becomes more of a
concern when a centralized unit, and not the individual facility,
makes most of the decisions. As currently proposed in the San Diego
region, program managers will have to petition the regional
advisory board for funds. The program manager then basically
becomes an advocate for his area. Each program manager can justify
additional funding because customers will make requests without
budgets and without paying for the services.
A drawback with establishing added fee-for-service activities is
that they would most probably fall under the rules of the current
NWCF. The current NWCF provides a much-needed flexibility, but it
has lost the confidence of many customers. In addition, charging
fees for services requires added administrative and accounting
processing. Thus, decisions to charge fees for services should be
made only when benefits will clearly outweigh overhead costs.
Establish Full Cost Visibility
Payment for service is related to cost visibility, but it is not
the same. A good accounting system could capture the cost even
without reimbursements.
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The costs should be visible to both service providers and
internal customers. In general, these costs have not been very
visible to anyone. Part of the reason is that facilities do not
have all resources in their budgets and indirect costs are not
captured by anybody. The costs of military personnel and
construction are often left out of the cost of delivering a
service. Indirect costs of a base's service probably should include
the support for military personnel, such as housing, personnel
offices, and the other quality-of-life features provided on a
base.
The regionalization plan in the San Diego region does include a
program to introduce activity-based costing (ABC). When this
program is put in place and maintained, it should be extended to
capture all costs, including military personnel and construction.
Currently, the San Diego region plans for ABC do not include the
full cost of military personnel. Full cost visibility could help
establish fees for service and help facilities manage their
operations more efficiently.
Integrate Competitive Sourcing
The Navy, like all of the Department of Defense (DOD), has an
aggressive initiative to open to competitive bidding many of its
support services. The effort builds on the previous success of
competitions over a wide range of activities and organizations. To
date, the Navy has been performing these competitions at individual
bases without the benefits of regionalization.
Regionalization and competition are complementary because
competitions for larger activities generally produce a greater
percentage of savings than do smaller competitions. Moreover,
regionalization should reduce the administrative cost of
competition, and the new regionalized departments should be able to
represent the in-house bid in a more effective manner.
As suggested in Chapter 3 in the section titled
“Competition,” regionalized activities should be
competitively sourced. The Navy should announce competitions as
soon as it decides to regionalize, or as soon as possible
thereafter. This would give private firms, as well as the in-house
work force, time to restructure and reengineer activities. Industry
forums could improve both in-house and outside bids. If, in fact,
an in-house team is successful in a competition (as has been the
case in the past [General Accounting Office3 studies]), it provides direct market
evidence that its organization is the most efficient.
3U.S. General
Accounting Office. 1998. Public-Private Competitions; DOD's
Determination to Combine Depot Workloads Is Not Adequately
Supported, GAO/NSIAD-98-76, Washington, D.C., January; U.S.
General Accounting Office. 1997. Privatization and Competition;
Comments on H.R. 716, The Freedom from Government Competition
Act, GAO/T-GGD-97-185, Washington, D.C., September 29; U.S.
General Accounting Office. 1997. Defense Outsourcing; Challenges
Facing DOD as It Attempts to Save Billions in Infrastructure
Costs, GAO/T-NSIAD-97-110, Washington, D.C., March 12; U.S.
General Accounting Office. 1996. Defense Depot Maintenance;
Privatization and the Debate Over the Public-Private Mix,
GAO/T-NSIAD-96-146, Washington, D.C., April 16.
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Fully Integrate All Bases in a
Region
As noted above, many of the naval bases in the San Diego region
are reluctant to participate in the regionalization. In the San
Diego region, the naval aviation depot (NADEP), Space and Naval
Warfare Systems Command (SPAWAR) activities, and the hospital
should participate fully. Some argue that regionalization should
not include all activities in direct support of missions. Any
attempt to separate activities on the basis of mission support
reduces the merits of the consolidation. Mission-funded
organizations should be directed to move as many of the support
people into the consolidated organization as possible. By retaining
budgets and purchasing services through a reimbursable system,
mission-funded organizations would retain control over the level of
services.
Seek Customer Input and Measure
Customer Satisfaction
The current suppliers of services are basically shaping
regionalization. It makes sense for functional experts in
facilities, supply, air operations, and so on, to work on the
design of the new organization. However, it is natural for the
current providers to construct an organization that mirrors the
individual, smaller organizations except for the elimination of
some middle management positions. Also, there will be an
inclination to continue to provide the services as they have in the
past. Yet, the old organization may not have been satisfying its
customers, and customers' inputs are needed to help shape and
reengineer the new organization. As proposed in Chapter 3, the
committee recommends that each of the new regionalized departments
establish a performance work statement with output metrics based on
both customer and provider inputs. These mission statements would
help define the departments and the subordinates.
All of these concerns will exist in a decentralized system,
where each base and facility makes its individual decisions.
However, when individual commands are closer to the end users (or
may be the end users themselves), they would be more aware of
changing needs and local priorities. Often, centralized decision
makers can consider priorities among functions, but they may find
it difficult to make across-base comparisons. Consideration of
customer inputs and fee for service are key ingredients in any part
of the reorganization and reengineering process needed to offset
the bureaucratic tendency of centralized organizations.
Establish Metrics Jointly with
Customers
A common challenge for organizations is to define meaningful
metrics for judging performance and to use these measures properly.
The more centralized the decision process, the more important is
the role of metrics. The consolidated service providers, often
headquartered away from the base, have to judge the
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quality and adequacy of services. There are many layers and
levels of metrics. The higher-level metrics reflect the overall
functions and goals of the infrastructure, and the lower-level
metrics are more clearly related to day-to-day resource decisions
and performance measurement. The higher-level metrics provide
context and direction to the organization. Regional commanders are
generally not accountable for their magnitude and changes. It is
the lower-level metrics on which they can be judged. The greatest
challenge is to connect the lower-level metrics to the higher-level
ones. Even when those connections are not well defined, and they
often are not, it is still important to track both sets
systematically. A “best practice” of many successful
firms is to have a regular audit process that reviews metrics and
publishes the results. Some examples of higher level metrics are
the following:
• Readiness condition of home-ported ships as they leave
for deployments,
• Readiness condition of home-based squadrons as they leave
for deployments,
• Retention rates of Service members in the region,
• Percent of regional Service members requesting to stay in
the Southwest Region, and
• Customer satisfaction on surveys.
Each individual metric has its weaknesses. Some are better
applied to a base than to a region. But collectively, they present
a picture of what material and personnel support should do. Since
regional support is only one component of success, some trends may
be unrelated to regional performance. Yet, a downward trend because
of outside forces may justify increasing or shifting resources by
claimant and resource sponsors. Common metrics from the CNO to base
departments should focus the organization on its mission and
purpose.
Lower-level metrics are important for day-to-day regional
management. The set of metrics selected should be constantly
reviewed. The goal is to capture a reasonable set of indicators
that collectively provide a picture to the regional commander.
Examples of some lower-level metrics are as follows:
• Number of hours an airfield is closed,
• Number of nested berthings at pier,
• Square-foot cost to operate and maintain buildings,
• Elapsed time for repairing problems in housing,
• Utility costs per square foot of space,
• Crimes committed at Navy installations,
• Elapsed time for remedying environmental incidents,
and
• Waiting time for family services.
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After the metrics are identified, the Navy must establish
benchmarks. Benchmarks could be based on historical “good
periods,” the performance at the best installations, or where
comparable measures can be made with private-sector
performance.
Institutionalize Success
The Southwest regionalization effort is being built around the
personalities of the region's leaders. The committee noted that
they have built a partnership and a feeling of trust that allows
the bases and tenants to break away from the traditional
organizations. However, these relationships are fragile, and the
rotation of key personnel could easily erode the gains. Over time,
the regionalization may retain its form on paper, but a different
set of leaders could revert to old practices and recreate their own
support. The Navy must adopt policies and mechanisms of procedure
and process to guarantee that successes endure and that process
improvement continues.
Better Train and Assign Shore
Managers
When organizations are stable, good general managers can come in
and effectively run the operations. When rapid change is called
for, leaders with a deeper understanding of how support
organizations work and with enough tenure to make changes are
required. The Navy must decide how to better train and assign its
shore establishment leaders. These leaders must understand the
component departments, needs of customers, current technologies,
and modern business practices. The Southwest Region has a good
share of experienced leaders, but this is unusual given current
assignment policies and rotation. The Navy should consider extended
tours for base commanders, require one previous base command
assignment before assignment to the top position, and ensure
promotion opportunities for excellent performance in shore command
assignments. The executive officers could be Navy civilians with
5-year contracts. Such contracts allow for continuity and protect
the Navy from poor performance. The Navy should cooperate with
bases of other military departments in the same area. Joint efforts
and cooperation in emergencies, safety, counterterrorism, and so on
would be desirable, and likely necessary. Joint efforts in housing
and environmental controls might further reduce costs for all
concerned.
The Future of Regionalization
The Navy has made significant progress in overcoming parochial,
“stove-piped” interests in favor of implementing
regional cost-reduction strategies across multiple activities and
major claimants. But more can be done. The Navy could expand its
ongoing regionalization efforts to include other
“ashore” funtional
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costs—that is, those incurred in periods of relative
tranquility—while not creating unacceptable risks for crisis
and war. The committee is of the opinion that further opportunity
exists for achieving savings in the maintenance infrastructure
through reengineering across existing maintenance levels (depot,
intermediate, and unit) and recommends continued exploration of
opportunities consistent with the level of risk that can be
tolerated for crisis and war situations.
Recommendations
• Provide regional maintenance coordinators with more
authority than just “the power of persuasion” among
equals to meet the regionalization of fleet maintenance objectives
(and overcome some of the parochial Navy challenges listed
above).
• Include the costs of the military personnel involved
in maintenance and other logistics functions in information made
available to decision makers at all levels. Without an
understanding of true costs in the Navy, decisions will be made on
the basis of intuition and incomplete facts.
• Continue to push for and eliminate excess capacity
where it exists. The committee acknowledges external pressures
inhibiting base closure and further contracting of depot work, but
overcoming these pressures should not be abandoned.
Smart Base
Smart Base is a specific Navy project to test and evaluate
initiatives that hold promise for reducing costs and/or improving
the delivery of services on naval bases. Initiatives could be built
around either recently developed technology or modern business
practices; however, the focus of most of the project is on the use
of computers to improve base support, with a common theme that
computers more quickly and accurately complete personnel,
financial, and facility transactions. Some of these initiatives
rely on new software for individual computers, but most of the
applications require that computers be linked and pass information.
As the committee notes below, this lack of connectivity among
functional computers has been a major limitation of these
initiatives. Other initiatives, such as Smart Card, examine
innovative ways for the Navy to use evolving commercial standards
in embedded-chip credit cards, much like those the commercial
banking industry has attempted to provide to its customers.
Essentially, the Navy's Smart Card would enable electronic access
to personnel records for record keeping, security clearances,
travel reimbursement, and so on.
As part of its review, the committee visited the Naval Station
at Pascagoula, Mississippi, and the Portsmouth Naval Shipyard in
Portsmouth, New Hampshire, which are principal installations
testing Smart Base initiatives. When the committee visited
Pascagoula, it was home port to four ships, 1,600 military
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personnel, and 90 civilians. Since then, the base has added a
cruiser and will soon have a Coast Guard cutter. It is a modern and
relatively small operational base.
Portsmouth, on the other hand, is an old and large industrial
facility. It is one of the four remaining public shipyards, and it
is dedicated to the repair and overhaul of nuclear submarines. The
facility is located on an island with four million square feet of
facilities, some of which date back to the Civil War. More than 90
percent of its current labor force of 3,400 are government
civilians. Although the primary activity of the base is ship
maintenance, about one-sixth of the work force, more than 550
people, provide base support.
Results to Data with Information
Technology
The Smart Base project is 2 years old. In FY 1997 and FY 1998,
the Navy will spend up to $20 million on its Smart Base
initiatives. The Navy uses Broad Agency Announcements, which invite
private firms to submit Smart Base proposals. To date, 200
proposals have been received—the largest number dealing with
the use of Smart Cards; currently, 21 different initiatives are
being tested at Smart Bases. For example, Pascagoula is the testbed
for systems that support distance learning and bachelor quarters'
management. The major projects at Portsmouth include an
environmental information management system, an energy management
system, and an electronic security system.
Although the project has not yet achieved any breakthroughs, it
is too early to judge the merits of individual initiatives. A
well-publicized failure at Pascagoula was the establishment of an
automated kiosk that would have allowed personnel to check onto the
base, check into the bachelor quarters, and update personnel
records. Service members would use Smart Cards to carry out the
transactions. The kiosk never worked and was recently removed.
However, a Smart Card seems to have been used successfully on board
the Navy's Smart Ship. It is noted that a version of the Smart Card
has been abandoned most recently by a number of major banks,9 but a few are continuing to use the
approach. This seems similar to the Navy experience overall.
Lessons Learned
Pilot initiatives established to demonstrate successful
innovation in day-to-day operations are difficult to implement. The
committee is concerned that many of the current initiatives will
not succeed and meet Navy objectives. Some of the shortfalls are
listed below.
9In a recent
newspaper article, it was noted that “use of the cards by
customers had not come up to expectations and that merchants had
pressed for a simpler operating system” (Authors, John. 1998.
“Lack of Interest Forces Banks to Abandon ‘Smart
Card’ Plans,” The Washington Times, November
4).
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Lack of Connectivity
Lack of information connectivity and networking among functions
is a problem throughout the Navy—and the Smart Base
experiments suffer as a consequence. One of the initiatives is to
develop Internet access. Other initiatives basically assume, rely
heavily on, or have limited value without the connectivity of
computers. As a simple example, Pascagoula's consolidated bachelor
quarters has five computers in its front desk area, each doing part
of the room management function. Information cannot be passed
between the computers, and all of the information cannot be
displayed on a common screen. Another example: a particular
software project allowed the purchase of office supplies
electronically, but its design did not recognize that the task is
normally done by clerks without Internet access.
Failure to Truly Use the Private
Sector
An unspoken principle underlying the Smart Base project is that
inefficiencies result from the lack of applying current
private-sector technology. The thought is that putting this
technology on bases will bring efficiency and service quality
closer to that used in the private sector. Unfortunately, this
approach could fail because what the Navy lacks in many areas is
more than technology; it lacks the private sector's ability to
integrate systems in order to solve business problems. The private
sector sharpens these skills continually in a competitive
environment. By acquiring only the technology, the Navy is
underutilizing the private sector. For every new hardware or
software feature acquired, the Navy will have to solve new problems
to make the new technology work.
Poor Planning for Phasing Out Legacy
Systems
The committee was told that essential data are still stored and
transactions still processed on old (legacy) systems. Interacting
with different functions and old systems requires people familiar
with the operations and maintenance of those systems. One example
cited was the recent arrival of a UNIX machine at Pascagoula for
the maintenance of personnel records. The base had no support and
training for the system, and there was no connectivity provided
with other systems on the base.
Lack of Fleet Support
OPNAV sponsors and Washington program managers appear to work
directly with the base, bypassing both the fleet commander and the
regional commander. This practice has made the claimant leadership
somewhat indifferent to the program because they have no stake in
its success.
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Poor Metrics
Like other public organizations, the Navy lacks profitability as
a metric to motivate the best introduction and use of technology.
That does not mean that it cannot focus on reducing costs and
improving performance. However, with the new technology, there has
been little or no attempt to introduce cost visibility to track the
costs, or to introduce and track performance metrics. Although
there is an initial analysis of return on investment, the Navy does
not appear to have a follow-up program.
Lack of a Transition Plan for
Successful Innovations
Overall, the Smart Base project is evaluating many innovative
ideas. However, the committee believes that the project will have
only a small impact on infrastructure costs because there is no
overall plan to extend successful Smart Base initiatives across the
Navy shore installations.
Other Efficiency Projects at
Pascagoula
Pascagoula appears leaner than other bases, but this result has
little to do with the formal programs because the base was
originally set up without many support activities. For example, the
base does not have family housing, commissary, club, library, or
chapel—these services are provided in the community. The base
is very modern; it employs fiber cable throughout, permitting
connectivity for most purposes. The base management has also
contained, reduced, and avoided costs in a number of ways, and
three projects are worth mentioning.
Electric Steam Plant
One of the most impressive technological introductions on the
base is the steam plant on the pier. The modern plant was built by
Mississippi Power at far less than the Navy's planned cost,
employing sensors throughout, with the monitoring and regulating of
the system highly automated. The system does not require an
operator. This plant and the way it was acquired involved
discussions with the private sector, which had the incentives to
integrate several technologies into a modern and efficient plant.
The base management estimates that this approach has saved the Navy
$1.3 million in construction costs ($2.3 million spent instead of
$3.6 million) and $500,000 annually in operation and maintenance
costs.
Galley
Another action that is saving money is the elimination of the
base galley. The bachelors now receive a basic allowance for
subsistence (BAS) and have
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small refrigerators and microwaves in their rooms. According to
the base commander, this arrangement appears to be well accepted.
Also provided is a Navy Exchange and a small McDonalds restaurant,
and negotiations are underway with the Subway fast-food chain. The
galley had cost $700,000 a year to operate, whereas the BAS cost is
$200,000 a year.
Grocery Store Discounts
The base at Pascagoula does not have a commissary. The base
management asked local grocery chains to provide discounts to
active and retired military families, and two chains offer these
discounts. The committee notes that there are hidden savings here.
DOD currently provides a 20 percent subsidy to the commissaries,
which in turn provide only a 10 percent discount to sailors. The
private grocery stores are providing a 6 to 7 percent discount at
no cost to DOD. Although Navy management has been unsuccessful to
date in having the state waive sales tax on grocery sales to
military personnel, the initiative is noteworthy.
Recommendation
Both the Office of the Chief of Naval Operations (OPNAV)
sponsors and individual participants associated with Smart Base
initiatives need to have regional commanders assess the likely
importance of these technology demonstrations, and have them
support transition mechanisms for those deemed to have high
payoff.
Information Technology For The 21st
Century And Smart Link
Currently, there are two rather separate information technology
(IT) initiatives in the Navy: (1) IT-21 is primarily for the fleet,
and (2) Smart Link is for shore installations. While conclusions
are offered in this section, recommendations within this area are
given in the next chapter in the context of the committee's vision
of a Navy-wide information plan.
Background
Information and Technology for the 21st Century (IT-21) is both
a new concept and a set of commercial standards providing the
framework for the evolution of IT in the Navy. The Space and Naval
Warfare Systems Command (SPAWAR) has been designated the lead
organization to move the Navy's current IT resources from a set of
disparate information assets to a fully integrated system providing
connectivity across the entire Navy. IT-21 includes the underlying
foundational elements of electronic communication—among them
metro-
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politan area networks (MANs), local area networks (LANs),
personal computers (PCs), and backbone and related assets—that
will advance the Navy's objective to function as a single, highly
efficient enterprise. In a larger DOD-wide framework, IT-21 will
contribute to the information superiority envisioned in Joint
Vision 2010.10 Coordination of
interfaces with other Armed Services and joint programs will be a
continuing challenge.
Within OPNAV, the Director for Space, Information Warfare,
Command and Control (N6) is the resource sponsor and is responsible
for implementing the IT-21 Naval Virtual Intranet (NVI). Under the
current plan, these funds will be applied first to support fleet
claimants, numbering some 120,000 personnel. Selected portions of
the shore establishment will be upgraded as part of this initial
endeavor. If this approach proves successful, then other Navy shore
elements will be brought into the upgraded IT structure.
A dialogue with industry is underway on IT-21 architecture. In
particular, the concepts for the NVI have been disclosed to
industry, and industry has communicated back to the Navy its view
for implementation. The NVI process is planned to result in major
acquisitions, with an emphasis on maximum use of commercial
off-the-shelf (COTS) products, use of commercial standards, and the
use of desired performance rather than detailed Navy design
specifications. Similar efforts by other Services have a similar
emphasis on COTS products, which can facilitate efficiencies in
linkages that will have to be made.
The Navy has also been evolving, separately from the other
Services, the socalled Smart Link. Smart Link is a demonstration
program, and some parts of the Navy have a vision that it should
encompass many of the intended features of IT-21. Smart Link is
designed to provide long-haul communications, linking shore
installations throughout the country, operating across a commercial
asynchronous transfer mode (ATM) backbone on the public switched
(unprotected) network. Smart Link could also grow at a later point
to provide support services afloat. The relationships between Smart
Link and IT-21 are unclear to the committee, and the issue of
transitioning legacy systems, in general, will require high-level
Navy attention.
Information Technology
Responsibilities and Authorities
The recent Navy focus on electronic connectivity, and
particularly connectivity for the fleet, places SPAWAR in charge.
However, the responsibilities for infrastructure connectivity are
less clear. Moreover, control of information content, integration,
collaboration, and sharing of infrastructure information are
important functions, but it is not clear to the committee that any
one individual, or any designated set of individuals, is in charge
of them.
10 Chairman,
Joint Chiefs of Staff. 1997. Joint Vision 2010. Washington,
D.C., July 26. Available online at <http://www.dtic.mil/doctrine/jv2010/jvpub.htm>.
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The shore establishment employs numerous IT systems, supporting
diverse functions and commands; these systems are not compatible
with one another and are costly to maintain. Smart new software
systems are being introduced under the new base regionalization
concept, but there is no clear process in place to ensure that all
bases will benefit from these regional developments. High-data-rate
service exists, to a large degree, at Navy bases throughout the
country with emphasis now placed on the LANs, MANs with associated
servers, and PCs, which still need to be funded and installed. If
regional IT “islands” are substituted for functional
local IT “stovepipes,” the problem of redundancy and
lack of interoperability will remain.
Information Technology Standards
A number of organizations and functional groups are active in
addressing Navy IT issues; chief among them the Chief Information
Officer (CIO) of the Navy. The CIO is a critical element of the
Navy's hierarchy in establishing IT policy and providing Navy-wide
leadership. The CIO chairs the Department of the Navy Board of
Representatives, composed of senior IT representatives from
throughout the Navy, and speaks with authority in furthering IT
interests. The committee notes that in the highly important area of
standards, the CIO recently issued a new IT standards document that
is now being reviewed by industry. Industry comments will be
considered before this document is issued formally. The committee
believes that there is no more important area than standards if the
Navy is to maintain the necessary discipline to avoid redundancies
and to achieve interoperability throughout its emerging IT
infrastructure.
Understanding Information Technology
Costs
From an industry perspective, the GartnerGroup says that the
total cost of ownership for a personal computer is $10,000.11 During its review, the committee was
unable to obtain reasonable estimates of Navy IT costs. The Navy's
IT, and the overall DOD IT for the defense infrastructure, have
evolved over decades, with no architect responsible for pulling
them all together into a coherent integrated system. The Bandwidth
Baseline Assessment Memorandum (BAM) study,12 done for the Navy fleet, has no known
counterpart to document the
11GartnerGroup
Total Cost of Ownership Research Team. 1998. TCO (Total Cost of
Ownership) 1: A Business Yardstick, conference presentation,
GartnerGroup, Stamford, Conn.; Redman, B., W. Kirwin, and T. Berg.
1998. Managing Distributed Computing, R-06-1697,
GartnerGroup, Stamford, Conn.
12Cebrowski,
VADM Arthur K., USN, Director of Space-Information Warfare. 1998.
Memorandum for RADM Jay Yakeley, USN, Director of Programming
Division (N80), re: POM-00 C4I Bandwidth Baseline Assessment
Memorandum (BAM), Office of the Chief of Naval Operations,
Washington, D.C., March 18.
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current installed IT systems on land. The Navy does have a
five-phase plan to identify the approximately 40 percent of IT
needs for shoreside activities, but it will not include items
bought with Navy operations and maintenance (O&M) funds. The
committee could not find a good baseline inventory of machines,
software applications and software systems, and connections to LANs
and wide area networks (WANs). Without a blueprint for existing
Navy IT infrastructure and a comparable plan or statement of needs
for the future, the committee could not make an intelligent
assessment of the overall costs for the Navy IT infrastructure, or
projected IT budget needs. Parenthetically, this lack of
information on total available IT assets also has caused a problem
in assessing the extent of the year 2000 (Y2K) problem.
Navy Culture, Values, and Resource
Allocation
There is a perception that when resources are scarce, the Navy
places its priorities on platforms and weapons systems.
Traditionally, IT capabilities and IT skills have not been valued
highly. Programming large sums of money for IT often results in the
funds being a target for budget reallocation.
The payoff from IT is not well understood. Moreover, with no
central management of IT, there are limited or no perceived
incentives to share, use best business practices, learn from each
other, keep track of what hardware and software configurations are
used, track how much is spent on personal computers, or obtain the
total cost of ownership. There is limited insight into the costs of
doing work (e.g., military personnel are viewed as cost-free in
many infrastructure areas), and the value of additional shared
information for management is not fully appreciated.
The Navy now is showing its understanding of the need to share
fleet information as it changes from platform-centric to
network-centric warfare. However, this need to share information to
improve effectiveness has not yet permeated the Navy
infrastructure.
Connectivity and Content
In the IT world, connectivity is the highway, sufficient
bandwidth makes it a superhighway, and the hardware and software
are the enablers. Information content is the essence of the value
in the product—getting the right information to the right
people at the right time. Metcalfe's law asserts that the power of
a network is proportional to the square of the number of nodes in
the network. Connectivity and access to shared information increase
the value of the product to the customer. To date, the Navy has
focused on laying the highway and increasing the bandwidth to
address the issues of the fleet—the fighting force of the
Navy. As the committee studied the essential non-deploying shore
support
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to the fleet, it found that in the Navy IT world, the shore
support has not had high priority.
Lessons from Industry
In industry, once the highway is laid, getting the right product
to market ahead of the competition becomes the issue. Time is an
important metric or measure of success. To reduce time from the
process, non-value-added work and transactions have to be
eliminated. Thus, management needs to understand what work is being
done, by whom, and where. In large organizations, most of the
information on what and how work is done is hidden. The costs of
getting work done are also not transparent.
The transformation of U.S. industry, which has reestablished its
strength in the global marketplace, is due to restructuring the way
work is done and how information is shared. IT has been a major
enabler of this change.
Tedious and time-consuming tasks have been reduced, or made
easier to perform. With the advent and broad use of the World Wide
Web (WWW), order and delivery processes have been revolutionized.
Paperless acquisition and electronic commerce are thriving. The
facility maintenance for millions of square feet can be managed by
a handful of people, centrally located, using an intelligent
database and decision support tools. Adult training and education
are being transformed by sophisticated, engaging, multimedia
courses designed for learning. Universities are now managing their
operations online. The Western Governors University is a
collaboration among 16 states to provide learning opportunities
online—shared and run across state boundaries. The University
of Phoenix has no campus; all communications take place online, and
non-Web courses are given in rented warehouses or storefronts.
Business is being done differently.
Making IT pay off in industry has been possible because of
process engineering, collaboration, and sharing of information.
Conclusions
As in the private sector, information technology will become
integral to the Navy's infrastructure. A culture shift for the Navy
involves moving from a position of information control to one
emphasizing the rapid sharing of information to enhance mission
accomplishment. Specifically:
• The Navy has pockets of excellence in information
technology, and applications thereof, but the knowledge is not
shared well. Many separate IT initiatives are not working in
concert.
• Information systems used in business and in the Navy
infrastructure do not in themselves reduce costs (i.e., they rarely
result in an overall net reduction
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of personnel simply by automating capabilities). Information
systems can be a lever for reducing costs by enhancing access to
and accountability for services.
• For the infrastructure and shore support areas it is not
well understood by those in the Navy, or clear to the committee,
who is responsible for providing desk-to-desk connectivity.
• The Navy has not fully identified the means for or funded
the complete desk-to-desk connectivity, including access to
sufficient bandwidth, needed to enable essential users to share
data as they can now share voice communication. The result is that
the benefits of full connectivity are not being realized even
though a major portion of the costs are being incurred.
• Funding Y2K solutions “out of hide” will
divert funds and attention from achieving the cost-effective
benefits of full connectivity across the Navy infrastructure.
• In the area of infrastructure information content, there
is not a clear delineation of responsibilities, authorities, and
accountability in the Navy.
• Output measures of performance for infrastructure
business areas are lacking, and they will be key to defining the
content of the information system needed for integrated management
of the Navy infrastructure.
• As the Navy changes its warfighting focus from
platform-centric to network-centric warfare, it may also be
appropriate to modify its management of the manning, training, and
equipping of its forces (i.e., realign assignments of
responsibility and accountability for portions of the
infrastructure) to better match what fleet commanders need from the
shore support establishment and to improve the cost-effectiveness
of the infrastructure.
• A precondition to achieving the full benefits of IT
across the Navy, and particularly across the Navy infrastructure,
is visible and committed leadership from the top. The Chief
Information Officer (CIO) and the Director for Space, Information
Warfare, Command and Control (OPNAV-N6), for example, have only the
power of persuasion to influence Navy IT evolution.
Closing Comment
The magnitude of the cost savings needed to recapitalize the
Navy at levels of $3.5 billion to $5.0 billion annually cannot be
obtained simply by “working harder and smarter” on the
$13.5 billion portion of the infrastructure focused on by N4 (i.e.,
base operations, installations, central logistics, and
quality-of-life activities) and discussed in this chapter.
Moreover, Navy information technology initiatives are focused
predominantly on fleet rather than infrastructure activities.
Therefore, information technology currently is not being utilized
to its full potential across the entire Navy.
The committee could not find within the Navy a bottom-up process
for achieving the 10 to 20 percent or greater infrastructure cost
savings required because of the factors enumerated herein. Although
progress made at individual
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units and commands shows that considerable savings are possible
when cultural resistance and parochialism give way to modern
business reengineering processes, such action has not been seen
across the entire infrastructure. The next chapters treat the
implications in greater detail.
Representative terms from entire chapter:
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