http://www.defenselink.mil/ pubs/dodreform/>.
OCR for page 10
Page 10
located throughout the world. Naval installations are major
components of the shore establishment and are complex enterprises.
Some are comparable to cities, which perform many different
functions while supporting numerous tenant organizations and often
include child care and commissary facilities, family housing,
hospitals, and so on.
The Office of the Chief of Naval Operations (CNO) Shore
Installation Management Division (OPNAV-N46) is the CNO's lead
office for Navy shore installation programs.4 Its primary responsibilities include
installation operations; base operating support; quality-of-life
mission support; infrastructure vision, strategic planning, plans,
and policy; housing; and the Navy's Smart Base project. The Deputy
Chief of Naval Operations for Logistics (N4) is leading a campaign
to reduce the cost of the infrastructure through an improvement in
efficiency and the consolidation of activities encompassing naval
installations.5 This campaign
includes initiatives such as regionalization (the consolidation of
base operating support functions in regions where individual
installations and facilities formerly operated more independently)
and Smart Base (a collection of experiments and tests designed to
reduce costs and improve the delivery of support services at naval
shore installations). Although some of these initiatives are
projected to result in significant savings, the committee estimates
that these initiatives will most likely yield annual savings of no
more than about $500 million. This shortfall is due primarily to
the fact that the managers of these naval installations (i.e., base
commanders and regional commanders) control only a small fraction
of all the resources located within their installations. For
example, in the San Diego region, with about 56,000 military and
civilian Navy employees and an annual personnel cost of about $2.5
billion, the regional base commander has control of less than $500
million of Navy costs per year. The vast majority of annual costs
at naval installations are controlled by other major commands that
may or may not be tenants of the specific installation. These
“claimants” are the Navy organizations that are
responsible for expending the portions of the Navy budget
apportioned to them. Examples of claimants are the Pacific Fleet
(PACFLT), the Naval Sea Systems Command (NAVSEA), and the
Commander, Navy Education and Training (CNET).
Partitioning of the responsibility for financial resource
management is the reason that initiatives limited to base
commanders, and to the supporting functions under their control,
are estimated to result, at best, in limited ($500 million) annual
infrastructure cost reductions. The relatively small potential cost
reduc-
4Deputy Chief
of Naval Operations, Logistics (N4) and the Office of the Deputy
Chief of Staff for Installations and Logistics. 1997. Navy and
Marine Corps Annual Logistics Review, Washington, D.C.,p.9.
5Hancock,
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 24.
OCR for page 11
Page 11
tions from shore installation management initiatives compared to
the overall size of the Navy infrastructure ($26.7 billion in FY
1999) motivated the committee to broaden its perspective on the
problem at hand.
With respect to the U.S. Navy, where all forces float6 or fly, the shore establishment in the
broadest sense is synonymous with infrastructure,
which—according to the Joint Chiefs of Staff—includes
“all activities that provide support or control of forces
from fixed bases of operations.”7 In accordance with this broader
perspective of the Navy shore establishment, the committee assesses
below the size of the basic problem driving the Navy's desire to
reduce infrastructure costs and reexamines the potential base from
which infrastructure cost reductions could be obtained. This latter
examination places the committee's review of N4 related activities
in perspective. It also includes a discussion of recent trends in
infrastructure costs and the resources associated with individual
infrastructure functions.
The Navy's Problem: Meeting its
Recapitalization and Modernization Goal Through Infrastructure
Reductions
Since the end of the Cold War, the Department of the Navy, along
with the other Services, has been faced with addressing new
national security challenges with smaller budgets. As the
Department of the Navy reduced its overall force structure, it cut
modernization funding by a larger percentage than other categories.
Infrastructure costs have been cut, but there is general agreement
among Navy leadership that infrastructure can and should be reduced
more, compared to the fleet that it supports. In this sense,
further infrastructure cost reductions are a potential source of
recapitalization funding to sustain the desired fleet
capability.
From FY 1991 to FY 1999 the Department of the Navy budget has
been reduced by approximately $40 billion (or about 33 percent),
and current projections indicate that it will continue to decline
at a rate of about 1.4 percent per year.8 Figure 1.1 illustrates the trends in
funding for U.S. Navy programs since FY 1991. Most notably, force
modernization was reduced by approximately $16 billion (about 42
percent) through FY 1999. This 42 percent reduction in
modernization compared to a 33 percent department-wide reduction in
total funding amounts to about a $3.5 billion excess reduction in
the U.S. Navy's moderniza-
6The term
“float” includes submarines.
7Graves,
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.
8 All data,
findings, and figures shown in this chapter are a result of the
committee's use of FY 1999–2003: President's Budget Future
Years Defense Programs. See Appendix B for further details.
OCR for page 12
Page 12
Figure 1.1
Funding for U.S. Navy programs, 1991–1999.
tion accounts. To return the Navy modernization budget to its
former (FY 1991) share of the total Department of the Navy budget
would require an estimated additional $3.5 billion per year (above
the FY 1999 figure of $22.4 billion). It is the committee's
judgment that establishing a reinvestment goal of $3.5 billion to
$5.0 billion is a reasonable target. Recent analysis of defense
modernization needs for ship construction through 2001 cited a
range of approximately $4.0 billion to $5.0 billion per year (more
than is currently projected) for modernization.9 Clearly, if the Department of the Navy
is to achieve its future recapitalization and modernization
objectives, a reduction in infrastructure and associated costs will
be necessary. If the $3.5 billion to $5.0 billion annual shortfall
for Navy modernization is to be recovered entirely from the Navy
infrastructure, a 13 to 19 percent reduction in infrastructure
costs would be needed. Reductions of this magnitude will demand
significant change in the overall management of the infrastructure
within the Department of the Navy. As defined by the Office of the
Secretary of Defense (OSD), infrastructure comprises the following
functional categories: acquisition, central logistics, central
personnel, communications, force management, installations, medical
functions, quality of life, science
9Lopez, VADM
Thomas J., USN, Deputy Chief of Naval Operations, Resources
Warefare Requirements and Assessments (N8). 1995. “The State
of the Navy,” briefing to the Naval Studies Board, September
13.
OCR for page 13
Page 13
Figure 1.2
Navy infrastructure initially considered by the committee. Data
shown are average
values from FY 1995 to FY 1999.
and technology, and training.10
Because the N4 is one of the more proactive staff elements
sponsoring programs specifically with the aim of infrastructure
cost reduction, the committee focused its attention on those
functional categories most closely associated with the N4, namely,
installations (less base closure), central logistics, quality of
life (which is largely family housing), and base closure and
environmental compliance. Figure 1.2 illustrates those
infrastructure categories initially considered by the
committee.
Trends in infrastructure categories initially reviewed by the
committee are illustrated in Figure 1.3. Base closure and
environmental compliance grew significantly from FY 1991 to FY 1995
and then declined substantially from FY 1996 through FY 1999. The
Navy does not have much influence on funding for these programs.
Conversely, installations (excluding base closure) make up almost
20 percent of the infrastructure and are the subject of the Navy's
regionalization initiative. As indicated above, the committee
estimates that this concept could eventually yield savings on the
order of 10 percent, or $500 million per year, but realization of
these savings will demand the full participation of all commands
and strong support from the CNO. To yield such significant savings,
reengineering of the services provided by the installations is a
necessary next step. Logistics comprises mainly central supply,
transportation, and maintenance activities. Each of these areas has
initiatives aimed at streamlining services,
10Office of
the Secretary of Defense, Program Analysis and Evaluation. 1996.
Defense Infrastructure Overview Briefing, November 1.
OCR for page 14
Page 14
Figure 1.3
Trends in funding for areas of infrastructure considered by the
committee.
but much more is needed. For example, in the area of
maintenance, regional maintenance coordinators for the most part
have only the power of personal persuasion to make changes and
achieve savings. Family housing makes up about two-thirds of the
funding for the functional category “quality of life.”
Public-private ventures can have a large impact on the cost of
meeting this requirement and should be pursued as a matter of
priority.
The recent actual and projected total Navy infrastructure
decline of about $750 million per year (shown in Figure 1.1) is
primarily a result of money being arbitrarily taken out of the
budget, particularly in base operating support, rather than the
result of the integrated introduction of new innovations to reduce
the cost of infrastructure. In fact, budget pressures have been the
driving impetus in forcing innovation and overcoming resistance to
change. Although a forcing function is desirable, it is also
necessary to have an overall, integrated strategic plan, which
appears to be lacking, that includes metrics that measure the
output of the infrastructure. Without such a plan and metrics, it
will not be possible to determine where additional savings can be
obtained with acceptable risk or where potential budget reductions
would create unacceptable risks and reductions in fleet
capabilities and readiness.
The $750 million in annual infrastructure reductions projected
over the past few years by the U.S. Navy is a long way from the
$3.5 billion to $5.0 billion annual goal. Meeting such a goal will
necessitate addressing all functional categories of the
infrastructure, which in turn requires a strategy for managing the
overall infrastructure.
Although training and general personnel activities were not
initially reviewed by the committee, these functional categories do
account for about one-fourth of
OCR for page 15
Page 15
the total cost of Navy infrastructure. They also influence every
other category of the infrastructure and are worthy of a separate
review and/or study.
The committee was briefed on U.S. Navy training activities after
making a specific request to obtain information on training-related
initiatives designed to reduce infrastructure costs, but it failed
to find any cost reduction initiatives comparable to those being
developed and supported in the installation management area.
Personnel management is another area that was not considered in
detail; however, it is apparent that sea-shore rotation objectives
have come into conflict with U.S. Navy objectives to reduce the
number of support personnel ashore and thereby reduce
infrastructure costs (see Chapter 3).
Organization of this Report
A review and assessment of selected U.S. Navy initiatives to
reduce infrastructure costs are presented in Chapter 2. As
indicated above, the review focuses on the initiatives being
supported within the OPNAV-N4 establishment for two reasons: (1)
the leadership within the functional portions of the OPNAV staff
for reducing infrastructure costs lies in OPNAV-N4, and (2) the
committee's attempts to obtain information on significant
infrastructure cost reduction initiatives in other functional
categories did not bear fruit.
Chapter 3 points to the need for an overall strategy for
managing the Navy's infrastructure. As paraphrased from the words
of General Andrew Goodpaster, a strategy contains three elements:
(1) What is to be achieved? (2) How is it to be achieved? and (3)
With what will it be achieved? In this case the “what”
is to reduce the Navy infrastructure in order to recapitalize and
modernize the Navy. The “how” is by reengineering the
business practices of the infrastructure and applying technology to
the infrastructure to enhance efficiency. The “with
what” is, in particular, what the committee found lacking as
it reviewed individual initiatives. Specifically, the integrating
threads—a comprehensive strategy—to tie disparate, and
sometimes overlapping, initiatives and activities together were
lacking.
Chapters 3 and 4 indicate that two objectives are key to the
Navy's success in meeting its recapitalization and modernization
goal: (1) assessing and specifying the key enablers that the Navy
should use to implement its chosen strategy (i.e., specifying the
third, “with what,” portion of a coherent strategy) and
(2) defining top leadership's role and potential actions needed to
achieve a major change of the magnitude required.
Chapter 3 covers a strategy for implementing three key enablers
that are essential for achieving the resource shifts necessary to
support the Department of the Navy's recapitalization goals.
Chapter 4 provides the mechanism for introducing the strategy and
enablers to the Department of the Navy. Supplemental information is
provided in the appendixes.
Representative terms from entire chapter:
navy infrastructure
Items in cart [0]
