Summary: Costly excess capacity in the Navy depot infrastructure has been aggravated by the recent privatization-in-place of the Louisville depot. In comparing privatization-in-place to the transfer of workloads to other Navy facilities, the Navy understated the annual savings from transferring the work and overstated the one-time transfer fee. GAO estimates that transferring the workload rather than privatizing-in-place would have saved $48.6 million during the first five years. After that time, transferring would yield annual savings of nearly $30 million. One of the contractors at Louisville could take over part of Louisville's workload at another industrial facility it operates that has significant excess capacity. GAO included defense infrastructure in its list of government areas at high risk for waste, fraud, abuse, and mismanagement. (See GAO/HR-97-7, Feb. 1997.) GAO's main concern relates to inefficient business processes and excess capacity. The Defense Department needs an overall plan for addressing the problem. The situation at Louisville is representative of this overall concern.
