Recapitalizing The Navy

A Strategy for Managing the Infrastructure

Committee on Shore Installation Readiness and Management
Naval Studies Board
Commission on Physical Sciences, Mathematics, and Applications
National Research Council

NATIONAL ACADEMY PRESS
Washington, D.C. 1998



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Recapitalizing The Navy A Strategy for Managing the Infrastructure Committee on Shore Installation Readiness and Management Naval Studies Board Commission on Physical Sciences, Mathematics, and Applications National Research Council NATIONAL ACADEMY PRESS Washington, D.C. 1998

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Page ii NOTICE: The project that is the subject of this report was approved by the Governing Board of the National Research Council, whose members are drawn from the councils of the National Academy of Sciences, the National Academy of Engineering, and the Institute of Medicine. The members of the committee responsible for the report were chosen for their special competences and with regard for appropriate balance. The National Academy of Sciences is a private, nonprofit, self-perpetuating society of distinguished scholars engaged in scientific and engineering research, dedicated to the furtherance of science and technology and to their use for the general welfare. Upon the authority of the charter granted to it by the Congress in 1863, the Academy has a mandate that requires it to advise the federal government on scientific and technical matters. Dr. Bruce Alberts is president of the National Academy of Sciences. The National Academy of Engineering was established in 1964, under the charter of the National Academy of Sciences, as a parallel organization of outstanding engineers. It is autonomous in its administration and in the selection of its members, sharing with the National Academy of Sciences the responsibility for advising the federal government. The National Academy of Engineering also sponsors engineering programs aimed at meeting national needs, encourages education and research, and recognizes the superior achievements of engineers. Dr. William A. Wulf is president of the National Academy of Engineering. The Institute of Medicine was established in 1970 by the National Academy of Sciences to secure the services of eminent members of appropriate professions in the examination of policy matters pertaining to the health of the public. The Institute acts under the responsibility given to the National Academy of Sciences by its congressional charter to be an adviser to the federal government and, upon its own initiative, to identify issues of medical care, research, and education. Dr. Kenneth I. Shine is president of the Institute of Medicine. The National Research Council was organized by the National Academy of Sciences in 1916 to associate the broad community of science and technology with the Academy's purpose of furthering knowledge and advising the federal government. Functioning in accordance with general policies determined by the Academy, the Council has become the principal operating agency of both the National Academy of Sciences and the National Academy of Engineering in providing services to the government, the public, and the scientific and engineering communities. The Council is administered jointly by both Academies and the Institute of Medicine. Dr. Bruce Alberts and Dr. William A. Wulf are chairman and vice chairman, respectively, of the National Research Council. This work was performed under Department of the Navy Contract N00014-96-D-0169/0001 issued by the Office of Naval Research under contract authority NR 201-124. However, the content does not necessarily reflect the position or the policy of the Department of the Navy or the government, and no official endorsement should be inferred. The United States Government has at least a royalty-free, nonexclusive, and irrevocable license throughout the world for government purposes to publish, translate, reproduce, deliver, perform, and dispose of all or any of this work, and to authorize others so to do. Copyright 1998 by the National Academy of Sciences. All rights reserved. Copies available from: Naval Studies Board National Research Council 2101 Constitution Avenue, N.W. Washington, D.C. 20418 Printed in the United States of America

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Page iii COMMITTEE ON SHORE INSTALLATION READINESS AND MANAGEMENT JOHN D. CHRISTIE, Logistics Management Institute, Co-Chair JOHN F. EGAN, Nashua, New Hampshire, Co-Chair JOHN W. ASHER III, Strategic Marketing and Analysis, Inc. ALBERT J. BACIOCCO, JR., The Baciocco Group LLOYD A. DUSCHA, Reston, Virginia ELVIN R. HEIBERG III, Heiberg Associates SAMUEL D. KLEINMAN, Center for Naval Analyses GENIE McBURNETT, Falls Church, Virginia NANCY Y. MOORE, RAND GERALD NADLER, University of Southern California SEAN O'KEEFE, Syracuse University DAN R. OLSEN, JR., Carnegie Mellon University MICHAEL W. O'NEILL, Deloitte & Touche, LLP HERBERT RABIN, University of Maryland JOSEPH B. REAGAN, Saratoga, California JOHN M. STEWART, McKinsey & Company, Inc. RAYMOND M. WALSH, Sonalysts, Inc. MITZI M. WERTHEIM, Center for Naval Analyses Naval Studies Board Liaison Seymour J. Deitchman, Chevy Chase, Maryland Navy Liaison Representatives VADM W.J. Hancock, USN, Office of the Chief of Naval Operations, N4 (through July 31, 1998) VADM James F. Amerault, USN, Office of the Chief of Naval Operations, N4 (as of August 3, 1998) RADM John T. Scudi, USN, Office of the Chief of Naval Operations, N46 (through August 17, 1998) RADM Annette E. Brown, USN, Office of the Chief of Naval Operations, N46 (as of October 26, 1998) David M. Wennergren, Office of the Chief of Naval Operations, N464 (through October 26, 1998) Consultants Sidney G. Reed, Jr. James G. Wilson Staff Charles F. Draper, Program Officer

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Page iv NAVAL STUDIES BOARD DAVID R. HEEBNER, Science Applications International Corporation (retired), Chair VINCENT VITTO, Charles S. Draper Laboratory, Inc., Vice Chair ALBERT J. BACIOCCO, JR., The Baciocco Group, Inc. ALAN BERMAN, Applied Research Laboratory, Pennsylvania State University NORMAN E. BETAQUE, Logistics Management Institute NORVAL L. BROOME, Mitre Corporation GERALD A. CANN, Rockville, Maryland PAUL K. DAVIS, RAND and RAND Graduate School of Policy Studies SEYMOUR J. DEITCHMAN, Chevy Chase, Maryland, Special Advisor ANTHONY J. DeMARIA, DeMaria ElectroOptics Systems, Inc. JOHN F. EGAN, Nashua, New Hampshire RICHARD J. IVANETICH, Institute for Defense Analyses DAVID W. McCALL, Far Hills, New Jersey ROBERT B. OAKLEY, National Defense University WILLIAM J. PHILLIPS, Northstar Associates, Inc. HERBERT RABIN, University of Maryland JOSEPH B. REAGAN, Saratoga, California HARRISON SHULL, Monterey, California JAMES M. SINNETT, Boeing Company KEITH A. SMITH, Vienna, Virginia ROBERT C. SPINDEL, Applied Physics Laboratory, University of Washington DAVID L. STANFORD, Science Applications International Corporation H. GREGORY TORNATORE, Applied Physics Laboratory, Johns Hopkins University J. PACE VANDEVENDER, Sandia National Laboratories PAUL K. VAN RIPER, Williamsburg, Virginia VERENA S. VOMASTIC, Institute for Defense Analyses BRUCE WALD, Arlington Education Consultants MITZI WERTHEIM, Center for Naval Analyses Navy Liaison Representatives RADM John W. Craine, Jr., USN, Office of the Chief of Naval Operations, N81 RADM Richard A. Riddell, USN, Office of the Chief of Naval Operations, N91 (through May 29, 1998) RADM Paul G. Gaffney II, USN, Office of the Chief of Naval Operations, N91 (as of May 29, 1998)

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Page v Marine Corps Liaison Representative LtGen John E. Rhodes, USMC, Commanding General, Marine Corps Combat Development Command Ronald D. Taylor, Director Charles F. Draper, Program Officer Susan G. Campbell, Administrative Assistant Mary G. Gordon, Information Officer Larissa M. Markarian, Senior Project Assistant (through October 16, 1998)

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Page vi COMMISSION ON PHYSICAL SCIENCES, MATHEMATICS, AND APPLICATIONS PETER M. BANKS, ERIM International, Co-Chair W. CARL LINEBERGER, University of Colorado, Co-Chair WILLIAM BROWDER, Princeton University LAWRENCE D. BROWN, University of Pennsylvania MARSHALL H. COHEN, California Institute of Technology RONALD G. DOUGLAS, Texas A&M University JOHN E. ESTES, University of California at Santa Barbara JERRY P. GOLLUB, Haverford College MARTHA P. HAYNES, Cornell University JOHN L. HENNESSY, Stanford University CAROL M. JANTZEN, Westinghouse Savannah River Company PAUL G. KAMINSKI, Technovation, Inc. KENNETH H. KELLER, University of Minnesota MARGARET G. KIVELSON, University of California at Los Angeles DANIEL KLEPPNER, Massachusetts Institute of Technology JOHN R. KREICK, Sanders, a Lockheed Martin Company (retired) MARSHA I. LESTER, University of Pennsylvania M. ELISABETH PATE-CORNELL, Stanford University NICHOLAS P. SAMIOS, Brookhaven National Laboratory CHANG-LIN TIEN, University of California at Berkeley NORMAN METZGER, Executive Director

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Page vii Preface As the Department of the Navy plans to meet the challenges of the 21st century, it must take into account budget trends since the end of the Cold War and the need for maintenance and modernization of the fleet. To adjust, significant restructuring of both fleet and shore activities has been undertaken and will continue. However, such restructuring must be done without adversely affecting the ability of naval forces to execute their missions. A serious challenge to the Department of the Navy is how to recapitalize and modernize for the future while maintaining fleet readiness within projected budgets. Reducing the costs associated with maintaining an extensive shore establishment has been viewed by the Department of Defense and the Department of the Navy as one means for achieving the necessary cost savings to finance the fleet of the future. Naval installations are major components of the shore establishment and are complex enterprises. Some are comparable to cities, with airports and harbors; others incorporate shipyards and aviation depots. Most have family housing, hospitals, and child care and commissary facilities. Typically, a base commander and his or her staff are responsible for managing more than 100 different activities and often must provide such support to numerous tenant organizations. Unfortunately, these commanders are not provided the tools needed for managing such complex enterprises, and today's accounting, information management, and personnel and legal systems are ill-suited to the challenge. By contrast, large enterprises in the private sector rely on management techniques and business practices that are based largely on advances in information technology, systems and industrial engineering, operations research, organizational design, accounting, production scheduling and economics, management of human resources,

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Page viii and environmental management. Use of these techniques has dramatically reduced overall operating costs and enabled better use of resources in major functions. Their application to shore installation operations could provide the same benefit to the Department of the Navy. With this in mind, the Navy has in fact established the Smart Base project, a set of initiatives to apply state-of-the-market, commercially available technology, policy changes, and better business practices to shore installation operations in an effort to increase efficiency. This initiative along with others is providing a testbed for new ways of doing business. At the request of Admiral Jay L. Johnson, USN, Chief of Naval Operations (CNO) (see Appendix A), the National Research Council (NRC) conducted a study designed to assist the Department of the Navy with its ongoing efforts to improve shore installation operations, readiness, and management through the focused application and integration of state-of-the-market technologies and business methods (including outsourcing, privatization, and partnerships with state and local governments), with a goal of reduced cost of infrastructure. The Committee on Shore Installation Readiness and Management, operating under the auspices of the NRC's Naval Studies Board, was appointed to (1) identify business practices (or enterprise processes) in addition to application of technology for enhancing efficiency; (2) recommend how implementation might be accomplished and evaluate efficiencies that might be gained; and (3) provide estimates that project Navy-wide savings that could result from further application. Against these objectives, it also was requested that the committee examine the Navy's Smart Base project. In responding to the CNO's request, the committee focused its considerations initially on U.S. Navy efforts to reduce shore installation costs, exclusive of base realignment and closure (BRAC). The committee's interpretation of the terms of reference was that it should investigate what could be done to achieve infrastructure savings outside of BRAC. The committee soon realized, however, that reengineering naval installations could bring only small savings and that the Navy and the Marine Corps infrastructure in total should be examined fully if the Department of the Navy's recapitalization goals are to be met. Furthermore, in its efforts to provide implementable recommendations, the committee identified and presents in the body of the report a number of specific actions that it believes are best assigned to particular individuals under the current Navy organization, e.g., the Secretary of the Navy, the Chief of Naval Operations, the Chief Information Officer, and such. In many cases, alternative approaches might be possible, particularly under a different organizational structure. The committee had no desire to comment on how the Navy is organized. Given the existing organizational structure, however, the committee felt compelled in many instances to provide at least one method by which specific problems could be solved and progress made in these complex areas. The Executive Summary gives the report's major recommendations. The body of the report presents and discusses additional, specific, detailed recom-

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Page ix mendations and actions regarding naval installations and also key aspects of the multifaceted Navy infrastructure. In making its recommendations, the committee was very conscious of the impact that potential changes in the infrastructure might have on the ability of the operating forces to carry out their missions. The committee believes that making the infrastructure more efficient by using good business practices, as opposed to the current approach of arbitrarily reducing funding for the infrastructure, will in fact enhance the support of the operating forces and improve the capability of the infrastructure to respond to new and/or additional requirements. This would include the requirement for dealing with sudden emergencies that necessitate rapid response, such as Desert Storm. The committee first convened early in 1998 and met for approximately 8 months. During that time, it held the following meetings and visited the following bases: • February 4–5, 1998, in Washington, D.C. Organizational meeting. Navy briefings. • March 4–5, 1998, in Washington, D.C. Navy briefings. Managerial accounting and facility management in the commercial sector. • April 27–30, 1998, in San Diego, California. Site visit to assess the regionalization efforts underway at Naval Base, San Diego. Briefings on management and change. • May 20–21, 1998, in Washington, D.C. Navy briefings. Use of information technology in the U.S. Air Force. • June 4, 1998, in Pascagoula, Mississippi. Subcommittee site visit to Navy's Smart Base. • June 10–11, 1998, in Washington, D.C. Navy briefings. Briefings on management and change. • June 24, 1998, in Portsmouth, New Hampshire. Subcommittee site visit to Navy's Smart Industrial Base. • July 1–2, 1998, in Washington, D.C. • August 11–12, 1998, in Washington, D.C. The resulting report represents the committee's consensus view on the issues posed in the charge.

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Page xi Acknowledgments The Committee on Shore Installation Readiness and Management extends its gratitude to the many individuals who provided valuable information and support during the course of this study. Special acknowledgment goes to Mr. David M. Wennergren, who assisted the committee with countless briefings and information throughout the early stages of this study. The committee wishes to extend a special thanks to RADM Veronica Z. Froman, USN, Commander, Naval Base, San Diego. Admiral Froman and her staff were gracious in hosting the committee on its 4-day site visit to learn more about regionalization efforts in the Southwest Region. Likewise, the committee wishes to thank VADM Henry C. Giffin, USN, Commander, Naval Surface Force, U.S. Atlantic Fleet, and RADM R. Tim Zeimer, USN, Commander, Naval Base, Norfolk, for visiting with the committee in Washington, D.C., to discuss fleet readiness and regionalization efforts in the Hampton Roads region. The committee also wishes to thank CAPT Vernon T. Williams, USN, Shipyard Commander, Portsmouth Naval Shipyard, and CDR Christy J. Wheeler, USN, Commander, Naval Station, Pascagoula, for hosting site visits by members of the committee to learn more about initiatives surrounding the Navy's Smart Base project. Finally, the committee wishes to thank the many men and women throughout the Armed Services, as well as government, academic, and industry leaders who provided the committee with insightful discussions throughout the course of this study. Without their combined efforts, the committee's report would not have been possible.

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Page xiii Acknowledgment of Reviewers This report has been reviewed by individuals chosen for their diverse perspectives and technical expertise, in accordance with procedures approved by the National Research Council's (NRC's) Report Review Committee. The purpose of this independent review is to provide candid and critical comments that will assist the authors and the NRC in making the published report as sound as possible and to ensure that the report meets institutional standards for objectivity, evidence, and responsiveness to the study charge. The content of the review comments and the draft manuscript remain confidential to protect the integrity of the deliberative process. We wish to thank the following individuals for their participation in the review of this report: ADM Stanley R. Arthur, USN (retired), Lockheed Martin Corporation, MG Norman G. Delbridge, USA (retired), Springfield, Virginia, Brian K. Dickson, PricewaterhouseCoopers LLP, L. Paul Dube, Arlington, Virginia, John R. Kreick, Sanders, a Lockheed Martin Company (retired), Joe H. Mize, Oklahoma State University, Richard L. Tucker, University of Texas, Austin, and Anthony M. Valletta, SRA International, Inc. Although the individuals listed above provided many constructive comments and suggestions, responsibility for the final content of this report rests solely with the authoring committee and the NRC.

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Page xv Contents Executive Summary 1 1 Introduction 9 Background, 9 The Navy's Problem: Meeting Its Recapitalization and Modernization Goal Through Infrastructure Reductions, 11 Organization of This Report, 15 2 Selected Navy Initiatives 16 Regionalization, 16 Facilities Planning, Maintenance, and Demolition, 27 Logistics, 34 Smart Base, 38 Information Technology for the 21st Century and Smart Link, 42 Closing Comment, 47 3 A Strategy For Managing The Infrastructure 49 The Strategy, 49 Navy-wide Enablers, 52 Implementing the Strategy, 80

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Page xvi 4 The Need For Top Leadership To Drive Change Across The Entire Navy System 82 The Compelling Case for Major Change Across the Navy, 82 The Leader's Crucial Role in Changing the Organization, 84 Appendixes A Admiral Johnson's Letter of Request 91 B Analysis of Department of the Navy Funding Trends 92 C Developing Output Measures 98 D Key Guides to Successful Change 101 E Committee Biographies 110 F Meetings Agendas 117 G Acronyms and Abbreviations 128