THE VIRGINIAN-PILOT
Copyright (c) 1996, Landmark Communications, Inc.
DATE: Monday, April 1, 1996 TAG: 9603300191
SECTION: BUSINESS WEEKLY PAGE: 04 EDITION: FINAL
SOURCE: BY NORMAN SISISKY
LENGTH: Long : 171 lines
Editor's note: The U.S. Department of Defense has turned substantial amounts of work over to private contractors in an effort to downsize and provide money for upgrading the armed forces. DoD now outsources 33 percent of distribution activities, 28 percent of military depot maintenance, and 25 percent of base commercial activities. Plans call for more outsourcing.
U.S. Rep. Norman Sisisky, D-Petersburg, a member of the House national security and small business committees, argues here that privatization has not been carefully thought through.
Sisisky spoke last week at a privatization conference in Norfolk sponsored by the Tidewater Association of Service Contractors. Here's his speech, edited for brevity.
In the current environment, it looks like the federal government is hell-bent on privatizing everything, right or wrong, whether it makes sense or not.
There has been a steady onslaught of proposals to privatize virtually all federal activities - even heretofore ``untouchable'' Department of Defense activities. Privatize NASA, abolish the commerce department - do this, do that, with little thought given to long-term impact.
First, let's look at what can go wrong. Just across the river is a perfect example. What happened to Norfolk Naval Shipyard (NNSY) in 1993 should never have happened. It's a great case study of what happens when privatization threatens to go too far.
After the 1993 Base Realignment and Closure (BRAC) list came out, and despite the official Navy and DoD position that NNSY should stay open, some continued to push to privatize. As a result, NNSY was considered for privatization by the '93 BRAC commission. NNSY supporters said privatization would eliminate competition in ship repair or overhaul, thereby increasing, rather than decreasing, costs for the government. If Newport News Shipbuilding, for example, took over NNSY, they would not only monopolize construction, but repair and overhaul in Hampton Roads. It would upset the balance between large, medium and small construction, repair, and overhaul facilities throughout Tidewater.
After the close call in 1993, NNSY faced the challenge of how to prepare for BRAC '95. They needed more efficiency and less overhead. They had to become more productive. If DoD crunched numbers and found it cheaper to go with the private sector, NNSY would be gone. . . .
Adm. Jim Taylor and Capt. Bill Klemm took big strides toward open management . . . to build a competitive workplace.
I'm not going to bore you with statistics, but as part of the process, the Navy measured productivity. The numbers bore out that NNSY became more efficient. The bottom line was that they were not on the 1995 BRAC list. . .
In two short years, NNSY improved productivity to the point where no objective observer would think of turning it over to a private contractor. NNSY's ability to compete helps hold down cost all the way around. They offer competition in peacetime, and insurance in case we go to war. NNSY shows that public depots can be a sound taxpayer investment. . . .
But what puzzles me is that recommendations still come out to privatize everything.
One of the most recent was the Congressional Budget Office study: Public and private roles in maintaining miltary equipment at the depot level. The thrust of the study is: DoD could save on the order of $1 billion annually by shifting work to the private sector.
DoD's own privatization plan says, ``The end state defined by the commission on roles and missions is divesture of virtually all DoD organic depot-level facilities and equipment and movement of all workloads and federal employees to the private sector.''
As a businessman, I think that's wrong because it eliminates competition. As a congressman, I think it's wrong because it hurts national security. . .
DoD is well-aware that one fly in the ointment of their privatization agenda are legal constraints on implementing privatization without congressional approval. I intend to do what I can to maintain a balance between the public and private sector.
Since two of the four local congressmen who have such a clear perspective on this are the chair and ranking member of the House National Security subcommittee on readiness (Herb Bateman and I), we may be able to get both sides to work together, and achieve a result that is best for the country.
One example of how Herb and I work together is we asked the General Accounting Office to review a number of issues related to depot closures and realignments mandated by BRAC. We got the GAO report back three weeks ago, and some conclusions will interest you.
First, GAO said DoD continues to overestimate savings for closing depots. GAO said some closure costs are still excluded from DoD estimates, while some haven't been revised to reflect changes in the cost of doing business after work is transferred to other sources.
Second, DoD is not using public-public or public-private competition to allocate the workloads of the depots they closed. For example, privatization in place eliminates the opportunity to save money through competition and sustains excess capacity that BRAC was supposed to eliminate.
GAO said DoD could substantially increase savings by ensuring that workloads for closing depots went to the most cost-effective repair facility, public or private.
GAO said this could be cone through public-public and public-private competition, and we should look at the cost of doing work at depots belonging to other services.
GAO concluded that neither DoD nor the services have done all they could to maximize savings. GAO also found that: 1) DoD cancelled public-private competition in 1994. 2) The Air Force is implementing at least one privatization-in-place plan that will likely increase costs. And 3) the services only rarely consider interservice options.
These findings reflect the lopsided privatization agenda we've seen from the last three administrations. But I'm still optimistic that cooler heads may prevail and ultimately produce better results.
One better result may be the new joint training, analysis and simulation center (JTASC) in Suffolk. Some of you may remember this as the old Naval Undersea Warfare Center, which BRAC '93 moved to Rhode Island. . . .
JTASC's primary mission is using computer simulation to train our military forces to operate in a joint environment. They learn to plan and coordinate operations with the regional commander. They get academic training, as well as participate in development and execution exercises. These include realistic scenarios, known threats, and actual terrain databases.
Trainees work with dedicated operational forces and commanders, observers and trainers, and plug right into the actual joint commander's communications set-up. The simulations provide training, testbeds for advanced technologies, and rehearsal capabilities.
They have the capability to review lessons learned, validate doctrine and initiate joint training publications to supplement professional military education. Lessons learned and new doctrine are then incorporated into the next exercise. This gives the U.S. military a rehearsal capability unheard of a few years ago. They are able to do this rapidly and communicate results virtually anywhere in the world. Take my word, it's absolutely incredible.
JTASC and the U.S. Atlantic Command (USACOM) are working with Old Dominion University to establish a new technology transfer program. This would put JTASC resources at the disposal of private companies that do industry modeling and simulation. Their goal is to establish a ``Virginia Modeling and Simulation Center.'' They already have a 7,000-square-foot building in Suffolk, and are looking at potential business partners. There'll be a consortium of state universities with ODU as the focal point.
This is a win-win situation for everybody, and should lead to a lower cost, higher quality product for both the military and private sector. Even apart from this program, having JTASC around has already paid dividends, as shown by the $57 million support contract awarded to TRW last summer. That contract will bring as many as 200 high-skill, high-wage jobs to the area.
In addition, DoD has also decided to create a new Joint Battle Center at Suffolk (with $20 million funding, and bringing in about 100 new jobs.) Where JTASC does training, the Joint Battle Center will do research, testing, development and evaluation, (RTD&E).
Their job is to put sophisticated ``C-4-Eye'' (command, control, communications, computer and intelligence) equipment in the hands of our young warriors.
This new Joint Battle Center will link regional commanders with companies that develop and manufacture that kind of equipment, and provide a great incentive for those companies to locate here. The entire region can capitalize on this partnership.
What makes Tidewater attractive is that we have a robust public and private sector. We're strong because of Newport News Shipbuilding and NNSY. Balanced diversity is one of our strongest assets.
My goal is to make this region a magnet for consolidated military missions, and an attractive home for future defense and nondefense business investment. You only have to look at a list of companies moving to Chesapeake, for example, to see what I'm talking about: EDO, Ingersoll-Dresser, Northrup-Grumman, Panasonic, etc.
They know Tidewater strives for a balanced partnership between public and private sector. They know we have a large pool of highly skilled, well-educated, highly motivated employees. And I'll put aside modesty for a moment to say they know we have effective representation on both sides of the aisle in Washington.
I've seen the privatization issue from all sides: public, private, federal, state, local, Washington, Richmond, Hampton Roads. I've seen privatization proposed where it didn't make a darned bit of sense and where it made all the sense in the world.
My only conclusion is that the success rate is still too random and too unpredictable - and changing that will take a lot of hard work. Sometimes it makes sense; sometimes it doesn't; and we don't' always have a good way to predict which is which. by CNB