DATE: Tuesday, August 5, 1997               TAG: 9708050073

SECTION: BUSINESS                PAGE: D1   EDITION: FINAL 

SOURCE: BY DALE EISMAN, STAFF WRITER 

DATELINE: WASHINGTON                        LENGTH:   74 lines

NAVY COULD HAVE SAVED MILLIONS, GAO REPORTS

The Navy could save almost $30 million per year by shifting the work of a weapons repair depot in Louisville, Ky., to Norfolk Naval Shipyard in Portsmouth and a Navy facility in southern Indiana, according to a new study by Congress' fiscal watchdog agency.

Instead, to comply with a decision by the 1995 Defense Base Closure and Realignment Commission, the service is turning the Naval Surface Warfare Center detachment in Louisville over to private operators. The commission's order was widely seen as a concession to the political clout of Kentucky's two U.S. senators.

The General Accounting Office said the service overestimated the cost of dividing the Louisville operation between the Portsmouth yard and a depot in Crane, Ind. And the Navy underestimated how much more cheaply the work done inLouisville could be performed at those facilities, the GAO said.

The GAO study appeared to endorse concerns voiced by Virginia lawmakers during the base-closing commission's review. Two Hampton Roads congressmen, Republican Herbert H. Bateman of Newport News and Democrat Norman Sisisky of Petersburg, requested the GAO review.

``What they've tried to do in Louisville is wasteful and serves no national security purpose,'' Sisisky, whose district includes the Portsmouth yard, said in a statement.

The Louisville depot repairs the 5-inch guns used by Navy destroyers and cruisers. It also handles maintenance on the Phalanx close-in weapons system, a computer-operated Gatling gun mounted on a variety of ships and used to fire on attacking missiles at close range.

The GAO said that before exercising contract options to keep the work in Louisville, the Navy should compare the cost of those contracts with that of transferring the work to other Navy facilities. But in a formal reply issued with the report, the Navy said other federal regulations will require it to decide on the contract options before the cost analysis can be completed.

In preparing for the 1995 base-closing round, the Navy recommended closing the Louisville depot and transferring its work to Portsmouth and Crane. That would have brought an additional 230 civilian jobs to Hampton Roads, while eliminating about 1,450 positions in Louisville.

The Navy's original recommendation called for shifting work on the 5-inch guns to Portsmouth and giving the Phalanx work to Crane. Both sites are underutilized, the service said, so the additional work would give the Navy a better return on its investment.

But after protests led by Kentucky Sens. Wendell Ford and Mitch McConnell, the commission recommended the ``privatization-in-place'' option, saying the work should go to Portsmouth and Crane only if private companies couldn't accommodate it in Louisville.

The GAO said Navy cost estimates developed since then overstated by about $10 million the expense of transferring the Louisville operations to the other Navy facilities. And the Navy underestimated by almost $21 million it would realize from the transfers, the report added.

The report said the Navy would have to spend about $234 million to complete the transfers, most of it for construction that would be required in Portsmouth and at Crane and for the movement of equipment and personnel.

But privatizing the Louisville operation will be expensive as well, the GAO concluded, costing about $133 million. The extra savings derived from the transfer would offset its extra cost in less than four years, the report said, and after that the Navy would save almost $30 million per year.

The GAO report is part of a series of recent studies by the agency that have criticized the Pentagon for maintaining more repair facilities than are needed for the post-Cold War military. The Defense Department agrees that it has too much maintenance capacity, the GAO said.

The report also recommended and the Pentagon agreed that the Navy should develop a plan to reduce that excess capacity at shipyards and other repair sites. ILLUSTRATION: FACT

If the Navy had shifted work from a Kentucky facility to Norfolk

Naval Shipyard and a facility in Indiana, it would have saved almost

$30 million. KEYWORDS: REPORT DEFENSE GAO

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