Management of the Navy’s shore infrastructure can be done with greater efficiency and cost-effectiveness through outsourcing. When private-sector contractors handle the management, maintenance, and operations of services ashore—like the tasks performed by these contract workers—Navy dollars and people can return to core missions.
We have a navy to protect our island nation through command of the seas. This is the Navy’s core mission—and it lives at sea, not on the beach.
The Navy is not about buildings and gates and grass. Our bases, stations, yards, and other installations exist only as they must to support readiness for combat at sea. Unfortunately, this is reflected in the management of the Navy’s shore infrastructure—it is not done with the greatest effectiveness. The Navy overspends on shore facilities whose inefficiencies needlessly divert dollars and people from the direct support of the Navy’s core mission. Is there a better, less costly system to run shore installations that will return resources to readiness and force building?
Hire It Done
Outsourcing is the answer. Put the management of the Navy’s shore installations under contract, buying the services of private-sector firms to provide the most efficient and effective shore management available.
Outsourcing is magic. At heart, it is about solutions. The Navy needs them; the industry’s best firms can provide them. Done well, outsourcing is mission-driven, bringing unmatched efficiency and creative, focused management to shore installations. The leading firms in the outsourcing industry are characterized by professionalism, deep expertise, genuine reliability, unmatched productivity, and a firm financial footing. Profit motivation drives them to seek total customer satisfaction. Fierce competition creates market forces that drive down costs—these forces are entirely absent at installations where the workers are federal employees.
This last benefit may be the most important: outsourcing brings dramatic cost reductions. It frees four assets—money, sailors, civil servants, and management attention—that are in critically short supply:
- The dollars freed by outsourcing’s efficiency can go to development and acquisition of combat hardware and other core essentials.
- Sailors can stop changing light bulbs and guarding gates and devote themselves to combat readiness.
- Civil-service jobs can be moved to program management and other Navy core functions.
- The leadership now lavished on shore management can focus entirely on core-mission matters.
Outsourcing is not new. In the commercial world, all forward-looking corporations are shedding non-core functions and hiring outside experts from specialized firms to do the work. Government comes to this trend late, but outsourcing is heavily emphasized in Vice President AI Gore’s National Performance Review, and it has been stressed repeatedly at senior levels of the Department of Defense, by the Vice Chairman of the Joint Chiefs of Staff, and by all the military services. The recently released Commission on Roles and Missions report strongly endorses outsourcing, ascribing to it a potential 20% cost savings.
The Navy is pushing outsourcing. High-level support is evident: in the Vice Chief of Naval Operations’ message on the subject to major claimants in May 1994, in the formation of the Shore Installation Management section (N-46) of the Chief of Naval Operations’ staff, in the formation of ShoreLant and ShorePac in the Fleets, and in the work of the fleet staffs and the staff of the Chief of Naval Personnel to move the shore establishment to a fully outsourced foundation in installation management. This is an important beginning, but there is more to be done.
Making Outsourcing Work
Navy people have become comfortable with outsourcing the design and procurement of weapons and platforms, buying essentially all hardware from private industry. But this proposal to hand over to contractors the management, maintenance, and operations of services and installations ashore requires some distinctly countercultural moves that do not come easily. Outsourcing is not for the timid.
At the local command level, outsourcing calls for farsighted decisions that reduce costs but cut jobs, that bring better work performance but transfer direct control, that improve essential services but put a visible price tag on frills, that move detailed management from government employees to civilian contractors.
At higher levels, getting the full benefit from outsourcing requires greater integration in programs and policy. It challenges entrenched interests and bureaucratic power spheres dedicated to running things as they are. It requires a cross-community readiness to accept Navy-wide solutions above those that serve the more narrow desires of the various parochial specialties. The Navy in Washington and the two Fleets must agree and work together to make outsourcing work, and Navy leadership must decide who is in charge of shore management—the mission owners who provide the resources or the civil engineers who build the bases.
Most needed at all levels is acceptance of a new way of thinking about the management of shore installations, a bold embrace of outsourcing and the private-sector solution.
Underlying this is a new mind-set: partnership. Partnership is intrinsic to outsourcing; it cannot work with maximum effectiveness without the full extension of trusting partnership between the government buyer and the commercial provider. Government oversight patterns that ignore this will force suboptimal results. The Navy should learn from its own outsourcing success stories—Submarine Base Bangor and the Atlantic Undersea Test and Evaluation Center Acoustic Range at Andros Island, for two great examples—that trusting the outsourcing contractor, working with him in partnership, and giving him the flexibility to function freely is the path of true wisdom.
Three-Part Formula for Success
Inside genuine partnerships, the outsourcing industry and Navy installations have learned what brings the greatest benefits at the least risk. The formula has three parts: buy big, buy smart, and run it well.
► Buy Big. Hiring Greenthumb Grass Service to mow lawns or putting a contract with Annie’s Awnings to replace barracks windows is not outsourcing. Outtasking is a better word for such buying. The benefits of obtaining commercial services through a big range of small contracts are few and maybe even negative. Running a base this way and buying services piecemeal is a costly business in terms of management attention.
True outsourcing is best described as integrated facility management. Buying true outsourcing brings about two marvelous results that scattered purchases cannot obtain: integration and coherent management.
The shore installation that gains greatest benefit from outsourcing buys an integrated set of solutions to the full range of services needed and also buys the total management of these solutions. Outsource everything! Outsource the whole base! Outsource all the bases! The benefits of outsourcing flow from a bold, holistic, full-scale embrace.
The Navy label for this broad, integrated approach is base operating support or BOS. Given the positive experiences where good BOS buys are in place, it is tough to justify base operations done any other way. In a fully outsourced base, the Navy retains three tasks: to set the requirements, provide the funding, and oversee the operation. Everything else is done better by someone hired to run it all—the outsourcing contractor.
Even at bases that are BOS-run, there are opportunities for greater gains through ever higher levels of outsourced management and fuller integration. The tightest, most effective management is produced in a single, base-wide, totally integrated BOS contract that relies on economies of scale to produce maximum cost efficiency. The small-business goals that seemingly justify fragmented out-tasking are easily handled at the subcontractor level. Buy solutions from the outsourcing contractor and leave to him the decision on where to obtain the services to produce these solutions. Contract language and incentives to meet customer goals in small business (and in safety, environmental protection, community engagement, affirmative action, and other value areas) ensure satisfaction.
Integrated outsourcing consolidated above the level of individual installations can produce even greater savings at many Navy locations. Several separate shore installations literally touch each other in Norfolk, and yet they have several different, unintegrated, inefficient solutions to shore management. Why not create a superbase, with full integration under a single outsourced contract? In Jacksonville, the Navy recently purchased public works functions for the three area bases under a single contract. Though not an integration of the widest range of services, it is the right start toward a regional BOS concept.
The Fleets have recommended even higher levels of outsourcing, proposing Navy-wide purchases of a wide range of services, including:
- Security
- Fire Fighting
- Bachelor Quarters
- Harbor Operations
- MWR Services
- Food Services
- Personnel Support Detachments
- Transition Assistance Management Programs
- Counseling and Assistance Centers
- Family Service Centers
- Family Advocacy Programs
Whether a fully integrated base-wide BOS operation, an even larger regional BOS contract, or a Navy-wide buy of private operation of a service, conscious and intelligent outsourcing is clearly preferable to hit-or-miss outtasking and certainly better than inflexible, unresponsive, inefficient non-outsourced government-only operation of shore installations. Buy big and include in what you buy from the BOS contractor his integrated management of the services he provides. This is the way to save the most.
Buy Smart. The Navy has a troublesome reputation within the outsourcing industry for being unwilling (unable) to distinguish between price and value. Time after time, Navy managers have awarded service procurements solely on the basis of price, considering neither suitability to the task nor the long-term cost of buying cheap. Time and again, a firm’s hard-won reputation for quality and value—and DoD guidance to weigh a firm’s past performance—has been ignored in source selection.
You get what you pay for. Cheap buys wind up costing the Navy in the form of lost quality and satisfaction, failed contractor performance, the need for excessive management attention, and costly litigation. The offerers that were not selected likely presented better long-term value. The reliability, flexibility, and quality of best-value purchases are far superior to those selected on a no-brains, lowest-price basis.
Of course, you also can pay too much. This happens to the Navy when it fails to encourage competition. The relationships between government managers and incumbent contractors sometimes can get so close that the outcome of the next competitive renewal is essentially predetermined, and other potential providers refuse to bid. The local base customer will remain happy, but the higher command that pays the bill will pay a premium for this coziness and comfort, and no one will ever see the innovation and dollar savings that real competition would generate.
How do you find and purchase the best value? The answer lies in giving outsourcing procurements the attention they warrant by taking source selection out of the hands of experts who are far removed from mission responsibility. Procurement of outsourcing for shore management should engage strategic thinking at senior levels. Source selection is rightly the province of the owner of the installation s mission and the resource provider who budgets the money to pay for it—and it should be reviewed by the echelon that will be stuck with the out-of-budget bad results of buying too little too cheap. Outsourcing procurements call for serious command attention in the front office.
But the mission owners and resource providers in the Navy tend to be of the warrior class, often with little experience in procurements. As a result, they shy away from the process, deferring and delegating to contracting specialists and public works technicians, who despite their alleged expertise are but narrow technocrats at heart. These players will produce procurements that emphasize their specialties and make their own lives easier, but miss the command perspective and downplay the importance of a contractor-operated system of integrated management. They buy what they want, not what the command wants or should want.
The technocrats should advise source selection, but they should not do it. That is the commander’s job, and it deserves the same professional attention that attends hardware procurements.
Another part of buying smart is saying well what is to be purchased. The task of crafting a sound request for proposal (RFP) is tough but tremendously important. The traditional RFP has tended to focus on compliance rather than performance, over-specifying the technical aspects and understating measures of satisfaction. These traditional compliance-based, design-specification procurements are easier to write, but they are harder to live with. Far superior are the newer performance-based buys that describe what, not how. The wise shore manager will devote great effort to telling potential bidders how customer satisfaction will be measured in terms of output, not process, letting the creative outsourcing firms figure out in their proposals how best to meet the performance and quality standards that are central to the procurement.
The wise manager also will start early, with enough time allotted for developing the request for proposal to eliminate the temptation to pull the last RFP off the shelf and simply buff it up. The bold gains of outsourcing do not yield from recycling the old system and perpetuating massive government employment at every contract recompetition. In addition, the outsourcing industry and management technology move far too far in five years to make buying the same thing again smart.
Mission owners and resource providers who take on the task of designing the procurement with a strategic outsourcing philosophy at its core, defining well what to buy, and seeing that they get it obtain the best results. It isn’t easy, but it needs be.
► Run It Well. The Navy will obtain the best outsourcing product if it avoids the temptation to try to manage the contractor’s work—that is the contractor’s job. The function called for is oversight, not management. Having issued a good RFP and signed a sound contract, the Navy now should confine itself to overseeing this contract and let the outsourcing provider run the work on the base. Having built customer satisfaction into the contract, the wise Navy customer now concentrates on determining how satisfied he or she is. With sound incentives in the contract, the outsourcing contractor cares greatly about the customer’s satisfaction and the customer gets what he or she wants. It should be pretty easy.
But it’s not. Outsourcing saves money by eliminating jobs; the designers of what have been typical Navy contracts—the technocrats—often are in the jobs that will go away. These technocrats have a powerful motive to design oversight mechanisms and cost-management systems that call for a standing army of government “workers” to watch the contractor work. The micromanager jobs thus invented to keep a full government work force on a base are costly in themselves, and the inefficiencies they generate in contractor operations, the false measures of performance they require, and the general interference they cause produce even greater costs. Outsourcing contractors often must contend with bent and broken processes that easily could be improved through contractor-government cooperation, but which don’t get fixed because doing so, however more efficient and less costly, would threaten government jobs.
The benefits from outsourcing are potentially great for the Navy, but only if the Navy can slice through the old compliance foundation for contractor relations and the traditionally ponderous oversight process and shift to a quality basis founded in performance and partnership. This means breaking some hearts and moving jobs from shore installation duties to the management of critical development programs and other core functions much more in need of scarce billets and bodies. Navy installations must streamline their operations greatly on the government side to realize the full potential of outsourcing.
Solutions for Sale
The outsourcing industry exists to give its customers solutions superior to those they can invent and operate on their own. Specialized expertise, maximum productivity, innovative management systems, trained and talented key personnel, constantly improving technology, and a cold eye on costs—these all measure success for the industry leaders.
Can the Navy trust its fortunes to contractors? It does so already in hardware—100%. It now has available for use and exploitation an equally competent and competitive service industry, one with excellent experience and a great track record in running the full range of facilities for every category of government and commercial customer. The issue is not whether we should outsource management of all Navy shore installations; both policy and compelling need give a vigorous yes to this question. The issues now at hand are how fast and how much, and the wise Navy answers to these questions are “right now,” and “totally.”
The outsourcing industry is primed and ready to provide the Navy with better answers to shore management than the Navy can itself create, to offer competition in place of monopoly, solutions in place of bureaucracy, and savings in place of permanent inefficiency. Change is always tough, but this one is vital. Break the paradigm— outsource. Let the private sector run the bases well and at the lowest overall cost.
Captain Byron manages the development of Navy and space-launch business for Johnson Controls World Services, Inc. A majority of his shore assignments in his 37 years of active duty involved the management and command of Navy shore installations.
Outsourcing Is Policy
The current emphasis on outsourcing of shore management has its foundation in federal policy going back several decades. Bureau of Budget Bulletin 55-4 of 15 January 1955 stated as executive branch policy that “the Federal Government will not start or carry on any commercial activity to provide a service or product for its own use if such product or service can be procured from private enterprise through ordinary business channels.” This policy continues to the present and expresses itself in the still-effective Office of Management and Budget (OMB) Bulletin A-76 and in sections of the current Federal Acquisition Regulations.
These several policy statements make direct government operations and maintenance the exception rather than the baseline they would seem to be in existing practice, reserving to government performance only “those functions . . . which either require the exercise of discretion in implying Government authority or the use of value judgment in making decisions for the Government.” Military activities defined as “core logistics functions” are exempted from contracting out by the DoD Authorization Act of 1985, but only those so identified by the Secretary of Defense, a list not including routine management, maintenance, and operations of Navy shore installations. As to what sailors in uniform should be doing ashore, existing policy authorizes military personnel to perform commercial or industrial activities only “if the activity is subject to deployment in a direct combat support role, provides essential training in military skills, or is needed to provide appropriate overseas rotation.”
Action will be necessary if these long-standing policies supporting full outsourcing are to gain their potential savings and efficiency. In its final report dated 24 May 1995, the Commission on Roles and Missions presents a strong case for full implementation of existing policy and a powerful endorsement of aggressive DoD outsourcing. The report notes that “more than a quarter- million DoD employees engage
in commercial-type activities that could be performed by competitively selected private companies” and cites as impediment the “legislated requirement for full and" open competition that conflicts with the proven private business standard of effective competition.” These are the Commission’s recommendations:
- Outsource all commercial-type support activities
- Outsource new support activities
- OMB withdraw Circular A-76; Congress repeal or amend legislative restrictions; DoD extend to all commercial-type activities a policy of avoiding public/private competition where adequate private-sector competition exists
- DoD move to a depot maintenance systems relying on the private sector
- Direct support of all new systems to competitive private contractors
- Establish a time-phased plan to privatize essentially all existing depot-level maintenance
J. Byron