I will talk to you today about criterion five – a criterion that was thoroughly disregarded when the decision was made to place Portsmouth Naval Shipyard on the base closure list. Criterion five requires DoD to consider "the extent and timing of potential costs and savings" when selecting military installations for closure or realignment. It stands to reason that cost is an important factor, and indeed it falls just after the four military value criteria. For if a base closure or realignment is not going to save money, why put a community through the pain and upheaval that it would cause? DoD developed a model known as "COBRA" to estimate the costs and savings associated with a proposed base closure. According to its user manual, COBRA is designed, and I quote, "to provide a consistent and auditable method of evaluating and comparing different courses of action." In the case of Portsmouth, however, the only consistency was that the COBRA results were consistently disregarded. When the Industrial Joint Cross Service Group met on January 13, 2005, it had COBRA runs before it that actually showed a cost – not a savings – from closing Portsmouth. As the slide shows, the COBRA run for Portsmouth reported a $1.8 million net present value cost over twenty years from closing the facility. In contrast, the COBRA run for Pearl Harbor reported a $584 million net present value savings over twenty years from closing the facility. Yet even though the COBRA runs calculated no net present value savings to the Department from closing Portsmouth until the year 2026, the Industrial Group made the decision to recommend closure of Portsmouth. And that recommendation never changed. DoD has told us that, as the Industrial Group's recommendation made its way up the chain to the Secretary of Defense, and I quote, "COBRA runs for all of the scenarios were periodically updated with the latest data." The slide you now see shows what DoD has told us were its final COBRA runs comparing closure of Pearl and Portsmouth. As you can see, although the numbers have changed, the basic result is the same: The COBRA model reports that closing Pearl would achieve $1.3 billion in net present value savings over twenty years – $760 million more in savings than closing Portsmouth would achieve. Again, we see the numbers from DoD's own economic model ignored. And there is another flaw with DoD's consideration of criterion five. The COBRA runs underestimated the costs of closing the Portsmouth shipyard because they ignored Portsmouth's superior efficiency as compared to the other three shipyards. Indeed, it is undeniable that Portsmouth is the most efficient shipyard for depot-level maintenance of submarines as compared to its sister yards of Pearl, Norfolk, and Puget. Efficiency is at the core of our shipyards' contribution to national security: the faster and better our submarines are repaired and upgraded, the sooner they will return to the fleet and the more effective they will be. DoD even admitted during its BRAC decision-making process that Portsmouth's efficiency is superior. In its critical January 13th meeting, the Industrial Group assessed the pros and cons of closing Portsmouth versus Pearl. As you can see, the Industrial Group's own briefing slide states that retaining Portsmouth – quote – "preserves [the] best performing SSN depot." Nevertheless, at that meeting, this committee decided to close Portsmouth. Why didn't DoD factor Portsmouth's superior efficiency into the COBRA runs for Portsmouth's closure? Because DoD found it too difficult to create a metric for measuring Portsmouth's efficiency for purposes of the COBRA analysis. The minutes of the Industrial Group reflect that this committee struggled with how to account for Portsmouth's superior efficiency. Indeed, in our recent interviews with Defense Department officials, the Navy's special assistant for BRAC literally used the same word: "struggled." Of course, determining how to account for efficiency across the shipyards is not a simple task. But the Industrial Group did not start wrestling with this issue seriously until very late in the BRAC decision-making process. On November 10, 2004, the Industrial Group requested assistance from the Comptroller in determining how to account for efficiency. The Comptroller responded in late December, recommending use of a "cost per unit of production effort or simply cost per direct labor hour." Either measure would have helped capture Portsmouth's efficiency. The Industrial Group, however, failed to reach a consensus on the Comptroller's recommendation. On January 6, 2005, the Industrial Group discussed this problem. As the slide shows, one of the participants said explicitly, and I quote, "Presently, there isn't a good metric available to capture or measure effectiveness." The committee decided to defer the issue and to establish a working group. On January 13th, despite the fact that the working group had not yet reported its recommendations, the Industrial Group met and decided to close the Portsmouth shipyard. On February 25th, the OSD-level Infrastructure Steering Group approved the Industrial Group's recommendation to close Portsmouth. Yet on March 3rd, one week after that meeting, the Industrial Group once again discussed – without success – its proposed methodology for incorporating efficiency into the COBRA runs. By then it was too late. Portsmouth never got credit for its efficiency in the COBRA runs analyzing its potential closure because the Department never established a methodology to do so. As a result, the COBRA analysis ignored the savings that have been documented. Portsmouth delivers Engineered Refueling Overhauls for $82 million cheaper and 6 months earlier than the other shipyards' average. Over the last five years, Portsmouth has delivered submarines a total of 60 weeks early. During that time, the other shipyards have been a total of 124 weeks late. But these savings were excluded from the COBRA analysis. DoD's failure to devise a metric for crediting Portsmouth for its proven superior efficiency is all the more surprising given that DoD was willing to use an arbitrary figure of 30 percent to credit the other shipyards for efficiency savings in administrative personnel relocated from Portsmouth. In sum, Portsmouth did not receive credit in the COBRA model for its proven efficiency because the Industrial Group struggled but ultimately decided that Portsmouth's efficiency was too difficult to account for. As a result, the Industrial Group substantially deviated from criterion five concerning the true savings and costs of closing Portsmouth.
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