Mr. Chairman, Commissioners, in deciding to close DFAS Limestone, the Department of Defense deviated substantially from criterion five. This criterion states that the Department must consider the potential costs and savings, including the number of years for the savings to exceed the costs. The Department of Defense assumes that the DFAS closures would start in 2006 and be completed in 2011. The initial one-time cost for this plan is $282 million. It would be paid back in the first year, and the twenty-year net present value of total savings under this proposal would be $1.3 billion. Based on this analysis, it appears that the Department would reap substantial savings from an overall consolidation. There is, however, a fatal flaw in this analysis. While the Department did an overall analysis of the savings that would result from consolidation, it did not examine the specific costs and savings related to the proposed closure of DFAS Limestone. In fact, the Department did not do COBRA runs for any scenarios that would involve keeping Limestone open. This is precisely the issue raised in Chairman Principi's letter of July 1st. This omission led to a flawed conclusion that, if implemented, would not be in the best economic interests of the Department of Defense, the people of Maine, or the American taxpayer. By using the Department's own certified data, and its own COBRA model, we have demonstrated that the best option for the Department is not to simply leave the Limestone Center open, but actually to expand it. Our analysis shows that keeping DFAS Limestone open would maximize savings and reduce costs overall. An expert hired by the State of Maine examined the Department's COBRA run on the DFAS consolidation plan. He then ran the COBRA model to determine the effect on the bottom line costs and savings of three different alternatives to the Department's recommendation: first, assessing the impact of keeping the status quo at DFAS Limestone; second, examining the impact of growing DFAS Limestone to 480 positions; and third, evaluating the impact of expanding DFAS Limestone to 600 positions. The analyst made no other changes to the overall data. For example, he accepted the Department's assumption that the planned reduction of the workforce to 241 would occur at DFAS Limestone even though the facility currently has 353 employees. He ran the entire COBRA model covering all 26 facilities. He then compared the scenarios where DFAS Limestone remained open or expanded with the Department's overall COBRA analysis under which Limestone would be closed. The results of this analysis are remarkable. Using the Department of Defense's own certified data, it is clear that closing DFAS Limestone would result in significant costs, not savings. In fact, the COBRA model demonstrates that the best way to maximize savings for the Department of Defense is actually to increase the workforce at DFAS Limestone. This chart shows the COBRA results of the four possible scenarios. On the chart, the horizontal line in the middle represents the status quo, keeping Limestone open with its currently planned number of employees. The line above the horizontal represents the costs to the Department over time from closing Limestone. The lines below the horizontal represent savings to the Department from keeping Limestone open and expanding it. The Department's own COBRA model demonstrates that, when you evaluate the proposed closure of DFAS Limestone on its own merits, the closure does not contribute anything to the savings from the overall DFAS consolidation. In fact, it is just the opposite. This chart demonstrates that the costliest option for the Department – the top line of the chart – is to close DFAS Limestone. Retaining DFAS Limestone would save the Department $1.4 million in one-time military construction costs to renovate the Columbus site, as well as $6.4 million in personnel and moving costs for a total of $7.8 million. These costs are the spike you see on the top line of the chart in year 2008. According to the COBRA run, there would be no savings over the 20-year BRAC period from closing Limestone. Even maintaining the status quo at DFAS Limestone is preferable. According to the COBRA run, if the status quo were maintained at Limestone – the horizontal line on the chart – the Department would avoid spending the $7.8 million just discussed. The twenty-year net present value of these savings is $1.7 million. The first rule of BRAC should be to "do no harm." It's clear that closing DFAS Limestone would be costly to the Department, and thus, the taxpayers. As you can see, the greatest benefit to the Department is to increase the size of the DFAS Limestone workforce. The business case for increasing the workforce at Limestone is compelling. DFAS Limestone could accommodate an additional 239 people for a total of 480 people with no military construction costs. For the purposes of this model, it is assumed that these positions would be those that the Department proposes be moved from Norfolk to Columbus. By moving them instead to DFAS Limestone, it eliminates the need for military construction funding at Columbus. This also produces savings in other areas because overhead as well as personnel costs, due to differences in locality pay, are demonstrably lower at Limestone than at Columbus. This alternative would save $2.9 million in one-time costs, and the twenty-year net present value of the savings would be $10.8 million. The savings for this scenario -- shown on this chart -- in comparison to the scenario proposed by the Department are even more startling. Compared to the Department's proposal, an expansion at Limestone to 480 people would save $10.7 million in one-time costs, and the twenty-year net present value of the savings from this alternative would be $12.5 million. Growing DFAS Limestone would provide even greater savings to the Department over the long-term. This is evident when you examine the scenario – shown on the bottom line of this chart – whereby Limestone would receive an additional 359 positions, bringing its workforce up to 600. For the purposes of the COBRA run, this would entail the 229 Norfolk positions going to Limestone, along with 80 positions that would go to Limestone instead of to Columbus. This scenario would require military construction funding of $1.23 million, which would allow for the renovation of 24,000 square feet at DFAS Limestone. This cost is, however, more than offset by the savings that result from the reduced personnel and overhead costs. Again, let's look at the substantial savings this option would provide in comparison to the Department's plan. Compared to that scenario, this proposal saves $11.9 million in one-time costs, and results in twenty-year net present value savings of $15.1 million to the Department and to the American taxpayer. BRAC criterion six states that the Department needs to consider the economic impact on communities in the vicinity of military installations. While the Department did analyze the economic impact of the closure, this analysis did not play a role in determining which sites would be consolidated. At the onset of this process, the Department ran an optimization model to determine the shape of DFAS consolidation, but that model did not take into account economic impact. Nevertheless, that was how the Department determined to go forward with the three sites. We have asked the Department if economic impact was included in this optimization model. The answer we received back – quoted here directly from a Defense Department document – was that the optimization model to determine the three gaining locations for DFAS did not include economic impact on communities. As the Department's own analysis shows, the economic impact of the closure of DFAS Limestone on the surrounding communities in Northern Maine is the most severe among all of the 26 affected DFAS sites. In other words, the Department calculated economic impact, but did not consider it in making its decision to close DFAS Limestone. Despite the clear mandate in the BRAC criteria, economic impact was not factored into the initial closure decision, which became the final decision. This disregard represents a substantial deviation from criterion six. It is particularly important in this analysis, because this closure would be a double blow to Northern Maine, given the previous closure of Loring Air Force Base. DFAS Limestone has been the anchor for the redevelopment of the base, and closing this facility based on faulty analysis would be unfair and unwise.
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