The Impact of Personnel Changes on Navy Base Operations and Maintenance (O and M) Expenditures: A Macro and Micro Study

During the FY 1994 Senate Appropriations Sub-Committee meetings the Navy Operations and Maintenance OM budget was reduced by 51.1 million .25 percent. Most of the reduction was to Base Operating Support OM. This reduction was a direct result of the budget being submitted which contained a manning level of 15,000 more personnel 2.5 percent than the actual level authorized for FY 94. In order to better understand whether the budget reduction is appropriate, this thesis examines whether there are acceptable methods of relating base OM expenditures to personnel levels and other variables. The question is examined at both the macro-level for the Navy and at the micro-level for San Diego Naval Station. A cost estimating model, Quick Cost, is utilized to determine the macro-level relationship. Navy and Air Force cost prediction models are introduced and compared for their usefulness at the micro-level. A regression analysis of San Diego Naval Stations OM is shown to be misleading as OM is negatively related to both personnel level and number of ships supported. These results are critiqued, and problems with this regression analysis are discussed. The analysis is used to develop some suggested methods of allocating manning data and other variables to Base Operating Support OM. Further analysis of this allocation question is required. Personnel reduction, Operations and maintenance, Cost estimation.