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With a large industrial base consisting in part of fourteen ammunition plants, some of which are mothballed, and two arsenals that manufacture ordnance items such as gun tubes, the Army has more capacity than it needs or anticipates it will need. This report assesses options for managing this industrial ordnance base. It identifies a range of problems, including the absence of a strategic vision, lack of investment capital, declining workload and high costs, and a requirement for expertise that falls outside the Army's primary areas of competence. The study proposes a strategic vision and explores four options for managing the arsenals and ammunition plants — privatization, creation of a federal government corporation, consolidation, and recapitalization on multifunction posts — drawing on economic theory, business literature, and U.S. law. It weighs the options from different perspectives, including feasibility, economic viability, and risk posed to national interests. The study recommends that the Army privatize ten of the eleven ammunition plants now owned by the government but operated by contractors, retaining one along with the ones owned and operated by the government as a hedge against the risk of losing the capacity of the privatized plants. It also recommends that the Army create a federal government corporation to run the two arsenals.

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The research described in this report was sponsored by the United States Army and conducted by the RAND Arroyo Center.

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