oversight

Defense Inventory: Opportunities Exist to Improve Spare Parts Support Aboard Deployed Navy Ships

Published by the Government Accountability Office on 2003-08-29.

Below is a raw (and likely hideous) rendition of the original report. (PDF)

              United States General Accounting Office

GAO           Report to the Chairman,
              Subcommittee on Defense,
              Committee on Appropriations,
              House of Representatives

August 2003
              DEFENSE
              INVENTORY
              Opportunities Exist to
              Improve Spare Parts
              Support Aboard
              Deployed Navy Ships




GAO-03-887
                                                 August 2003


                                                 DEFENSE INVENTORY

                                                 Opportunities Exist to Improve
Highlights of GAO-03-887, a report to the        Spare Parts Support Aboard Deployed
Chairman, Subcommittee on Defense,
Committee on Appropriations, House of            Navy Ships
Representatives




GAO is conducting a series of                    In typical 6-month deployments at sea, Navy ships are generally unable to
reviews in response to a                         meet the Navy’s supply performance goals for spare parts. GAO’s analysis of
congressional request to identify                data for 132,000 parts requisitions from ships in 6 Atlantic and Pacific battle
ways to improve the Department of                groups deployed in fiscal years 1999 and 2000 showed that 54 percent could
Defense’s (DOD’s) availability of                be filled from inventories onboard ship. This supply rate falls short of Navy’s
high-quality spare parts for ships,
aircraft, vehicles, and weapons
                                                 long-standing 65 percent goal. When parts were requisitioned, maintenance
systems. This report focuses on the              crews waited an average of 18.1 days to get the parts—more than 3 times the
effectiveness of the U.S. Navy’s                 Navy’s wait-time goal of 5.6 days for ships outside the continental United
spare parts support to deployed                  States. The Navy recognizes it has not met its supply goals for over 20 years.
ships. It examines (1) the extent to
which the Navy is meeting its spare              Two key problems contribute to the Navy’s inability to achieve its supply
parts supply goals, (2) the reasons              goals. Its ship configuration records, which identify the types of equipment
for any unmet supply goals, and                  and weapons systems that are installed on a ship, are often inaccurate
(3) the effects of spare parts supply            because they are not updated in a timely manner and because audits to
problems on ship operations,                     ensure their accuracy are not conducted periodically. In addition, the Navy’s
mission readiness, and costs.                    historical demand data are often out-of-date, incomplete, or erroneous
To conduct the review,
                                                 because supply crews do not always enter the right information into the
GAO looked at data on parts                      ships’ supply system databases or do not enter it on a timely basis. Because
requisitions, maintenance work                   configuration-record and demand data are used in models to estimate what a
orders, and casualty reports for                 ship needs to carry in inventory, inaccuracies in this information can result
various Navy ship deployments                    in a ship’s not stocking the right parts for the equipment on board or not
between fiscal years 1999 and 2003.              carrying the right number of parts that may be needed during deployment.
                                                 The Navy’s reasons for unfilled requisitions are shown in the figure below.

                                                 While precise impacts are not always well defined, the Navy’s spare parts
GAO is recommending that the
Navy (1) develop plans to conduct                supply problems can affect a deployed ship’s operations, mission readiness,
periodic ship configuration audits               and costs. GAO’s analysis of data on 50,000 work orders from 6 deployed
and ensure that configuration                    battle groups showed that 58 percent could not be completed because the
records are updated and                          right parts were not available onboard. More complete reporting of work
maintained, (2) ensure that parts                orders identified as critical or important would have resulted in a more
demand data are entered into ship                complete assessment of ship mission readiness. In addition, the Navy
supply systems promptly and                      expends substantial funds—nearly $25 million for six ships GAO reviewed—
accurately as required, (3)                      to maintain large inventories that are not requisitioned during deployments.
periodically purge unneeded spare
                                                 Reasons for Unfilled Requisitions for Six Deployed Battle Groups, Fiscal Year 1999-2000
parts from ship stocks to reduce
costs, and (4) ensure casualty
reports are issued consistent high-
priority maintenance work orders
as required. DOD concurred with
the first three recommendations
and the intent of the fourth
recommendation.
www.gao.gov/cgi-bin/getrpt?GAO-03-887.

To view the full product, including the scope
and methodology, click on the link above.
For more information, contact William M. Solis
at (202) 512-8412 or solisw@gao.gov.             Note: Because of rounding, percentages may not add to 100.
Contents


Letter                                                                                    1
               Results in Brief                                                           2
               Background                                                                 4
               Deployed Ships’ Supply Goals Go Unmet As Only About Half
                 of Needed Spare Parts Are Onboard                                        6
               Inaccurate Configuration and Demand Data Contribute to Unmet
                 Supply Goals                                                             9
               Spare Parts Supply Problems Can Affect Ship Operations and
                 Mission Readiness and Increase Costs                                   13
               Conclusions                                                              19
               Recommendations for Executive Action                                     20
               Agency Comments and Our Evaluation                                       20

Appendix I     Scope and Methodology                                                     23



Appendix II    Navy Work Order Priority Code Descriptions                                25



Appendix III   Navy Reasons for Spare Parts Not Onboard
               Deployed Ships                                                            27



Appendix IV    Comments from the Department of Defense                                   28



Tables
               Table 1: Navy Spare Parts Supply Rates for Six Selected Deployed
                        Battle Groups, Fiscal Years 1999-2000                             7
               Table 2: Navy Spare Parts Average Wait-Times, in Days, for Six
                        Selected Deployed Battle Groups, Fiscal Years 1999-2000           8
               Table 3: Percentages of Parts Types and Quantities Allowed to Be
                        Stocked Onboard and the Parts Supply Effectiveness Rates
                        for Lincoln Battle Group Surface Ships during the First 90
                        Days of Deployment, July-September 2002                         13
               Table 4: Impact of Spare Parts Shortages on Completion of
                        Maintenance Jobs for Selected Fiscal Years 1999 to
                        2000 Deployments                                                14



               Page i                                          GAO-03-887 Defense Inventory
          Table 5: Number of Different Types of Parts Carried Compared
                   with Total and Filled Requisitions for Lincoln Battle Group
                   Surface Ships after 6 Months of Deployment,
                   July-December 2002                                                               17


Figures
          Figure 1: Estimated Value of the Spare Parts Inventory Carried
                   Onboard and Actually Used during First 6 Months of
                   Deployment on Lincoln Battle Group Surface Ships,
                   Fiscal Year 2002                                                                 18
          Figure 2: Spare Parts Requisitions Filled and Unfilled for Six
                   Selected Battle Groups, Fiscal Years 1999-2000, According
                   to Reasons Identified by the Navy                                                27




          Abbreviations

          3-M               Maintenance and Material Management
          CASREP            Casualty Report
          COSAL             Coordinated Shipboard Allowance List
          DOD               Department of Defense
          SORTS             Status of Resources and Training System




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          Page ii                                                   GAO-03-887 Defense Inventory
United States General Accounting Office
Washington, DC 20548




                                   August 29, 2003

                                   The Honorable Jerry Lewis
                                   Chairman, Subcommittee on Defense
                                   Committee on Appropriations
                                   House of Representatives

                                   Dear Mr. Chairman:

                                   During deployments of U.S. Navy ships around the world, it is inevitable
                                   that some of the equipment or weapons systems on board these ships will
                                   break down and need repairs. To meet this eventuality, the Navy stocks
                                   each ship with tens of thousands of spare parts to enable the ship’s
                                   crew to maintain and repair the equipment in a timely manner. If the
                                   needed spare parts are not on board the ship, the repair work could be
                                   delayed—and equipment disabled—while supply crews obtain the parts
                                   from off-ship sources.1 During this delay, the ship’s operations and mission
                                   readiness may be compromised.

                                   This report is one of a series of reviews that we are conducting in response
                                   to your request that we identify ways to improve the Department of
                                   Defense’s (DOD’s) availability of high quality spare parts for aircraft, ships,
                                   vehicles, and weapons systems. In one of these reviews, we found that
                                   the Navy’s servicewide strategic plan does not specifically address
                                   means to mitigate critical spare parts shortages.2 This report focuses on
                                   the effectiveness of spare parts support provided to deployed U.S. Navy
                                   ships. To address this issue, we examined (1) the extent to which the Navy
                                   is meeting its spare parts supply goals on deployed ships, (2) the reasons
                                   for any unmet supply goals, and (3) the effects of spare parts supply
                                   problems on ships’ operations, mission readiness, and costs.




                                   1
                                    Off-ship sources include shore-based suppliers, such as Navy and Defense Logistics
                                   Agency warehouses and commercial vendors, and other ships in the fleet where needed
                                   spare parts may be obtained.
                                   2
                                    U.S. General Accounting Office, Defense Inventory: Navy Logistics Strategy and
                                   Initiatives Need to Address Spare Parts Shortages, GAO-03-708 (Washington, D.C.:
                                   June 27, 2003).



                                   Page 1                                                  GAO-03-887 Defense Inventory
                   In performing our work, we examined a variety of data related to Navy
                   spare parts supply and ship maintenance. These data covered different
                   time periods between 1999 and 2003 and represented the most current or
                   accessible information available during the period of our analysis. As
                   part of our study, we analyzed spare parts requisitions from Navy ships
                   deployed in Atlantic and Pacific fleet battle groups,3 amphibious readiness
                   groups, and Marine Corps expeditionary forces for varying periods during
                   fiscal years 1999 to 2001. We also analyzed maintenance work order and
                   casualty report data from the 6-month deployments of the Truman battle
                   group (Atlantic Fleet) in fiscal year 2000, and spare parts carried and used
                   by the Lincoln battle group (Pacific Fleet) in fiscal year 2002. In addition,
                   we reviewed historical information from 1982 to 2000 on the Navy’s ability
                   to fill onboard spare parts requests for both deployed and nondeployed
                   ships. We conducted our review from July 2002 to May 2003 in accordance
                   with generally accepted government auditing standards. Further details on
                   the scope and methodology we used in our work are found in appendix I.


                   During typical 6-month deployments at sea, Navy ships generally have
Results in Brief   been unable to meet the goals that the Navy fleets use in assessing
                   spare-parts supply performance. Our analysis of data for ships in 6
                   battle groups from the Atlantic and Pacific fleets that deployed during
                   fiscal years 1999 and 2000 indicated that only about 54 percent of the
                   total of 131,855 requisitions could be filled from onboard ship stocks
                   and that the remainder had to be requested from off-ship sources.
                   This performance falls short of the average supply effectiveness rate4
                   of 65 percent that the Navy fleets use as a goal for filling spare parts
                   requisitions from onboard stocks. When needed high-priority parts
                   were requisitioned, maintenance crews had to wait an average of about
                   18.1 days to receive the parts—more than three times the Navy’s wait-time
                   goal of 5.6 days for ships outside the continental United States. Moreover,
                   other Navy data suggest that these wait times can even be longer. These
                   unmet goals are not a new problem. The Navy recognizes that its ship
                   supply effectiveness performance has fallen short of its goals for more
                   than 20 years.




                   3
                    Battle groups generally consist of 8 to 12 ships and include an aircraft carrier and 1 or
                   more cruisers, destroyers, frigates, submarines, and supply ships.
                   4
                    Supply effectiveness rates refer to gross availability, or the percentage of parts that were
                   in stock on the ship when requisitioned.




                   Page 2                                                       GAO-03-887 Defense Inventory
Our analysis identified two key problems that contribute to the
Navy’s inability to achieve its supply goals for deployed ships. First, the
Navy’s ship configuration records, which identify the kinds of equipment
or weapons systems installed on a ship, are often inaccurate. These
inaccuracies occur because configuration records are not always captured
or updated in a timely manner when new equipment is installed aboard
ship and because audits to ensure correct records are not conducted
periodically. Second, the Navy’s historical demand data, which reflect the
failure rates of specific parts, are frequently out-of-date, incomplete, or
erroneous because the right information is not always entered, or entered
on a timely basis, into the supply system databases as required. Because
the Navy uses configuration records and demand data in its allowance
models to estimate what a ship needs to carry in its inventory during
deployment, inaccuracies in this data can result in a ship’s not stocking the
right parts—or not carrying the right number of parts—for the equipment
or systems installed on board. Thus, even though a ship may stock nearly
all of the parts identified on its allowance list, it may still fall short of
meeting the Navy’s supply goals.

The Navy’s spare parts supply problems can adversely affect a deployed
ship’s operations and mission readiness because necessary repairs may
be delayed while equipment remains disabled, and they also can increase
costs. Our analysis of data on more than 50,000 maintenance work orders
opened during the deployments of 6 battle groups indicated that about
29,000, or 58 percent, could not be completed because the needed repair
parts were not available on board ship. The full impact of such shortages
on a ship’s operations and mission readiness is not easily determined
because of discrepancies in the numbers of high-priority maintenance
work orders and casualty reports issued.5 An inspection of data for
one battle group showed that, although many of the work orders were
identified as high-priority because they affected equipment critical for the
ship’s operations and mission readiness, ship crews did not always issue
the required casualty reports. Where casualty reports were issued, these
problems were generally reflected in ship’s readiness reporting. However,
fuller casualty reporting would have likely resulted in a more complete



5
 According to Navy guidance, each high-priority maintenance work order (with
priority codes 1, 2, and 3) filled out by a ship’s crew is supposed to generate a casualty
report (CASREP). Casualty reports are directly related to a unit’s readiness reporting; they
identify a ship’s equipment status and its impact on ship operations and mission readiness.
Appendix II shows the relationship between these two reporting systems, according to
Navy maintenance reporting guidance.




Page 3                                                      GAO-03-887 Defense Inventory
             assessment of readiness. The Navy’s parts supply problems can also affect
             costs. Although the exact amounts have not been quantified, Navy officials
             recognize that they incur additional costs—when needed spare parts are
             not available on board ship—to locate and transport the needed parts
             from off-ship sources. The Navy also expends substantial funds—totaling
             nearly $25 million for the 6 ships we reviewed—to maintain large
             inventories that are not requisitioned during deployments because its
             efforts to periodically identify and remove unneeded spare parts from ship
             inventories are given low priority.

             Given the critical nature of spare parts shortages and their impact on ship
             operations and readiness, we are recommending that the Secretary of
             Defense direct the Secretary of the Navy to (1) develop plans to improve
             ship configuration records; (2) ensure that historical demand data are
             recorded promptly and accurately as required, (3) periodically identify
             and, when appropriate, purge unnecessary spare parts from its ships’
             inventories to reduce costs; and (4) ensure that casualty reports are issued
             consistent with high priority maintenance work orders as required to
             determine clearly the impact of spare parts shortages on ships’ operations
             and mission readiness. DOD concurred with the first three
             recommendations and concurred with the intent of the fourth
             recommendation. DOD’s comments and our evaluation of them are on
             page 20 of this report.


             The Chief of Naval Operations is responsible to the Secretary of the
Background   Navy for the command, utilization of resources, and operating efficiency
             of the operational forces of the Navy and of the Navy’s shore activities.
             The shore establishment provides support to the operating forces (known
             as the fleet), including facilities for the repair of machinery and
             electronics, ships, and aircraft, and for the storage of spare parts. The
             Naval Supply Systems Command provides naval forces with supplies and
             services through a worldwide, integrated supply system. Its Naval
             Inventory Control Point exercises centralized control over different line
             items of repair parts, components, and assemblies for ships, aircraft, and
             other weapons systems.




             Page 4                                           GAO-03-887 Defense Inventory
Supplying spare parts to deployed ships requires coordination between
the supply command and the Naval operating forces. The operating forces
report to the Chief of Naval Operations and provide, train, and equip naval
forces. The operating forces also report to the appropriate Unified
Combatant Commanders. As units of the Navy enter one of the designated
worldwide areas of Naval responsibility, they are operationally assigned to
the appropriate numbered fleet. All Navy units also have an administrative
chain of command with the various ships reporting to the appropriate
ship type commander: aircraft carriers, aircraft squadrons, and air
stations are under the Commander, Naval Air Force; submarines come
under the Commander, Submarine Force; and all other ships fall under
the Commander, Naval Surface Forces. Normally, the type commander
controls the ship during its primary and intermediate training cycles, and
then it moves under the operational control of a fleet commander.

The Navy determines what kinds of spare parts to carry on board deployed
ships by identifying the kinds of equipment that are installed (the ship’s
configuration) and the types and quantities of repair parts and any special
tools, test equipment, or support equipment needed to do preventive and
corrective maintenance during extended and unreplenished periods at sea.
Specifically, the Navy identifies maintenance requirements and uses them
to develop a list of allowable parts for the equipment. For parts on the list,
the Navy uses predicted failure rates, which it updates using actual
demand for parts data in inventory allowance models. The office of the
Chief of Naval Operations approves these models.

Although the Navy revised its instruction for determining spare parts
supply effectiveness in October 1999, it continues informally to use the
supply-system performance goals that were established in 1983.6 These
performance goals measure a ship’s ability to fill all of the repair part
requisitions that it receives. Two important goals are: (1) that gross
availability of 65 percent of repair parts required by ships and aircraft
carriers are to be filled from onboard inventories7 and (2) that the average
customer wait-time for the delivery of high-priority parts from ships’
supply inventories and off-ship sources is to occur within 135 hours (or
about 5.6 days) for ships outside of the continental United States. This


6
 These goals were defined in the Navy instruction OPNAVINST 4441.12B, dated May 1983,
Retail Supply Support of Naval Activities and Operating Forces.
7
 While the Navy’s supply effectiveness goals vary, the goal is 65 percent for surface ships
and aircraft carriers, not including the aircraft.




Page 5                                                      GAO-03-887 Defense Inventory
                       average customer wait-time is the supply system’s response time from the
                       date an order for a required part is issued until it is received by the
                       customer. The Navy is in the process of revising its supply performance
                       goals but it has not yet completed this work.8

                       The Navy’s annual budgets contain about $750 million for ships’ spare
                       parts, including about $200 million for initial spares and about $525 million
                       for replenishment spares. However, the Navy also identifies requirements
                       for spare parts that have not been funded. For example, it identified
                       $200 million in unfunded requirements in the fiscal years 2002 to 2004
                       budgets to increase safety-level stock for repairable items.


                       Only about 54 percent of spare parts requisitions for ships in 6 battle
Deployed Ships’        groups in the Atlantic and Pacific fleets deployed in fiscal years 1999 and
Supply Goals Go        2000 could be filled from onboard sources—a supply effectiveness rate
                       that fell below the Navy’s goal of 65 percent. When priority parts were not
Unmet As Only About    on board, ships had to wait an average of 18.1 days, more than 3 times the
Half of Needed Spare   Navy’s wait-time goal of 5.6 days for ships outside the continental United
                       States. The Navy has fallen short of meeting its ship supply performance
Parts Are Onboard      goals for more than 20 years.


Ships Average          Our analysis of ships in 6 selected Atlantic and Pacific fleet battle groups
54 Percent Onboard     deployed in fiscal years 1999 and 2000 showed that on average they were
Parts Supply Rates     able to supply about 54 percent of the spare parts that were requisitioned
                       from onboard inventories. As table 1 shows, this average supply
                       effectiveness rate ranged from 51 to 61 percent for different battle groups
                       during that period. The rates fell short of the Navy’s supply system
                       performance goal of 65 percent for surface ships and aircraft carriers,
                       which it has used informally since 1999.




                       8
                        OPNAVINST 4441.12D, Apr. 29, 2003, Retail Supply Support of Naval Activities and
                       Operating Forces.




                       Page 6                                                   GAO-03-887 Defense Inventory
Table 1: Navy Spare Parts Supply Rates for Six Selected Deployed Battle Groups, Fiscal Years 1999-2000

 Battle group                        Total number of            Number filled             Supply         Number not filled             Percent not
                                                                                                a
 (year deployed)                         requisitions              onboard                  rate                onboard                      filled
 Atlantic Fleet
                          b
 Enterprise (1999)                              33,346                   17,123                 51                    16,213                    49
 Kennedy (1999)                                 35,992                   19,127                 53                    16,865                    47
 Truman (2000)                                  22,253                   12,069                 54                    10,184                    46
 Pacific Fleet
 Constellation (1999)                           12,432                     7,556                61                      4,876                   39
 Stennis (2000)                                 16,175                     9,668                60                      6,507                   40
 Lincoln (2000)                                 11,657                     5,937                51                      5,720                   49
 Total/average percent                       131,855                     71,490                 54                    60,365                    46
Source: GAO analysis of Navy data.
                                            a
                                             The supply rate is the percentage of requisitions filled from parts available on board ships.
                                            b
                                             The Enterprise battle group deployed in October 1998, the first month of fiscal year 1999.


                                            These supply rates for the deployed battle groups are consistent with
                                            fleetwide historical data available from Navy reports. These data show
                                            that from 1982 to 2000 Navy ships in both deployed and nondeployed
                                            status were, on average, able to fill about 55 percent of their parts
                                            requisitions from onboard inventories. These rates have not varied much
                                            over the past 20 years, indicating that little overall progress has been made
                                            in meeting the Navy’s 65 percent goal.

                                            These findings were further reinforced by our analysis of Navy data for
                                            Pacific Fleet surface ships in amphibious readiness groups and ships in
                                            Marine Corps expeditionary forces. These groups, which included a total
                                            of 42 ships, showed an average availability of about 54 percent of spare
                                            parts requisitioned during deployments in calendar years 1999 to 2001,
                                            although individual ships reported a wide range of supply rates. For
                                            example, a destroyer in one Marine expeditionary force group reported an
                                            average supply rate of about 31 percent during deployment, whereas a
                                            ship used to transport and land Marines and their equipment and supplies
                                            in a deployed amphibious readiness group averaged 62 percent.




                                            Page 7                                                              GAO-03-887 Defense Inventory
Average Wait-Times                      When requisitioned parts were not on board ship, the Navy maintenance
Exceed Navy Goal                        crew had to wait far longer than the Navy’s stated wait-time goals to
                                        obtain the needed parts from off-ship sources. The wait-time goal for
                                        critical, high-priority items for ships outside the continental United States
                                        is 5.6 days.9 The Navy’s data for these ships, which were deployed between
                                        fiscal year 2000 and February 2003, showed that when needed high-priority
                                        parts were requisitioned, maintenance crews had to wait an average of
                                        18.1 days—more than 3 times the Navy’s wait-time goal—to receive
                                        the parts.10

                                        The average wait-times for all spare parts, not just priority items, are
                                        even longer. For the six Atlantic and Pacific battle groups deployed in
                                        fiscal years 1999 and 2000 that we analyzed, repair crews experienced an
                                        overall average wait-time of about 25.6 days, with a range of 16.2 to
                                        32.5 days. Table 2 shows the wait-times for spare parts supplied both from
                                        off-ship sources, as well as from onboard supplies.

Table 2: Navy Spare Parts Average Wait-Times, in Days, for Six Selected Deployed Battle Groups, Fiscal Years 1999-2000

                                               On-ship average                     Off-ship average                        Overall average
 Battle group (year deployed)                   wait-time days                       wait-time days                         wait-time days
 Atlantic Fleet
 Enterprise (1999)a                                          7.2                                  57.2                                29.1
 Kennedy (1999)                                              9.3                                  39.7                                21.4
 Truman (2000)                                               9.6                                  55.5                                28.4
 Pacific Fleet
 Constellation (1999)                                        4.1                                  39.1                                16.2
 Stennis (2000)                                             17.7                                  54.5                                32.5
 Lincoln (2000)                                             10.6                                  46.9                                23.8
 Total average wait-time                                     9.9                                  49.6                                25.6
Source: GAO analysis of Navy data.
                                        a
                                         The Enterprise battle group deployed in October 1998, the first month of fiscal year 1999.




                                        9
                                         The Navy has used a wait-time goal of 135 hours, or about 5.6 days, for supplying
                                        high-priority parts to ships outside the continental United States. This number is based on
                                        an average of the times needed to fill parts requisitions from both onboard ship inventories
                                        and off-ship sources. It assumes that 65 percent of all requisitions are filled from onboard
                                        inventories within 2 hours and the remaining 35 percent are filled from off-ship sources
                                        within 16 days.
                                        10
                                             These are parts needed for immediate maintenance-related use.




                                        Page 8                                                            GAO-03-887 Defense Inventory
                      Navy supply officials said they are concerned about the lengthy average
                      wait-time data being reported and are analyzing how this response time
                      can be shortened. They were especially concerned that the number of days
                      required for getting the parts to do the repair work seemed higher than
                      what would be reasonable.

                      The best of the Navy’s wait-time performance is for parts that are needed
                      to repair high-priority, mission-critical equipment. Navy supply officials
                      said that wait-times of about 12 to 14 days for these critical parts are about
                      the best the Navy is achieving because it uses expeditors to locate the
                      parts and it employs premium transportation to deliver the parts to the
                      ships. For example, a ship will send a requisition for a critical part to a
                      shore-based team whose job is to determine quickly if the part is available
                      anywhere in the military supply system or elsewhere, and identify the
                      fastest mode of transportation available (usually commercial overnight
                      delivery) to an overseas point. The Navy will then pick up the part for final
                      delivery to the ship while it is either in port or at sea.


                      Our analysis identified two key problems that contribute to the Navy’s
Inaccurate            inability to achieve its supply goals for deployed ships: inaccurate ship
Configuration and     configuration records and incomplete, outdated, or erroneous historical
                      parts demand data. The Navy uses these data in models that estimate the
Demand Data           types of parts (range) and the number of each part (depth) that should be
Contribute to Unmet   stocked on board a ship during its deployment. However, because of data
                      inaccuracies, the ships may stock all of the parts they are allowed to
Supply Goals          carry but still find they cannot fill a large number of parts requisitions
                      from onboard inventories, thus failing to meet the Navy’s supply
                      performance goals.


Ship Configuration    Navy headquarters and fleet officials acknowledge that the accuracy
Records Are           of ship configuration data is a serious concern. Specifically, they said
Often Inaccurate      that (1) ship configuration records are not always updated in a timely
                      manner when equipment or weapons systems are modified and
                      (2) required configuration audits are not conducted regularly to ensure
                      that configuration data correspond with the equipment or weapons
                      systems on board. The Navy identifies current and accurate configuration
                      data as the cornerstone of logistics support to its ships. Configuration
                      records provide a detailed description of the characteristics, including
                      dimensions and technical information, of each piece of equipment or
                      weapon system on board the ship. This information is used in allowance
                      models to prepare a Coordinated Shipboard Allowance List (COSAL).


                      Page 9                                            GAO-03-887 Defense Inventory
The allowance list identifies the individual spare parts related to each
piece of equipment or weapon system on board. Ships depend on
accurate configuration records to ensure that, among other things, the
right spare parts and special tools, along with the proper manuals and
other documentation, are available on board ship.

Navy officials said that while it is difficult to attribute any one cause to
spare parts shortages on board, inaccurate ship configuration records are
a major problem. If inaccurate configuration records are used in allowance
models, the resulting allowance lists may identify some parts that should
be stocked but that do not match the equipment that is actually on board.
As a result, repair crews could requisition a part for a failed piece of
equipment but find that the part is not on the allowance list and, thus,
not in stock. The requisitions data from our sample of 6 battle group
deployments showed that about 17.3 percent of the 60,365 unfilled
requisitions were for parts that were not on the ships’ allowance parts lists
(see app. III).

One reason that ship configuration records are not current or accurate
is that they are not updated or changed, as required, when equipment or
systems are installed, removed, or modified. This problem can occur on
both new and older ships. According to Navy supply and fleet officials,
the allowance lists for new ships are often based on the configuration
of the first ship to be built in the production line, and subsequent
changes to follow-on ships’ configurations are not always documented.
Thus, a ship’s actual configuration could change—and the records not be
modified—even before the ship is delivered from the shipbuilder. On older
ships, the equipment and systems are frequently upgraded or replaced
without properly updating configuration data because the procedures in
place to change configuration records as equipment is changed are not
always followed. For example, when equipment is installed, removed,
or modified by contractors, ship personnel do not always promptly or
accurately enter these changes into the ship’s configuration database in
order that the spare parts required to support the altered equipment can
be ordered.

Moreover, the Navy has not performed the configuration audits it has
identified as needed to ensure that configuration data for equipment




Page 10                                          GAO-03-887 Defense Inventory
                            and weapons systems on board are accurate.11 According to Navy
                            officials, these audits are supposed to be done periodically but none
                            were conducted between 1995 and 2000 because of budget constraints.
                            Officials said they are beginning to perform configuration audits again
                            and are developing an audit program, but its implementation will depend
                            on the funding available and whether funding is earmarked specifically for
                            audits. The officials estimated that a viable program might cost about
                            $500,000 a year. Without these audits, the extent of the configuration
                            records’ accuracy will remain unclear.

                            While audits have not been conducted for a period of time, validations—
                            which are more in-depth than audits—of ships’ configuration data have
                            revealed problems with their accuracy. The Navy performs validations to
                            establish the precise configuration of critical systems and equipment that
                            is experiencing problems and corrects the configuration data (e.g., items
                            are added or deleted) to reflect what is actually found on board the ships.
                            Seven Pacific Fleet validations completed between October 2002 and
                            January 2003 identified inaccuracies averaging 37 percent of the records
                            reviewed. For example, Navy Pacific Fleet officials provided us with
                            information about a configuration record validation of a new ship
                            delivered to the fleet. The validation identified 901 errors (588 added and
                            313 deleted records) in the selected systems and equipment, or about
                            39 percent of the 2,337 configuration records that were reviewed. On an
                            older aircraft carrier, a January 2003 validation identified 3,712 errors
                            (1,790 added and 1,922 deleted records) in the selected systems and
                            equipment, or about 43 percent of 8,555 configuration records reviewed.


Parts Demand Data           In addition to inaccurate ship configuration information, the Navy
Are Frequently Incomplete   frequently uses incomplete, outdated, or erroneous historical demand data
and Out-of-Date             in its parts allowance models. This can lead to incorrect estimates of the
                            number of parts needed during a deployment period and result in unmet
                            supply goals. Historical parts demand data provides the projected failure
                            rates or actual replacement rates for spare parts over a long period of
                            time. Each repair part listed on the allowance list is expected to fail at
                            some point in normal ship operations during deployment and is a potential


                            11
                              The Navy Sea Systems Command has set a goal of 95 percent accuracy in its
                            configuration data for ships. Ships can have 35,000 to 125,000 configuration records each.
                            An audit entails examining a randomly selected sample of configuration records and actual
                            equipment installed onboard and comparing them with each other for accuracy.
                            COMNAVSURFLANT/COMNAVSURPAC Instruction 4400.1J, dated Aug. 17, 2000.




                            Page 11                                                   GAO-03-887 Defense Inventory
allowance item. However, only those parts with sufficiently high projected
failure rates or actual replacement rates, along with items required for
planned maintenance or for safety measures, will normally be authorized
as onboard repair parts.

According to Navy officials, data on parts’ failure rates are supposed to
be accurately, promptly, and continuously updated, but this updating does
not always happen. In some cases, ship or shore personnel may not report
that a particular spare part has been used and, thus, the information does
not get into the supply system database. As a result, the Navy’s parts
allowance list will be based on incomplete, outdated, or erroneous
historical failure-rate data and the ship will stock too few or too many
spare parts of a particular type.

Our analysis of the requisitions on board deployed battle group ships
revealed that about 38 percent of the 60,365 unfilled requisitions were
mainly for parts that were on the allowance list, but were not in stock
when requisitioned (see app. III). Navy officials told us that this problem
could result partly from inaccuracies in the demand data that are used to
develop allowance lists. Officials also suggested that it could stem from
the inability of a ship’s crew to obtain a high percentage of the spare parts
on their allowance lists prior to deployment. However, our analysis
showed that, at deployment, Navy ships generally are stocked with a high
percentage of the types of parts (range) and the quantities of parts (depth)
that are on their allowance lists. Supply officials from the Navy’s Pacific
Fleet told us that their goal for surface ships was to stock 93 percent of the
range and 90 percent of the depth identified on their allowance lists and
that deploying ships, which were usually given a high funding priority,
generally deployed with percentages higher than these.

As table 3 shows, our analysis of data for the Lincoln battle group (Pacific
Fleet) deployed in fiscal year 2002 indicated that the ships were stocked
with an average of 98.1 percent of the different types of parts (range) and
an average of 93.1 percent of the quantities of each part (depth) that were
on their allowance lists, which included the parts expected to be needed
during the first 90 days of deployment (July to September 2002). In
contrast, during this period, an average of only 58.3 percent of the ships’
requisitions were filled from parts carried on board. This assessment
shows that, although these ships carried a high percentage of the types
and quantities of allowed items, they continued to fall short of meeting the
Navy’s supply effectiveness rate goal of 65 percent.




Page 12                                           GAO-03-887 Defense Inventory
Table 3: Percentages of Parts Types and Quantities Allowed to Be Stocked Onboard and the Parts Supply Effectiveness
Rates for Lincoln Battle Group Surface Ships during the First 90 Days of Deployment, July-September 2002

 Lincoln battle group ships          Percent of types allowed (range)          Percent of quantities allowed (depth)               Supply ratea
 Camden                                                               97.9                                              96.4                 53.0
 Fletcher                                                             97.5                                              83.4                 37.2
 Mobile Bay                                                           97.0                                              96.5                 59.0
 Paul Hamilton                                                        99.1                                              98.8                 78.7
 Reuben James                                                         98.9                                              87.8                 56.6
 Shiloh                                                               98.6                                              95.2                 60.1
 Average                                                              98.1                                              93.1                 58.3
Source: GAO analysis of Navy data.
                                          a
                                           The supply rate is the percentage of parts requisitions that could be filled from stocks on board ship.




                                          The Navy’s spare parts supply problems can delay the completion
Spare Parts Supply                        of needed maintenance and repair jobs on deployed ships and can
Problems Can Affect                       affect their operations and mission readiness, although their precise
                                          impacts are not always well defined. Our analysis of data on more than
Ship Operations and                       50,000 maintenance work orders for 6 battle group deployments in 1999
Mission Readiness                         and 2000 indicated that about 58 percent were delayed because the
                                          needed repair parts were not available on board ship. Our closer analysis
and Increase Costs                        of maintenance work orders and casualty reports for one battle group
                                          indicated a discrepancy in reporting the extent to which equipment
                                          failures occurred and, thus, the extent to which these problems were
                                          reflected in readiness assessments is unclear. The Navy’s supply problems
                                          also have an impact on costs. Although the exact amounts have not been
                                          quantified, Navy officials recognize that they incur substantial costs to
                                          obtain needed parts from off-ship supply sources. The Navy also expends
                                          substantial funds—totaling nearly $25 million for the six ships we
                                          reviewed—to maintain large inventories that are not requisitioned during
                                          deployments because it has given low priority to identifying and purging
                                          unneeded spare parts from ship inventories.


Lack of Spare Parts Can                   Shortages of required parts can often delay the completion of
Delay Needed Ship Repairs                 needed maintenance and repair jobs. Our analysis of more than
                                          50,000 maintenance work orders opened during 6 recent battle
                                          group deployments indicates that about 29,000 (almost 58 percent of
                                          the total) could not be completed because one or more needed repair
                                          parts were not on board ship. Table 4 summarizes this information.



                                          Page 13                                                             GAO-03-887 Defense Inventory
Table 4: Impact of Spare Parts Shortages on Completion of Maintenance Jobs for Selected Fiscal Years 1999 to
2000 Deployments

                                                    Number of jobs     Percent of jobs        Number of jobs       Percent of jobs
 Battle group                        Total number completed with all completed with all     requiring off-ship   requiring off-ship
 (year deployed)                            of jobs  parts onboard      parts onboard                    parts                parts
 Atlantic Fleet
 Enterprise (1999)a                        12,607                 4,727              37.5               7,880                 62.5
 Kennedy (1999)                            13,362                 5,256              39.3               8,106                 60.7
 Truman (2000)                              9,553                 4,118              43.1               5,435                 56.9
 Pacific Fleet
 Constellation (1999)                       4,501                 2,318              51.5               2,183                 48.5
 Stennis (2000)                             5,557                 2,823              50.8               2,734                 49.2
 Lincoln (2000)                             4,780                 2,123              44.4               2,657                 55.6
 Total/average                             50,360               21,365               42.4              28,995                 57.6
Source: GAO analysis of Navy data.
                                              a
                                              Deployed in October 1998.


                                              Navy fleet officials told us that a maintenance job is generally not started
                                              until all the needed parts are on board ship. This delay is due to the time
                                              and labor involved in tearing down equipment and possibly losing parts if
                                              equipment is left partially disassembled awaiting repair.


Data Unclear on Impact                        A complete picture of the impact of the Navy’s spare part shortages,
of Spare Parts Shortages                      however, is unclear because the Navy’s two forms of reporting on the
on Ship Operations and                        extent to which significant equipment malfunctions affect a ship’s
                                              operations and mission readiness are inconsistent. The two forms of
Mission Readiness                             reporting are high-priority maintenance work orders and casualty
                                              reports. The Navy uses four priority codes for maintenance work,
                                              with priorities 1, 2, and 3 considered high priority.12 High priority work is
                                              defined as critical, extremely important, or important to a ship’s essential
                                              equipment and systems, operations, or mission (see app. II for complete
                                              definitions of these codes). Navy maintenance reporting instructions
                                              require that any maintenance job with one of these three priority codes
                                              should generate a casualty report. According to Navy guidance on casualty
                                              reports, they are directly related to a unit’s readiness reporting and



                                              12
                                               Ships’ Maintenance and Material Management (3-M) Manual, OPNAV Instruction 4790.4C,
                                              Nov. 7, 1994.




                                              Page 14                                               GAO-03-887 Defense Inventory
identify the ship’s equipment status and impact on the ship’s operations
and mission readiness.13 Where casualty reports are issued, these problems
are to be reflected in a ship’s readiness reporting. Our review of about
4,000 casualty reports issued for deployed Pacific Fleet ships from 1999 to
2001 indicated that they generally resulted in degraded ship readiness, as
reported by the Status of Resources and Training System (SORTS).14
SORTS is used DOD-wide to report the degree to which a unit is capable of
undertaking its assigned wartime missions.

However, our analysis of ship maintenance work orders and casualty
reports for one battle group (Truman) in the Atlantic Fleet deployed in
fiscal year 2000 showed a discrepancy between the number of work orders
with priority 1, 2, or 3 and the number of casualty reports that were filled
out when a job was assigned one of these priority codes. The work orders
indicated that, of 5,435 total maintenance jobs, 2,635 were identified as
priority 1, 2, or 3. Although there should have been a similar number of
casualty reports, only 906, or one-third of the 2,635, were issued for these
ships during this period of time. One must assume that a more complete
reporting of casualty reports, as required for high priority maintenance
work orders, would provide the basis for a more complete assessment
of readiness.

A similar discrepancy occurred between the number of high-priority
work orders and casualty reports issued for maintenance jobs on surface
ships in the Pacific Fleet between fiscal years 1995 and 2002. According
to a Pacific Fleet maintenance analyst, of about 1 million surface ship
maintenance jobs coded with priority 1, 2, or 3, only about 50,000 casualty
reports, or about 5 percent, were issued.

Although Navy guidance calls for up-to-date and accurate casualty reports,
Navy officials said that the final decision on whether to submit a casualty
report is left to the judgment of the ships’ commanders and is based on
their perception of the importance of the degraded equipment to the ships’
assigned missions and the status of redundant equipment that the ships
carry. Navy officials said that the number of casualty reports that are
issued should be higher, but they suggested that commanders’ concerns
that a high number of such reports could reflect negatively on their


13
 Operational Reports NWP 1-03.1, (Formerly NWP 10-1-10, letter of promulgation
Nov. 1987).
14
     Status of Resources and Training System (SORTS), NWP 10-1-11 (Rev. A).




Page 15                                                    GAO-03-887 Defense Inventory
                           leadership may limit the number of reports that are issued. For example,
                           we were told that casualty reports are usually not generated when ships
                           are getting ready to deploy; if too many are generated, it might be seen as a
                           failure of the ships’ command leadership.

                           Some ships that issued only a few minor casualty reports were found,
                           on closer inspection, to have significant ship operations and mission
                           readiness problems. For example, Navy ships are required to have periodic
                           inspections to determine if they are fit for further service and to identify
                           any conditions that limit their capability to carry out assigned missions.15
                           Inspection reports we reviewed identified various deficiencies,16 such as
                           the failure of equipment to meet performance and safety requirements or
                           the need for excessive maintenance resources. During an inspection in
                           February 2002 of a destroyer forward-deployed in Yokosuka, Japan,
                           which had issued 16 low-priority casualty reports prior to the inspection,
                           inspectors gave the ship an unsatisfactory rating—the lowest possible
                           rating—in the areas of self-defense, full power, and steering tests; they
                           also found that it had significant material deficiencies and equipment
                           operational capabilities discrepancies. Inspectors told us such
                           discrepancies between casualty reporting and the actual conditions found
                           during the inspections of the ships were not uncommon.


Navy Incurs Substantial    Another effect of the Navy’s spare parts supply problems is increased
Costs to Obtain Off-Ship   costs. The Navy expends additional funds to obtain needed spare parts
Parts and Maintain         from off-ship sources. To get these parts, it must identify where they are
                           available (e.g., from a shore-based Navy supply center or a commercial
Large Inventories          vender) and then transport them to the ship.

                           The Navy also incurs substantial costs to carry large parts inventories
                           that are not requisitioned. Our analysis of data for six ships in the Lincoln
                           battle group (Pacific Fleet) during deployment in 2002 showed that the
                           ships requisitioned only a small percentage of the different types of parts
                           carried on board. As shown in table 5, the ships carried a total of
                           62,727 different types of parts. By the end of 6 months, the supply crews



                           15
                             Title 10 U.S.C. Section 7304 requires a board of Naval officers to conduct a material
                           inspection of all naval ships at least once every 3 years, if practicable, and to report when,
                           as a result of a material inspection, a ship is found unfit for further service.
                           16
                             A deficiency is an item that requires corrective action to bring the material condition of
                           the ship into compliance with required standards.




                           Page 16                                                       GAO-03-887 Defense Inventory
                                                   had received 10,471 requisitions for spare parts and filled 6,549 of them
                                                   from onboard stocks. This number (6,549) represented 10.4 percent of the
                                                   total part types carried on board. Navy fleet officials acknowledged that
                                                   ships generally carry many times more parts than are requisitioned during
                                                   their deployments and indicated that there are opportunities to reduce
                                                   inventories without adversely affecting ship operations if more accurate
                                                   data was available.

Table 5: Number of Different Types of Parts Carried Compared with Total and Filled Requisitions for Lincoln Battle Group
Surface Ships after 6 Months of Deployment, July-December 2002

                                                             Total requisitions                        Requisitions filled from onboard stocks
 Lincoln battle               Number of all part                                                                                          Percent of all
 group ships                     types carried               Number         Range (percent)                     Number                  part types used
 Camden                                   7,797                 1,443                     18.5                       843                                10.8
 Fletcher                                11,744                 1,717                     14.6                       689                                 5.9
                 a
 Mobile Bay                              12,291                 2,167                     17.6                     1,637                                13.3
 Paul Hamilton                           11,815                 1,652                     14.0                     1,322                                11.2
 Reuben James                             7,573                 1,733                     22.9                     1,018                                13.4
 Shiloh                                  11,507                 1,759                     15.3                     1,040                                 9.0
 Total                                   62,727                10,471                     16.7                     6,549                                10.4
Source: GAO analysis of Navy data.
                                                   a
                                                    The Mobile Bay data overstate the number of onboard requisitions filled because the ship filed
                                                   452 individual requisitions for bulk issue items (light bulbs) that should have been included on a
                                                   smaller number of requisitions for larger quantities, according to type command supply officials.


                                                   Furthermore, the Navy spent far more to carry this inventory of spare
                                                   parts than it spent for the parts that it actually used during the Lincoln
                                                   battle group’s 6-month deployment in 2002. Using available Navy data on
                                                   the value of the six ships’ onboard inventories, we estimated the value of
                                                   the inventory carried onboard ship be about $27.6 million and the value of
                                                   the used inventory to be about $2.9 million. See figure 1.




                                                   Page 17                                                            GAO-03-887 Defense Inventory
Figure 1: Estimated Value of the Spare Parts Inventory Carried Onboard and
Actually Used during First 6 Months of Deployment on Lincoln Battle Group
Surface Ships, Fiscal Year 2002




According to Navy supply officials, to minimize the inventory of unneeded
spare parts carried on board ships, ships could purge their existing
inventories periodically and revise the allowance parts lists based on
accurate configuration records, demand data, and allowance models. The
revised allowance would identify both shortages of needed parts and
excesses of unneeded parts. They said that allowance lists used to be
reviewed and updated periodically, but these reviews are no



Page 18                                             GAO-03-887 Defense Inventory
              longer performed. Although officials acknowledged that the inventory of
              unneeded parts should be minimized, they said a higher priority has been
              placed on correcting the shortages of needed spare parts because of their
              impact on ships’ operations and mission readiness. They said that the
              existing inventories of unneeded parts have already been purchased, and
              the costs cannot be recouped.


              The Navy’s long-standing failure to meet its spare parts supply
Conclusions   performance goals has led to shortages of needed parts on board
              ships and some degradation in ships’ operations and mission readiness
              during long deployments at sea. These shortages stem from the Navy’s
              inability to determine, in a reliable way, what types of spare parts and
              how many of each type need to be stocked on board ship. The Navy uses
              inaccurate, out-of-date, or incomplete ship configuration and historical
              demand information to develop the parts allowance lists that identify what
              repair parts, manuals, and other related items a ship should carry in its
              onboard inventory. Even though a ship may stock almost all of the parts
              on the allowance list, it is likely to fall short of meeting the Navy’s
              supply performance goals because the data used to develop the
              allowance lists are inaccurate. When needed parts are not available on
              board, a large number of repair jobs are delayed and equipment is not
              functional—sometimes for weeks or months—until the ships’ crews can
              obtain the parts from off-ship sources. Moreover, the Navy may not have a
              complete picture of the actual impact that equipment downtime has on the
              ships’ operations and mission readiness because of discrepancies in the
              reporting systems the Navy uses to monitor these problems.

              The Navy’s spare parts supply problems also substantially increase costs.
              Because of inaccuracies in the information the Navy uses to develop its
              allowance lists, it often stocks the wrong types or the wrong quantities
              of parts on board ships. As a result, the Navy has to spend additional
              money to obtain the parts it needs from off-ship sources, often incurring
              high expenses to locate the parts and transport them to the ships. It also
              expends substantial funds to maintain large inventories on board its ships
              that are not requisitioned during deployments. However, the Navy has
              given low priority to purging unneeded parts from its ships’ inventories
              and, instead, has focused on purchasing additional spare parts to avoid
              future shortages.

              Until the reliance on poor ship configuration records and historical
              demand information to identify what spare parts should be carried on
              board is broken, the Navy’s deployed ships will continue to experience


              Page 19                                         GAO-03-887 Defense Inventory
                         critical spare parts shortages that undermine their ability to fulfill their
                         missions at sea.


                         In order to improve supply availability, enhance operations and mission
Recommendations for      readiness, and reduce operating costs for deployed ships, we recommend
Executive Action         the Secretary of Defense direct the Secretary of the Navy to

                     •   develop plans to conduct periodic ship configuration audits and to ensure
                         that configuration records are updated and maintained in order that
                         accurate inventory data can be developed for deployed ships;
                     •   ensure that demand data for parts entered into ship supply systems are
                         recorded promptly and accurately as required to ensure that onboard ship
                         inventories reflect current usage or demands;
                     •   periodically identify and purge spare parts from ship inventories to reduce
                         costs when parts have not been requisitioned for long periods of time and
                         are not needed according to current and accurate configuration and parts
                         demand information; and
                     •   ensure that casualty reports are issued consistent with high priority
                         maintenance work orders, as required by Navy instruction, to provide a
                         more complete assessment of ship’s readiness.


                         In written comments on a draft of this report, DOD concurred with three
Agency Comments          recommendations and concurred with the intent of the fourth
and Our Evaluation       recommendation, but not its specific action. DOD’s written comments are
                         reprinted in their entirety in appendix IV.

                         In concurring with our first recommendation, DOD said that, although the
                         Navy has an audit plan to look at current ship configurations and provide
                         updated allowance listings, the Navy needs to be more aggressive in
                         following up on configuration changes to ensure that the configuration
                         records on board ship match those in the Navy’s main configuration
                         database. At the time of our review, the procedures had not been validated
                         and reconciled, for example, with the high percentages of inaccuracies
                         identified during validations done to identify and correct problems;
                         moreover, sufficient funding to implement the program was not assured.
                         DOD also noted that the Navy recently set up a Maritime Allowancing
                         Working Group that is undertaking a comprehensive review of its current
                         inventory and allowance practices, including ship configuration
                         management. However, at the time of our review, the Navy had not
                         established time frames for reporting on this effort.




                         Page 20                                             GAO-03-887 Defense Inventory
Although DOD concurred with our second recommendation, it asserted
that our report does not adequately substantiate our claim about the
accuracy of demand data. In our report, however, we cited Navy officials
who told us that spare parts’ failure rates, which rely on demand data, are
not always updated promptly or accurately. Moreover, 60,000 requisitions
for spare parts were not on ships in 6 battle groups deployed in fiscal
years 1999 and 2000 either because they were not on allowance parts
lists or were on these lists but were not in stock when requisitioned
(see app. III). Navy officials told us that such shortages occur in part from
relying on inaccurate demand data. DOD pointed out that many items on
the lists do not qualify for allowances. They said that these parts are not
stocked on board because of a ship’s designated repair capability, the
results of the readiness optimization calculation used in the sparing model,
and the forecast for demand falling below the sparing threshold. However,
these determinations also rely on accurate and timely demand data.

In concurring with our third recommendation, DOD said that the Navy
needs to undertake a more comprehensive program to identify and,
when appropriate, purge excess spare parts from ship inventories, but it
added that such efforts should not be based solely on parts demand
history. In our recommendation, we said that decisions to remove spare
parts from ship inventories should be based on both demand data and
current and accurate ship configuration information. DOD correctly
noted that critical items related to safety requirements and readiness
optimization should not be removed because they could jeopardize a
ship’s safety and mission. We support the Navy’s plan to focus initially on
identifying and purging those spare parts that support systems that are no
longer installed on board ships.

DOD concurred with the intent of our fourth recommendation that called
for the Navy to ensure that casualty reports are issued consistent with high
priority maintenance work orders as required by Navy instruction, to
provide a more complete assessment of ship’s readiness. We based our
recommendation on the Navy’s current maintenance instruction that calls
for casualty reports to be issued for certain high-priority maintenance
actions according to the level of importance that the failed equipment has
on a ship’s operations and mission. DOD said that casualty reports and
maintenance orders are inherently different in purpose, and the
instructions should be updated to ensure that casualty reports are
generated when deemed appropriate to get the attention required from the
logistics system. We believe that, while the instruction may need to be
updated or revised, the maintenance data that are gathered under the
current instruction are both relevant and important to the Navy’s ability to


Page 21                                          GAO-03-887 Defense Inventory
assess fully a ship’s operations and mission readiness. In its response,
DOD said the Navy has emphasized the need to use standardized reporting
procedures and that fleet commanders have asked their commanding
officers to report on ship status accurately and in a timely manner through
the Status of Resources and Training System report.

We are sending this report to other interested congressional committees;
the Secretary of Defense; the Secretary of the Navy; and the Director,
Office of Management and Budget. We will also make copies available to
others upon request. In addition, the report will be available at no charge
on the GAO Web site at http://www.gao.gov/.


Please contact me on (202) 512-8412 if you or your staff has any
questions concerning this report. Key staff members who contributed to
this report were Allan Roberts, Lionel Cooper, Gary Kunkle, Joel Aldape,
Odilon Cuero, Dale Yuge, Jean Orland, and Nancy Benco.

Sincerely yours,




William M. Solis
Director, Defense Capabilities
 and Management




Page 22                                          GAO-03-887 Defense Inventory
             Appendix I: Scope and Methodology
Appendix I: Scope and Methodology


             To identify the extent of spare parts shortages on deployed Navy ships,
             we focused on spare parts requisitions by deployed battle groups in the
             Atlantic and Pacific fleets during fiscal years 1999-2002. We analyzed
             the Navy’s goal and supply effectiveness data from its Maintenance and
             Material Management (3-M) Database Open Architectural Retrieval System
             by identifying supply requisitions for repair parts that were either filled or
             not filled from inventories on board deployed ships. We reviewed reports
             regarding the Navy’s overall ability to fill onboard spare parts requisitions
             on deployed ships between 1982 and 2001 in order to identify any long-
             term trends. We also reviewed the Navy’s goals and data on the average
             customer wait-time for critical and noncritical parts on deployed ships
             during fiscal years 1999 and 2002.

             To determine the reasons for spare parts shortages, we analyzed Navy data
             on unfilled requisitions for 6 battle groups deployed during fiscal year
             1999-2000. We analyzed and categorized the reasons for parts shortages
             based on the reported data. We also examined Navy policies and
             procedures regarding ships’ spare parts, including the need for accurate
             data and the impact of inaccurate data on the allowed parts carried on
             deployed ships. We examined and discussed with Navy officials the
             procedures that are used to ensure that accurate ship configuration
             and demand data records are maintained and the circumstances that
             can affect this accuracy. Moreover, we analyzed the reasons for the
             differences between the spare parts provisions, (e.g., the range and depth)
             and the amounts that are actually used to fill spare parts requisitions in
             order to gain a better understanding of why the Navy’s provisioning
             process does not more effectively and efficiently meet the deployed ships’
             spare parts requirements.

             To examine the impact of spare parts shortages on deployed ships’
             operations and mission readiness, we analyzed data on maintenance work
             orders and requests for spare parts that were not available on board the
             6 battle groups during selected fiscal year 1999-2000 deployments.
             Also, we reviewed the Navy’s criteria for assessing the effects of failed
             equipment on a ship’s ability to accomplish its mission, particularly
             the standards for determining what maintenance work orders result in
             casualty reports. We then applied the criteria to maintenance work orders
             for the Truman (Atlantic Fleet) battle group deployed in fiscal year 2000 to
             identify those that should have resulted in casualty reports reflecting ship
             operations and mission readiness. We compared the results of this analysis
             with data on Navy casualty reporting to determine if the number of failed
             equipment items meeting the criteria for reporting mission readiness
             degradation were reported in accordance with Navy criteria, policies, and


             Page 23                                           GAO-03-887 Defense Inventory
Appendix I: Scope and Methodology




procedures. We also reviewed data on casualty reports and SORTS data
submitted by deployed Pacific Fleet surface ships during calendar years
1999, 2000, and 2001 to determine if the casualty reports were reflected in
SORTS equipment readiness reporting. In addition, for six ships in the
Lincoln (Pacific Fleet) battle group deployed in fiscal year 2002, we
identified the total number of parts carried, both range and depth, and
compared this to the number of requisitions submitted and filled from
onboard inventories. We compared the Navy’s data on the estimated value
of the onboard inventory with the estimated value of the inventory actually
used in order to gain insight into the dollar impacts of carrying parts that
are not used during ships’ deployments. We discussed the results of this
analysis with Navy headquarters and fleet officials.

We reviewed Navy briefings and prior GAO reports regarding the effects
of parts shortages on Navy supply and maintenance actions, and we
discussed the Navy’s goals and initiatives intended to assess the effects
of parts shortages on ships’ operations and military readiness with Navy
officials at the various locations we visited. These locations included the
Naval Warfare Assessment Station, Corona, Calif.; the Fleet Technical
Support Center, the Naval Air Force, and the Naval Surface Force,
U.S. Pacific Fleet, San Diego, Calif.; the headquarters, U.S. Pacific Fleet
and the Submarine Force, U.S. Pacific Fleet, Pearl Harbor, Hawaii; the
Naval Supply Systems Command, its Naval Inventory Control Point, and
the Naval Sea Logistics Center, Mechanicsburg, Pa.; and Naval Sea
Systems Command and the office of the Chief of Naval Operations,
Washington D.C.

We performed our work from July 2002 to May 2003 in accordance with
generally accepted government auditing standards.




Page 24                                           GAO-03-887 Defense Inventory
              Appendix II: Navy Work Order Priority Code
Appendix II: Navy Work Order Priority Code
              Descriptions



Descriptions

              According to Navy maintenance reporting instructions, Navy ship crews
              are required to identify maintenance work order priorities.1 High-priority
              (Priority 1, 2, and 3) work orders affect equipment that is critical,
              extremely important, or important for a ship’s operation. Any maintenance
              job with one of these three priority codes is required to generate a casualty
              report (CASREP). Casualty reports are directly related to a unit’s
              readiness reporting and identify the ship’s equipment status and impact on
              the ship’s operations and mission readiness.2

              Priority 1—Mandatory: Critical safety or damage control item.
              Required for performance of ship’s mission. Required to sustain
              bare minimum acceptable level of human needs and sanitation.
              C-4 CASREP (Casualty Report) on equipment.

              Priority 2—Essential: Extremely important safety or damage control
              item. Required for sustained performance of ship’s mission. Required to
              sustain normal level of basic human needs and sanitation. Required to
              maintain overall integrity of ship or a system essential to ship’s mission.
              Will contribute so markedly to efficient and economical operation and
              maintenance of a vital ship system that the pay-off in the next year will
              overshadow the cost to accomplish. Required for minimum acceptable
              level of preservation and protection. C-3 CASREP on equipment.

              Priority 3—Highly Desirable: Important safety or damage control
              item. Required for efficient performance of ship’s mission. Required for
              normal level of human comfort. Required for overall integrity of equipment
              or systems that are not essential, but are required as backups in case of
              primary system failure. Will contribute so markedly to efficient and
              economical operation and/or maintenance of a vital ship system that
              the payoff in the next year will at least equal the cost to accomplish.
              Will effect major reduction in future ship maintenance in an area or
              system that presently cannot be maintained close to acceptable
              standards. Required to achieve minimum acceptable level of appearance.
              C-2 CASREP on equipment.




              1
               Ships’ Maintenance and Material Management (3-M) Manual, OPNAV Instruction 4790.4C,
              Nov. 7, 1994.
              2
               Operational Reports NWP 1-03.1 (formerly NWP 10-1-10, letter of promulgation Nov.
              1987).




              Page 25                                                 GAO-03-887 Defense Inventory
Appendix II: Navy Work Order Priority Code
Descriptions




Priority 4—Desirable: Some contribution to efficient performance.
Some contribution to normal level of human comfort and welfare.
Required for overall integrity of other than an essential system or its
backup system. Will contribute to appearance in an important area.
Will significantly reduce future maintenance.




Page 26                                          GAO-03-887 Defense Inventory
                              Appendix III: Navy Reasons for
Appendix III: Navy Reasons for Spare Parts
                              Spare Parts Not Onboard
                              Deployed Ships


Not Onboard Deployed Ships

                 Our analysis of the 60,365 unfilled requisitions from the deployments of
                 six battle groups in fiscal years 1999 and 2000 showed that there are a
                 number of reasons why the Navy might not stock needed parts on board
                 ship (see fig. 2). These unfilled requisitions represented 46 percent of all
                 131,855 requisitions submitted during these deployments. Our analysis of
                 the reasons identified in the Navy’s database showed that

             •   about 17.3 percent (10,472) of the unfilled requisitions were for parts that
                 were not on the allowance parts list;
             •   about 44.4 percent (26,787) of the unfilled requisitions were for parts that
                 were on the allowance parts list but the Navy decided not to carry them on
                 board; and
             •   about 38.3 percent (23,106) of the unfilled requisitions were for parts that
                 were on the allowance parts list, the Navy decided to carry them, but they
                 were not in stock when needed.

                 Figure 2: Spare Parts Requisitions Filled and Unfilled for Six Selected Battle
                 Groups, Fiscal Years 1999-2000, According to Reasons Identified by the Navy




                 Note: Because of rounding, percentages may not add to 100.




                 Page 27                                                      GAO-03-887 Defense Inventory
         Appendix IV: Comments from the Department of Defense
Appendix IV: Comments from the
Department of Defense




         Page 28                                                GAO-03-887 Defense Inventory
Appendix IV: Comments from the Department of Defense




Page 29                                                GAO-03-887 Defense Inventory
           Appendix IV: Comments from the Department of Defense




(350210)
           Page 30                                                GAO-03-887 Defense Inventory
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