oversight

Defense Inventory: Improved Management Framework Needed to Guide Army Best Practice Initiatives

Published by the Government Accountability Office on 1999-09-14.

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

                   United States General Accounting Office

GAO                Report to Congressional Committees




September 1999
                   DEFENSE
                   INVENTORY

                   Improved
                   Management
                   Framework Needed to
                   Guide Army Best
                   Practice Initiatives




GAO/NSIAD-99-217
United States General Accounting Office                                                               National Security and
Washington, D.C. 20548                                                                         International Affairs Division



                                    B-281458                                                                                     Letter

                                    September 14, 1999

                                    Congressional Committees

                                    Section 347 of the Strom Thurmond National Defense Authorization Act for
                                    Fiscal Year 1999 provides for the secretary of each military department to
                                    submit to the Congress a schedule for implementing best commercial
                                    inventory practices for the acquisition and distribution of secondary
                                    inventory items.1 A best commercial inventory practice is defined as a
                                    practice that enables military departments to reduce inventory levels while
                                    improving the responsiveness of the supply system to user needs. Section
                                    347 further requires that the schedule provide for implementation of such
                                    best practices to be completed within 5 years of enactment, or by
                                    October 17, 2003. The section also requires us to evaluate the extent to
                                    which the secretary of each military department has complied with the
                                    act’s requirements.

                                    In this report, we discuss our evaluation of the Army’s best practices
                                    implementation schedule, which the Assistant Secretary of the Army for
                                    Acquisition, Logistics, and Technology submitted to the Congress on
                                    June 14, 1999. This report provides our evaluation of that schedule.2
                                    Specifically, we (1) evaluated the extent to which that schedule responds to
                                    the provisions of the act and (2) identified specific elements of a
                                    management framework needed for effective implementation and
                                    oversight of the Army’s best practice initiatives.



Results in Brief                    The Army’s schedule is generally responsive to the act. Specifically, the
                                    schedule describes 18 initiatives that address the Army’s inventory
                                    management functions, and for most of the initiatives, it provides for
                                    implementation to be completed within 5 years. The initiatives are
                                    primarily aimed at improving the Army’s information management,
                                    maintenance, and acquisition processes and transferring logistics activities
                                    to the private sector. Specific time frames for full implementation of three


                                    1
                                     Secondary inventory includes spare parts, clothing, and medical supplies to support Department of
                                    Defense (DOD) operating forces worldwide.
                                    2
                                     We are providing separate reports on the Army, Air Force, and Navy best practice implementation
                                    schedules.




                   Leter            Page 1                                                    GAO/NSIAD-99-217 Defense Inventory
                     of the initiatives were not included in the schedule. Therefore, we could
                     not determine whether these initiatives are to be implemented within the
                     required 5-year time frame.

                     Though generally responsive to the act’s requirements, the schedule
                     provides a management framework that lacks specific elements such as an
                     overall strategy and outcome-oriented goals and performance measures.
                     While the initiatives are generally guided by the Army’s “Revolution in
                     Military Logistics,” there is no comprehensive strategy or plan that guides
                     the efforts. Consequently, no detailed framework exists to increase the
                     likelihood that the initiatives are coordinated and do not conflict or
                     duplicate efforts. Also, there are no specific performance goals established
                     to measure the overall results of the initiatives. In our prior work, we noted
                     that the lack of a detailed management framework contributed to DOD’s
                     difficulty in implementing new initiatives. Without a more effective
                     management framework, opportunities for oversight by the Congress and
                     DOD managers would be limited since meaningful evaluations of progress
                     and results would be impossible. The Government Performance and
                     Results Act offers a model for developing an effective management
                     framework to assess the results of the initiatives and improve the
                     likelihood of successful implementation and assessment.

                     To make progress and results information available to the Congress and
                     DOD managers, we are recommending that the Secretary of the Army
                     develop a Results Act management framework for the initiatives in the
                     schedule that includes an overall strategy and performance plan.



Background           To provide reparable parts for its aviation and ground equipment, the Army
                     uses an extensive logistics system that is based on management processes,
                     procedures, and concepts that have evolved over time. Reparable parts are
                     expensive items that can be fixed and used again, such as hydraulic pumps,
                     navigational computers, engines, and landing gear. The Army’s logistics
                     system, often referred to as a logistics pipeline or a supply chain, consists
                     of a number of interrelated activities that provide reparable parts where
                     and when they are needed.3 These activities include the acquisition,


                     3
                      The Army also purchases, stores, and distributes consumable parts that are used extensively to fix
                     reparable parts and aircraft. The Defense Logistics Agency provides most of the consumable parts that
                     Army repair activities use and handles a large portion of the warehousing and distribution of reparable
                     parts.




             Leter   Page 2                                                     GAO/NSIAD-99-217 Defense Inventory
storage, repair, and distribution of parts, which together require billions of
dollars of investments in personnel, equipment, facilities, and inventory.
Figure 1 is a general illustration of the interrelationship of the major
functions of the Army’s logistics pipeline for secondary items.



Figure 1: Army’s Logistics Pipeline for Secondary Items


                                                 Base level or unit
                                                   Base level or unit
                                                level maintenance
                                                  level maintenance


         Acquisition
          Acquisition




     Depot storage
      Depot storage
                                                 Base level or unit
                                                  Base level or unit                 Unit
                                                   level supply                       Unit
                                                     level supply


  Depot maintenance
   Depot maintenance



      Maintenance
       Maintenance
         centers
          centers
      of excellence
       of excellence


    Other Army unit
     Other Army unit
   or military service
    or military service
         supply
           supply
Source: Office of the Army Deputy Chief of Staff for Logistics.




Page 3                                                      GAO/NSIAD-99-217 Defense Inventory
Since 1990, we have identified DOD’s management of secondary
inventories as a high-risk area because levels of inventory were too high
and management systems and procedures were ineffective. 4 In addition,
our financial statement audits have identified continuing significant
problems with the integrity of DOD’s inventory data. For example, we
reported that inaccurate inventory data resulted from weaknesses in DOD’s
procedures relied on to maintain visibility over, and conduct physical
counts of, on-hand inventories. Until these problems are effectively
resolved, DOD’s ability to reliably measure and assess performance will
continue to be impaired.5 While DOD has made some improvements, these
general conditions still exist, and this area remains on our high-risk list.6
We have reported that adopting best business practices in inventory
management and improving the reliability of financial management
information are key steps toward solving these problems.

The Congress has recently taken specific actions to encourage DOD to
adopt best commercial practices to improve its inventory management. The
National Defense Authorization Act for Fiscal Year 1998 required the
Director of the Defense Logistics Agency to develop and submit to the
Congress a schedule for implementing best commercial practices for the
acquisition and distribution of nine categories of consumable-type
supplies. The act also required that the schedule provide for the
implementation of such practices to be completed by November 2000. The
Strom Thurmond National Defense Authorization Act for Fiscal Year 1999
placed a similar requirement on the secretary of each military department.
The military departments’ schedules are to provide for the implementation
of such best practices to be completed by October 17, 2003.

DOD is working to adopt best practices in its operations. In November
1997, the Secretary of Defense issued the Defense Reform Initiative report,


4
  In 1990, we began a special effort to review and report on the federal program areas that we identified
as high risk because of vulnerabilities to waste, fraud, abuse, and mismanagement. This effort, which
was supported by the Senate Committee on Government Affairs and the House Committee on
Government Reform, brought a much-needed focus to problems that were costing the government
billions of dollars.
5
 Results Act: DOD’s Annual Performance Plan for Fiscal Year 1999 (GAO/NSIAD-98-188R, June 5, 1998);
DOD Financial Management: More Reliable Information Key to Assuring Accountability and Managing
Defense Operations More Efficiently (GAO/ T-AIMD/NSIAD-99-145, Apr. 14, 1999); and Department of
Defense: Status of Financial Management Weaknesses and Actions Needed to Correct Continuing
Challenges (GAO/T-AIMD/NSIAD-99-171, May 4, 1999).
6
  Major Management Challenges and Program Risks: Department of Defense (GAO/OCG-99-4, Jan.
1999).




Page 4                                                       GAO/NSIAD-99-217 Defense Inventory
                         which called for a revolution in DOD’s business affairs and identified a
                         number of reengineering initiatives aimed at adopting modern business
                         practices to achieve world-class standards of performance. In addition, the
                         DOD performance plan for fiscal year 2000 notes that the inventory supply
                         system is larger than required to support today’s smaller force structure
                         and outlined goals to reduce inventory levels and streamline infrastructure.
                         In March 1999 testimony, the Under Secretary of Defense (Acquisition
                         Reform) stated that DOD needed “a revolution in business affairs . . . one
                         that embodies the best of modern business practices, the ability to access
                         the full range and scope of technologies to meet the speed and agility
                         demanded by the new battlespace, and an absolute commitment to finding
                         the best, most efficient means of delivering goods and services to our
                         warfighters.”



Army’s Schedule          The Army’s schedule is generally responsive to the requirements of the act.
                         It contains 18 initiatives that address the acquisition and distribution of
Generally Responds to    secondary inventory items the Army manages and, for most of the
the Act’s Requirements   initiatives, it provides for implementation within 5 years (see table 1).
                         The18 initiatives are primarily aimed at improving the information
                         management, maintenance, and acquisition processes and transferring
                         logistics activities to the private sector. For example, the Logistics
                         Integrated Data Base initiative will integrate 66 separate databases that will
                         allow data to be stored once, yet be used in multiple applications. The
                         Velocity Management initiative is intended to examine the entire Army
                         logistics pipeline to speed up the distribution and repair of component
                         parts and better utilize existing Army inventory.




                         Page 5                                       GAO/NSIAD-99-217 Defense Inventory
Table 1: Army Initiatives and Projected Completion Date
Initiative category     Initiative                                            Projected completion date
Information             Logistics Integrated Data Base                        Dec. 2000.
management
                        Virtual Integrated Materiel Management Center         Sept. 2001.

                        Wholesale Logistics Modernization Program             Information not provided.

                        Global Combat Support System—Army                     Sept. 2002.

                        Army Total Asset Visibility                           Completed.

Maintenance             National Maintenance Program                          Sept. 2003.

                        Depot Repair Process Improvements                     Dec. 2000.

                        Electronic Sustainment Support Centers                Information not provided.

Acquisition             Lead Time Reduction                                   Fiscal year 2001.

                        Modernization Through Spares                          Information not provided.

                        Paperless Contracting                                 Jan. 2000.

Outsourcing             Apache Prime Vendor Support                           Fiscal year 2004.

                        M109 Family of Vehicles Fleet Management              December 1999 contract award.

                        Focused Sustainment                                   10-year contract awarded in 1998.

                        Consolidated Contractor Life Cycle Support—Training   Completed.
                        Aids and Simulators

Other initiatives       Velocity Management                                   Completed.

                        Single Stock Fund                                     Sept. 2002.

                        Lateral Redistribution                                Completed.

                                             For most of the initiatives, the schedule provides background information,
                                             an overview of each initiative’s goals and objectives, implementation sites,
                                             funding requirements, projected savings, and projected dates for
                                             completion. However, for three of the initiatives, the schedule does not
                                             specify a planned completion date. Without this information, we cannot
                                             determine whether implementation will be completed within the required
                                             5-year time frame. (See app. I for a description of each initiative.)




                                             Page 6                                         GAO/NSIAD-99-217 Defense Inventory
Management                    Though generally responsive to the act’s requirements, the schedule
                              provides a management framework that lacks an overall strategy and
Framework Is Key to           outcome-oriented goals and performance measures. Specifically, it does
Implementing                  not have a comprehensive strategy or plan to ensure that the efforts are
                              coordinated and do not conflict or duplicate efforts, nor does it establish
Initiatives                   specific performance goals to measure the overall results of the initiatives.
                              The Government Performance and Results Act offers a model for
                              developing an effective management framework to guide the
                              implementation of the initiatives and provide the Congress and other
                              decisionmakers with information on progress and results.


Schedule Provides a Limited   In our past work, we reported that the lack of a management framework
Management Framework          containing an overall strategy and outcome-oriented goals and
                              performance measures contributed to DOD’s difficulty in implementing
                              new initiatives.7 For example, we reported that DOD did not have an
                              adequate management framework to clearly determine the progress being
                              made in realizing the Total Asset Visibility initiative’s goals and that the
                              initiative’s strategic and implementation plans were inadequate. As a
                              result, DOD managers did not have a clear picture of the initiative’s
                              implementation status or know how various initiatives within each service
                              contributed to achieving DOD’s overall goals and objectives. We also
                              reported that there was confusion over who would use the Total Asset
                              Visibility system and how it would be used.

                              The Army’s schedule represents a collection of best practice initiatives the
                              Army plans to complete within the next 5 years to improve the acquisition
                              and distribution of secondary supply items managed by the Army. The
                              schedule describes the initiatives within the context of the Army’s Strategic
                              Logistics Plan and other DOD planning documents, but it does not contain
                              a comprehensive strategy or overall outcome-oriented goals and
                              performance measures. For most of the initiatives, the Army identified
                              general goals and objectives, describing an end state that the Army hopes
                              to achieve, such as “maximize repair capabilities and optimize the use of
                              available resources,” and “reduce asset inventories,” but it did not establish
                              specific performance measures for those goals.




                              7
                                Defense Inventory: DOD Could Improve Total Asset Visibility Initiative With Results Act Framework
                              (GAO/NSIAD-99-40, Apr. 12, 1999).




                              Page 7                                                    GAO/NSIAD-99-217 Defense Inventory
                         In addition, the Army associated each schedule initiative with specific
                         aspects of its “Revolution in Military Logistics,” which is its overall process
                         of changing logistics operations in support of DOD goals. However, the
                         schedule does not define the way the individual initiatives will support
                         these goals and objectives, the extent to which they may reduce the Army’s
                         $9.6 billion secondary inventory,8 or the extent to which they will improve
                         the responsiveness of the supply system to user needs. Without this
                         information, it is impossible to determine the magnitude of impact these
                         initiatives may have on the Army’s overall logistics operations and
                         objective information about implementation progress and whether the
                         initiatives are achieving their desired outcomes may not be available to the
                         Congress and DOD managers.



Results Act Management   The Results Act framework generally consists of establishing strategic
Framework                plans, performance plans, and mechanisms for measuring program
                         progress and results. Such a framework includes (1) establishing broad
                         general initiative goals and objectives, (2) linking these goals to DOD’s
                         overall goals and objectives, (3) establishing quantifiable performance
                         measures to assess whether the initiatives are achieving desired results,
                         (4) defining levels of accountability and responsibility for implementing the
                         initiatives and identifying the resources that will be required to achieve
                         goals, (5) establishing milestones to measure progress toward full
                         implementation, and (6) defining an evaluation plan to periodically
                         compare actual results to established goals and objectives. This
                         information allows the Congress and DOD managers to measure initiative
                         implementation progress and determine if the initiatives are achieving their
                         desired results.

                         In addition to these potential benefits, considering the initiatives as
                         interrelated efforts maximizes their systemwide improvement potential.
                         Our prior work on best inventory management practices has shown that
                         efforts to reengineer a logistics system are more successful when the
                         various logistics activities are viewed as a series of interrelated processes
                         rather than isolated functional areas.9 For example, when one airline
                         began changing the way it purchased parts from suppliers, it considered


                         8
                          Inventory value reported in the Department of Defense Supply System Inventory Report, Sept. 30,
                         1998. The Army Working Capitol Fund financial statements report this inventory value at $10.5 billion.
                         9
                          Inventory Management: DOD Can Build on Progress by Using Best Practices for Reparable Parts
                         (GAO/NSIAD-98-97, Feb. 27, 1998).




                         Page 8                                                     GAO/NSIAD-99-217 Defense Inventory
                 how the changes would affect mechanics in repair workshops.
                 Additionally, airline officials described how a combination of supply chain
                 improvements could lead to continuous improvements. They also
                 described how culture changes, improved data accuracy, and more
                 efficient processes lead to reductions in inventories and complexity of
                 operations. These reductions can lead to further efficiencies and process
                 improvements.



Conclusions      The Army’s schedule generally meets the requirements of the act by
                 providing information on 18 initiatives, most of which are scheduled to be
                 completed within 5 years. Achieving the Army’s goal of improved
                 management of secondary items will depend on the successful
                 implementation of these initiatives. Implementation of the initiatives is
                 generally guided by processes the Army refers to as a “Revolution in
                 Military Logistics.” However, the processes set forth in that document are
                 general in nature and implementation and assessment of initiatives of this
                 magnitude and complexity would benefit from more specific guidance.
                 The Results Act provides a framework for implementing and assessing the
                 initiative results. Without a more effective management framework,
                 opportunities for oversight by the Congress and DOD managers would be
                 limited since meaningful evaluations of progress and results would be
                 impossible.



Recommendation   To provide a mechanism to improve the potential for successfully
                 implementing the Army initiatives and measure results, we recommend
                 that the Secretary of the Army develop a management framework for
                 implementing the 18 initiatives based on the principles embodied in the
                 Results Act. Specifically, the management framework should include

                 • a comprehensive strategy that is directly linked to top-level DOD goals
                   and objectives and that recognizes the interrelationship of the initiatives
                   and the overall impact the initiatives will have on the Army’s logistics
                   pipeline, such as reducing pipeline time, improved customer service,
                   and reductions in total inventory and
                 • a performance plan that includes clearly defined goals and objectives,
                   defined levels of accountability, quantifiable performance measures,
                   interim schedule milestones, and plans to periodically assess the overall
                   impact the initiatives have achieved in reducing inventory levels while
                   improving the responsiveness of the supply system to user needs.



                 Page 9                                      GAO/NSIAD-99-217 Defense Inventory
Agency Comments and   In commenting on a draft of this report, DOD concurred with our
                      recommendation and stated that the Army is revising its Strategic Logistics
Our Evaluation        Plan to more clearly articulate the relationships, goals, objectives, and
                      metrics of logistics initiatives. They will also provide regularly scheduled
                      review and analysis to the Assistant Secretary of the Army (Acquisition,
                      Logistics, and Technology). DOD further stated that approval of the
                      revised Army Strategic Logistics Plan structure by the Assistant Secretary
                      is anticipated during the first quarter of fiscal year 2000. DOD’s comments
                      are included in their entirety as appendix II.

                      DOD did express concern that the draft report implied that the current
                      management framework for implementing the initiatives included in the
                      schedule is inadequate. DOD stated that the Army’s current management
                      framework is guided by the Army’s Revolution in Military Logistics and that
                      each initiative supports an element of that process. Further, DOD cited
                      results that have been achieved and asserted that such results would not
                      have been possible without an adequate management framework. We did
                      not conclude that the Army’s framework was inadequate. However, we
                      clearly believe it can be improved. We have revised our conclusion to more
                      clearly reflect our position.



Scope and             We have evaluated the Army, Air Force and Navy best practice
                      implementation schedules separately. This report summarizes our
Methodology           evaluation of the Army’s schedule. Our analysis was based on the
                      information contained in the schedule, discussions with Army officials, and
                      our prior work comparing DOD and private sector logistics practices. We
                      reviewed the schedule to determine the extent to which it responds to the
                      act’s requirements. Specifically, we evaluated the extent to which (1) the
                      initiatives cover the acquisition and distribution of secondary inventory
                      items and (2) the implementation of the initiatives will be completed within
                      5 years.

                      In addition to determining whether the schedule responds to the act’s
                      requirements, we identified areas in which it could be improved to guide
                      initiative implementation and improve management of secondary inventory
                      items. Specifically, we examined the schedule in terms of
                      outcome-oriented Results Act principles to determine whether the
                      schedule provides an overall strategy for adopting best practices and
                      contains key management information to guide implementation. We did




                      Page 10                                     GAO/NSIAD-99-217 Defense Inventory
not assess the merits of the initiatives or the initiatives’ likelihood for
success.

We interviewed officials and obtained information about ongoing and
planned initiatives at Army Headquarters, Washington, D.C.; the Office of
the Secretary of the Army for Research, Development and Acquisition and
the Army Materiel Command, Arlington, Virginia; and the Combined Arms
Support Command, Fort Lee, Virginia. We also discussed the results of
implementing the initiatives, the impact on supply operations, and
customer satisfaction with logistics personnel at Fort Bragg, North
Carolina, and Fort Campbell, Kentucky. In addition, we used information
from reports that we have issued since 1995 and are listed in GAO related
products.

We conducted our review from November 1998 to June 1999 in accordance
with generally accepted government auditing standards.


We are sending copies of this report to the appropriate congressional
committees; the Honorable William S. Cohen, Secretary of Defense; the
Honorable Louis Caldera, Secretary of the Army; Lieutenant General
Henry T. Glisson, Director, Defense Logistics Agency; and Jacob Lew,
Director, Office of Management and Budget. We will also make copies
available to others upon request.

Please contact me on (202) 512-8412 if you or your staff have any questions
concerning this report. Major contributors to this report are listed in
appendix III.




David R. Warren, Director
Defense Management Issues




Page 11                                        GAO/NSIAD-99-217 Defense Inventory
List of Congressional Committees

The Honorable John Warner
Chairman
The Honorable Carl Levin
Ranking Minority Member
Committee on Armed Services
United States Senate

The Honorable Ted Stevens
Chairman
The Honorable Daniel K. Inouye
Ranking Minority Member
Subcommittee on Defense
Committee on Appropriations
United States Senate

The Honorable Floyd Spence
Chairman
The Honorable Ike Skelton
Ranking Minority Member
Committee on Armed Services
House of Representatives

The Honorable Jerry Lewis
Chairman
The Honorable John P. Murtha
Ranking Minority Member
Subcommittee on Defense
Committee on Appropriations
House of Representatives




Page 12                            GAO/NSIAD-99-217 Defense Inventory
Page 13   GAO/NSIAD-99-217 Defense Inventory
Contents



Letter                                                                                            1


Appendix I                                                                                       16
Summary of Army
Initiatives

Appendix II                                                                                      23
Comments From the
Department of Defense

Appendix III                                                                                     25
GAO Contacts and
Staff
Acknowledgments

Related GAO Products                                                                             28


Tables                  Table 1: Army Initiatives and Projected Completion Date                   6


Figures                 Figure 1: Army’s Logistics Pipeline for Secondary Items                   3




                        Abbreviations

                        DOD        Department of Defense




                        Page 14                                   GAO/NSIAD-99-217 Defense Inventory
Page 15   GAO/NSIAD-99-217 Defense Inventory
Appendix I

Summary of Army Initiatives                                                                                    Appenx
                                                                                                                    Idi




                              The Army’s best practices implementation schedule lists 18 best practice
                              initiatives. We have categorized the initiatives into information
                              management, maintenance, acquisition, outsourcing, and other . This
                              appendix summarizes the information contained in the schedule submitted
                              to the Congress on June 14, 1999.



Information                   Five initiatives listed in the Army’s implementation schedule involve
                              replacing old or developing new logistics information management
Management Initiatives        systems. For example, with the Logistics Integrated Data Base initiative,
                              the Army plans to integrate over 60 databases into a single database. A new
                              system being developed by the Army, the Global Combat Support System–
                              Army, is intended to provide field commanders with a comprehensive
                              logistics picture for their units.


Logistics Integrated Data     Under the Logistics Integrated Data Base initiative, the Army plans to
Base                          reengineer the current structure of the databases within its Logistics
                              Support Activity. This initiative is designed to integrate 66 databases into a
                              single database that will allow data to be stored once and used in multiple
                              applications, to use commercial off-the-shelf components, and to provide
                              user friendly windows-like applications. This initiative began in August
                              1997, and it is scheduled for completion in December 2000. The data
                              elements developed for this initiative are also intended to support the
                              Global Combat Support–Army initiative.


Virtual Integrated Materiel   The Army intends to reduce costs and improve performance by integrating
Management Center             logistics life-cycle management functions into one virtual materiel
                              management center with this initiative. These functions include weapon
                              system sustainment and integration, readiness analysis, and management
                              support. Under this initiative, the Army’s geographically dispersed materiel
                              management centers will operate in an integrated data environment, with
                              the majority of life-cycle management data being stored in digital format.
                              The Army began work on this initiative in September 1997, and it expects
                              implementation to be completed by September 2001.



Wholesale Logistics           The Wholesale Logistics Modernization Program initiative is a program
Modernization Program         designed to ensure the Army’s combat readiness by modernizing the Army’s
                              wholesale logistics processes. Under this program, the Army will rely on a



                              Page 16                                      GAO/NSIAD-99-217 Defense Inventory
                              Appendix I
                              Summary of Army Initiatives




                              contractor to reengineer its business process and sustain a modernized
                              software system, which will replace its 30-year old supply and depot
                              management systems. The Army had planned to release the solicitation for
                              this contract upon approval of an A-76 study1 and award the contract
                              10 months later. On April 20, 1999, the Army waived the A-76 requirement
                              for this initiative. The union representing the affected Army civilian
                              employees has appealed the waiver, and the final determination of this
                              issue is pending. As a result, we were unable to determine if this initiative
                              will be completed by 2003.


Global Combat Support         The Global Combat Support System--Army initiative is a logistics
System–Army                   information system that builds on the functions and processes of existing
                              systems to generate data, integrate databases, and combine combat service
                              support information from external sources as necessary to execute the
                              Army’s Revolution in Military Logistics. This initiative was begun in the
                              second quarter of fiscal year 1997, and it is projected to be completed
                              during the fourth quarter of fiscal year 2002. Initially, the system will
                              integrate the functions in the Standard Army Management Information
                              Systems into a single database with a common programming language and
                              operating environment. Ultimately, the system is intended to integrate with
                              joint systems to serve as the land force combat support system. The system
                              is intended to provide field commanders with the full logistics picture. For
                              example, once in place, this system will enable field commanders to
                              quickly determine the status of all supply requests.


Army Total Asset Visibility   As we have reported,2 the Army’s Total Asset Visibility capability is an
                              automated tool that is designed to improve the ability of soldiers,
                              logisticians, and managers to obtain and act on information about the
                              location, quantity, condition, and movement of assets through the Army’s
                              logistics pipeline. Fielding of the tool, completed in 1996, provides
                              visibility of 99 percent of Army inventories across all classes of supply,


                              1
                               In 1966, the Office of Management and Budget issued Circular A-76, which established federal policy
                              for the government’s performance of commercial activities and set forth the procedures for studying
                              them for potential contracting. The circular and its Supplemental Handbook provide guidance to
                              federal agencies on procedures to be followed in determining whether commercial activities should be
                              performed by in-house personnel, another federal agency through interservice support agreements, or
                              the private sector.
                              2
                                Defense Inventory: DOD Could Improve Total Asset Visibility Initiative With Results Act Framework
                              (GAO/NSIAD-99-40, Apr. 12, 1999).




                              Page 17                                                   GAO/NSIAD-99-217 Defense Inventory
                          Appendix I
                          Summary of Army Initiatives




                          according to the Army. The Army believes that some key benefits include
                          easier distribution of assets, reduced inventories and receipt processing
                          time, and fewer duplicate requisitions due to improved asset tracking. This
                          initiative, which the Army considers to be completed, will also support the
                          Department of Defense’s (DOD) Total Asset Visibility initiative.



Maintenance Initiatives   Three initiatives focus on improving maintenance operations. The National
                          Maintenance Program and Depot Repair Process Improvements initiatives
                          are designed to improve maintenance operations at the installation and
                          depot levels. The depot improvement initiative is also intended to simplify
                          how units obtain contractor services for the maintenance and logistics
                          support of communication equipment. The Electronic Sustainment
                          Support Center initiative relates to maintaining and providing logistics
                          support of communication equipment.


National Maintenance      This Army-wide initiative is to maximize repair capabilities and optimize
Program                   the use of available resources at all maintenance levels within the Army.
                          The initiative centralizes the management of all Army sustainment
                          maintenance programs while decentralizing the actual repair of the
                          components and end items. The workload will be distributed across depot
                          and installation activities, and repairs will be made based on the national
                          need for an item. Implementation of this initiative began in February 1996,
                          and its completion is projected by the end of September 2003.


Depot Repair Process      The Depot Repair Process Improvements initiative is intended to improve
Improvements              depot maintenance process efficiencies by meeting production schedules,
                          decreasing production costs, reducing parts and asset inventories, and
                          accelerating repair times. This initiative began in March 1996, and it is
                          scheduled for completion by the end of December 2000.


Electronic Sustainment    Under this initiative, the Army established Electronic Sustainment Support
Support Centers           Centers to provide units with a single focal point for the maintenance and
                          logistics support of communication equipment and systems. In turn, the
                          centers work with the myriad of contractor and Army organizations that
                          repair and provide logistics support for communication equipment and
                          systems. The Army has regional centers at Fort Bragg, North Carolina, and
                          Fort Hood, Texas, and plans to establish another center in Korea during the



                          Page 18                                    GAO/NSIAD-99-217 Defense Inventory
                          Appendix I
                          Summary of Army Initiatives




                          third quarter of 1999. In its schedule, the Army described this initiative as
                          ongoing, but the schedule did not provide for any further expansion beyond
                          establishing a center in Korea. As a result, we could not determine if this
                          initiative is planned to be completed within 5 years as required by the act.



Acquisition Initiatives   The three acquisition initiatives are intended to reduce the time involved in
                          ordering and receiving supplies to replenish inventory, enhance the
                          performance of spare parts through technology insertion, and reduce the
                          paperwork required when ordering supplies.



Lead Time Reduction       This initiative is the Army’s effort to reduce the time it takes to order and
                          receive supplies to replenish inventory levels. By reducing lead time, the
                          Army intends to reduce its inventory levels. This initiative began in fiscal
                          year 1995, and it is planned to be completed in fiscal year 2001.


Modernization Through     This initiative is intended to reduce operation and support costs and to be
Spares                    accomplished through the spare parts acquisition process. Under this
                          initiative, suppliers will be given greater design and manufacturing
                          flexibility to incorporate technology that the commercial marketplace uses
                          into the spare parts they manufacture for the Army. The Army believes that
                          replacement parts will last longer if they are equipped with state-of-the-art
                          technology. This initiative is an ongoing program, and there were 10
                          projects underway as of June 1999. The projected completion date for this
                          initiative, as indicated by the schedule, remains “to be determined.”
                          Therefore, we were unable to determine when this initiative will be
                          completed.


Standard Retail Supply    The Army’s paperless contracting initiative is intended to reduce the
System Interface—         amount of paperwork when local (Army units, installations, and depots)
                          supply activities order items from local vendors. This project began in
Paperless Contracting
                          January 1999, and it is scheduled for completion in January 2000.



Outsourcing Initiatives   The Army included four outsourcing initiatives in its schedule. With two of
                          the initiatives, Apache Prime Vendor Support and M109 Family of Vehicles
                          Fleet Management, the Army hopes to outsource much of the weapon
                          system logistics requirements for the Apache attack helicopter and the



                          Page 19                                      GAO/NSIAD-99-217 Defense Inventory
                          Appendix I
                          Summary of Army Initiatives




                          Paladin mechanized field artillery. The Focused Sustainment initiative
                          provides units with a means to obtain contractor logistics support for
                          equipment ranging from tanks to rifles. The Army has outsourced logistics
                          support for a large portion of its training equipment with the Consolidated
                          Contractor Life Cycle Support initiative. We have reported on DOD efforts
                          to outsource existing workloads.3



Apache Prime Vendor       This initiative is a contractor’s proposal to use commercial practices to
Support                   reengineer logistics support, improve readiness, reduce life-cycle costs,
                          and provide savings that can be used to modernize the Apache aircraft.
                          The prime vendor program is intended to rely on private-sector capital to
                          upgrade Apache components in conjunction with its management of the
                          parts pipeline. The initiative is being studied by the Army to address
                          unresolved issues. The Army does not know when a decision will be made
                          on whether the program will go forward.4 According to the schedule, the
                          initiative’s projected completion date is fiscal year 2004.


M109 Family of Vehicles   This initiative is similar to the Apache Prime Vendor Support initiative in
Fleet Management          that logistics support is to be reengineered for self-propelled artillery to
                          improve readiness and reduce life-cycle costs (supply and maintenance
                          expenditures). The schedule projects a December 1999 contract award;
                          however, the Army is studying the initiative, and it is unknown when a
                          decision will be made on whether the initiative will go forward. As a result,
                          we were not able to determine when this initiative is planned to be
                          completed.


Focused Sustainment       The Focused Sustainment initiative consists of a group of six contracts that
                          provide sustainment services, such as maintenance, diagnostics, training,
                          and parts supply, for all Tank and Automotive Command weapon systems.
                          These services are available to all Army customers, anywhere in the world.
                          The Command manages over 3,000 weapon systems, including tanks,


                          3
                           Defense Depot Maintenance: DOD Shifting More Workload for New Weapon Systems to Private Sector
                          (GAO/NSIAD-98-8, Mar. 31, 1998) and Outsourcing DOD Logistics: Savings Available but Defense
                          Science Board Projections Are Overstated (GAO/NSIAD-98-48, Dec. 8, 1997) cover a variety of
                          outsourcing issues.
                          4
                           Army Logistics: Status of Proposed Support Plan for Apache Helicopter (GAO/NSIAD 99-140, July 1,
                          1999) examines many of the issues the Army must address before the Apache Prime Vendor Support
                          contract can be awarded.




                          Page 20                                                  GAO/NSIAD-99-217 Defense Inventory
                          Appendix I
                          Summary of Army Initiatives




                          trucks, trains, boats, rifles, and machine guns. Contracts were awarded in
                          October 1998, and they will be in effect for 10 years.


Consolidated Contractor   This initiative, which is completed, has resulted in the Army outsourcing
Life Cycle Support—       95 percent of the life-cycle sustainment for its training aids, simulators, and
                          simulations. The contracts awarded provide worldwide on-site supply and
Training Aids and         maintenance support for a variety of systems, such as flight simulators and
Simulators                battle simulation systems. According to Army documentation, these
                          contracts have produced savings of 30 to 50 percent. The Army began this
                          contracting practice in May 1990.



Other Initiatives         The Army plans to implement several other initiatives to improve its
                          logistics pipeline, integrate two separately managed levels of inventory, and
                          share its excess inventory with the other services.


Velocity Management       In September 1995, the Army established its Velocity Management program
                          to develop a faster, more flexible, and more efficient logistics pipeline. The
                          program’s goals, concept, and top management support parallel
                          improvement efforts in private sector companies. The program’s overall
                          goal is to eliminate unnecessary steps in the logistics pipeline that delay the
                          flow of supplies through the system. The program consists of Army-wide
                          process improvement teams for the following four areas: ordering and
                          shipping of supplies, repair cycle, inventory levels and locations (also
                          known as stockage determination), and financial management. Velocity
                          Management is an ongoing program.


Single Stock Fund         The Single Stock Fund initiative will integrate separately managed
                          wholesale and installation inventories into a single entity. This initiative
                          will improve the acquisition and distribution of supply items by eliminating
                          numerous inefficiencies (e.g., multiple points of sale, multiple billing
                          ledgers, and duplicative automated systems, all used to manage the same
                          inventory). By October 2000, stock-funded supplies owned and managed
                          by installations and corps are expected to become wholesale assets to be
                          managed by the Army Materiel Command. In addition, division-level stock
                          funded supplies are expected to become wholesale assets by October 2001.
                          The Army projects completion of this program by September 2002.




               Ltert      Page 21                                       GAO/NSIAD-99-217 Defense Inventory
                         Appendix I
                         Summary of Army Initiatives




Lateral Redistribution   DOD’s Lateral Redistribution Program improves national inventory
                         managers’ stewardship of resources by providing the ability to redistribute
                         assets within DOD, both intraservice and interservice, to fill backorders
                         and offset repair and procurement decisions. These actions are
                         accomplished through the transfer of assets from the Army’s, and other
                         services’, retail and wholesale systems. As part of this program, the Army
                         has automated the redistribution process for secondary items. With lateral
                         redistribution, the Army and the other services expect to reduce excess
                         inventories and the number of requisitions on the services’ wholesale
                         systems. The program is an ongoing initiative that began in fiscal year
                         1996.




                         Page 22                                    GAO/NSIAD-99-217 Defense Inventory
Appendix II

Comments From the Department of Defense                       AppenIx
                                                                    Idi




              Page 23        GAO/NSIAD-99-217 Defense Inventory
               Appendix II
               Comments From the Department of Defense




               Now on p. 9.




Now on p. 9.




               Page 24                                   GAO/NSIAD-99-217 Defense Inventory
Appendix III

GAO Contacts and Staff Acknowledgments                                                     AppeInx
                                                                                                 Idi




GAO Contacts      Charles Patton, (202) 512-4412
                  Robert Repasky, (202) 512-9868



Acknowledgments   In addition to those named above, Penney Harwell,
                  Robert Malpass, and William Woods made key contributions
                  to this report.




                  Page 25                                 GAO/NSIAD-99-217 Defense Inventory
Page 26   GAO/NSIAD-99-217 Defense Inventory
Page 27   GAO/NSIAD-99-217 Defense Inventory
Related GAO Products


                   Inventory Management: More Information Needed to Assess DLA’s
                   Best Practice Initiatives (GAO/NSIAD-98-218, Sept. 2, 1998).

                   Inventory Management: DOD Can Build on Progress by Using Best
                   Practices for Reparable Parts (GAO/NSIAD-98-97, Feb. 27, 1998).

                   Defense Inventory Management: Expanding Use of Best Practices for
                   Hardware Items Can Reduce Logistics Costs (GAO/NSIAD-98-47,
                   Jan. 20, 1998).

                   Inventory Management: Greater Use of Best Practices Could Reduce
                   DOD’s Logistics Costs (GAO/T-NSIAD-97-214, July 24, 1997).

                   Inventory Management: The Army Could Reduce Logistics Costs for
                   Aviation Parts by Adopting Best Practices (GAO/NSIAD-97-82, Apr. 15,
                   1997).

                   Defense Inventory Management: Problems, Progress, and Additional
                   Actions Needed (GAO/T-NSIAD-97-109, Mar. 20, 1997).

                   Inventory Management: Adopting Best Practices Could Enhance Navy
                   Efforts to Achieve Efficiencies and Savings (GAO/NSIAD-96-156, July12,
                   1996).

                   Best Management Practices: Reengineering the Air Force’s Logistics
                   System Can Yield Substantial Savings (GAO/NSIAD-96-5, Feb. 21, 1996).

                   Inventory Management: DOD Can Build on Progress in Using Best
                   Practices to Achieve Substantial Savings (GAO/NSIAD-95-142, Aug. 4,
                   1995).




(709381)   Leter   Page 28                                   GAO/NSIAD-99-217 Defense Inventory
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