oversight

Defense Management: Army Could Achieve Efficiencies By Consolidating Ammunition Management

Published by the Government Accountability Office on 1999-09-30.

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 Readiness and Management Support,
                   Committee on Armed Services, U.S.
                   Senate

September 1999
                   DEFENSE
                   MANAGEMENT

                   Army Could Achieve
                   Efficiencies by
                   Consolidating
                   Ammunition
                   Management




GAO/NSIAD-99-230
Contents



Letter                                                                                3


Appendixes   Appendix I:  Examples of Fragmented Management and
               Decision-Making                                                       20
             Appendix II:   Army Ammunition Plants                                   22
             Appendix III: Comments From the Department of Defense                   24
             Appendix IV: GAO Contacts and Staff Acknowledgments                     26


Figures      Figure 1: Activities With Responsibilities for Conventional
               Ammunition                                                             6
             Figure 2: Management of the Conventional Ammunition Life
               Cycle                                                                  7
             Figure 3: Conventional Ammunition Procurement Program
               Budgets, Fiscal Year 1985 Through Fiscal Year 1999                     9




             Page 1                                  GAO/NSIAD-99-230 Defense Management
Page 2   GAO/NSIAD-99-230 Defense Management
United States General Accounting Office                                                       National Security and
Washington, D.C. 20548                                                                 International Affairs Division



                                    B-281873                                                                            Leter




                                    September 30, 1999

                                    The Honorable James M. Inhofe
                                    Chairman, Subcommittee on Readiness
                                    and Management Support
                                    Committee on Armed Services
                                    United States Senate

                                    Dear Mr. Chairman:

                                    The National Defense Authorization Act for Fiscal Year 1996 directed that
                                    the Army review and report on the management of conventional
                                    ammunition programs within the Department of Defense. In response, the
                                    Army contracted with Pacific Northwest National Laboratory in June 1996
                                    to conduct a comprehensive study of the management and configuration of
                                    the ammunition industrial base.1 The study, completed in June 1997,
                                    recommended several actions to address the fragmentation of management
                                    responsibilities and accountability and the inefficiencies that impact the
                                    ammunition industrial base. In fiscal year 1999, the budget for conventional
                                    ammunition procurement programs was about $2 billion.

                                    As you requested, we reviewed the Army’s implementation of the study’s
                                    recommendations. Specifically, we assessed the Army’s (1) progress
                                    toward reorganizing the management of conventional ammunition to
                                    address the fragmentation issues and (2) efforts to improve business
                                    practices to enhance the operational efficiency of ammunition production
                                    and procurement. This is the first in a series of reports that will also
                                    address issues such as demilitarization, capacity utilization, and storage of
                                    conventional ammunition.



Results in Brief                    The Army has made limited progress in addressing the problem of
                                    fragmented management of its conventional ammunition program. Senior
                                    Army leadership has been considering alternative organizational structures
                                    identified by a study team as a means of addressing the fragmentation


                                    1
                                     The industrial base includes both government-owned and private-sector ammunition
                                    production plants.




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             issue. However, no decisions have been made because of lack of agreement
             on where management of conventional ammunition would fit into the
             Army’s organizational structure, and no milestones have been set for
             resolving the issue. In lieu of an organizational change and recognition of
             the need to integrate ammunition management, the Commanders of the
             three commands that deal with conventional ammunition formed an
             informal coordination group. The Commanders agreed to work together on
             common activities to pursue the most comprehensive and cost-effective
             approach to conventional ammunition management. However, the
             coordination group’s decisions are not binding and are dependent on all
             members agreeing to proposed actions.

             Although the Army has not resolved the problem of fragmented
             management of conventional ammunition, it has developed initiatives to
             improve its business practices to enhance the operational efficiency of
             ammunition production and procurement. These initiatives have not yet
             been completed and their outcomes are yet to be determined. Further, the
             long-term success of these initiatives will depend upon the ability of the
             informal coordination group to ensure cooperation among all participants
             and resolve issues of common interest.

             This report contains recommendations to the Secretary of Defense and the
             Secretary of the Army intended to address management fragmentation.



Background   In March 1975, the Department of Defense established the Single Manager
             for Conventional Ammunition within the Secretary of the Army. The Single
             Manager was expected to be the central procuring and logistics agency for
             conventional ammunition common to all military services. Additionally, the
             Single Manager was to be responsible for managing the Army’s ammunition
             production facilities. The Single Manager concept evolved from a July 1970
             Logistics Management Institute report and one of our reports.2 These
             reports recommended, among other things, that the Army centrally manage
             all ammunition to avoid duplication among production facilities and
             manufacturing processes.




             2
              Effective Central Control Could Improve DOD’s Ammunition Logistics (B-176139, Dec. 6,
             1973).




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Management of             While the Secretary of the Army is officially recognized as the Single
Conventional Ammunition   Manager, the Army’s Industrial Operations Command, a subordinate
                          command of the Army Materiel Command, is responsible for the day-to-day
                          execution of the Single Manager role. However, in actual practice,
                          ammunition management responsibility is fragmented among three major
                          Army commands. Specifically, in addition to the Industrial Operations
                          Command, the Tank-automotive and Armaments Command, also a
                          subordinate command of the Army Materiel Command, and the Program
                          Executive Office for Ground Combat Support Systems,3 which reports to
                          the Assistant Secretary of the Army for Acquisition, Logistics, and
                          Technology (Acquisition Executive), have significant ammunition
                          management responsibilities as well as other responsibilities. Figure 1
                          shows the commands that have Program, Project, or Product Managers
                          who are responsible for procuring conventional ammunition for their
                          programs.




                          3
                           The Program Executive Office for Ground Combat Support Systems provides program
                          oversight and direction to the Program or Project Managers under its command.




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Figure 1: Activities With Responsibilities for Conventional Ammunition




                                          Source: Office of the Executive Director for Conventional Ammunition.




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                                        As illustrated in figure 1, the Army’s Acquisition Executive is not in the
                                        Single Manager’s chain of command. However, as shown by the dotted line
                                        in figure 1, there is a coordinating function within the Deputy Chief of Staff,
                                        Ammunition, (Army Materiel Command), which supports both the
                                        Industrial Operations Command and the Acquisition Executive. The
                                        Acquisition Executive is responsible for making policies that impact the
                                        government-owned industrial base, and the Industrial Operations
                                        Command is responsible for executing that policy. However, the
                                        Acquisition Executive has no direct authority over decisions made by the
                                        Single Manager and can only influence how policies are executed.

                                        The Program Executive Office and the Tank-automotive and Armaments
                                        Command differ from the Single Manager in that they are responsible for
                                        research and development, initial production and fielding, and product
                                        improvement, but they are not responsible for logistics activities such as
                                        production base management and wholesale depot operations. Figure 2
                                        shows the responsibilities of the Single Manager and the Program, Project,
                                        or Product Managers in the ammunition life cycle.



Figure 2: Management of the Conventional Ammunition Life Cycle




                                        Source: Industrial Operations Command.




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                        The Department of Defense directive for the Single Manager, signed by the
                        Deputy Secretary of Defense and revised in 1995, states that once
                        ammunition items reach stable production, they are to be assigned to the
                        Single Manager responsible for follow-on production, logistics functions,
                        and demilitarization. However, the Program, Project, or Product Managers
                        operate under a separate Department of Defense directive, also signed by
                        the Deputy Secretary of Defense and issued in 1996, which charges these
                        managers with full life-cycle responsibility for their programs. Information
                        from various Army officials indicates that the differences in responsibility
                        are the genesis of the fragmentation among these commands. Appendix I
                        illustrates problems caused by fragmented management.


Declining Budgets and   The end of the Cold War and subsequent changes to defense missions
Requirements            resulted in declining budgets and requirements for conventional
                        ammunition. As shown in figure 3, ammunition procurement funding for all
                        services has declined significantly, falling from a peak level of about
                        $4.3 billion in fiscal year 1985 to about $2 billion in fiscal year 1999, with
                        about one-half of the total going to the procurement of Army ammunition.




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Figure 3: Conventional Ammunition Procurement Program Budgets, Fiscal Year
1985 Through Fiscal Year 1999
    5,000 Current dollars in millions

    4,500

    4,000

    3,500

    3,000

    2,500

    2,000

    1,500

    1,000

     500




            Fiscal year

Source: Office of the Secretary of Defense, Office of Munitions.


Requirements for conventional ammunition also changed as the services
decreased their dependence on traditional ammunition items and increased
their reliance on highly technical, precision munitions.4 In 1997, the
Department of Defense issued a new policy on requirements determination
in an attempt to generate consistent conventional ammunition
requirements Department-wide and address changes in mission
requirements. The new policy states that military departments should
establish ammunition requirements and associated acquisition programs to
properly perform their military mission. The Army is conducting a study to
determine whether the increased investment in more modern precision
munitions would have a significant impact on reducing the total life-cycle



4
 Precision Munitions cover both guided and smart munitions. Guided munitions are one-on-
one munitions-one munition for one target-that are guided to their target through a target
acquisition sensor or laser designation system. Smart Munitions are “fire and forget” and
have an autonomous capability to search, detect, classify, select, and engage targets with a
lethal mechanism.




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                          cost of ammunition. According to the study director, the study should be
                          completed in November 1999.

                          Decreasing requirements for conventional ammunition have resulted in a
                          reduction in both government-owned and private-sector production plants.
                          The number of government-owned ammunition plants decreased from 32 in
                          1978 to 22 in 1999. Of these 22 plants, 8 are currently producing
                          ammunition, 6 are contractor operated, and 2 are government operated. Of
                          the 14 remaining plants, 4 are inactive5 and 10 are no longer required for
                          current or future production and are in the process of being disposed of.
                          Additionally, the number of contractor-owned plants declined from 286 in
                          1978 to 72 in 1999. A list of the 22 plants is included in appendix II.


Congressional Concerns    To comply with Section 1082 of the National Defense Authorization Act for
Over Program Management   Fiscal Year 1996, the Army contracted with Pacific Northwest National
                          Laboratory to conduct a comprehensive review of the ammunition
                          industrial base. The key objectives of the study were to assess the
                          capability and capacity of the industrial base for conventional ammunition
                          and recommend a strategy for configuring and managing the base to
                          effectively meet Department of Defense planning guidance.

                          In June 1997, the contractor issued its report: Recommended Strategy for
                          Configuring and Managing the U.S. Munitions Industrial Base. The study
                          found that, among other things, the ammunition management system was
                          fragmented and the business environment needed to be stabilized. The
                          report stated that different organizations, specifically the Industrial
                          Operations Command, the Tank-automotive and Armaments Command,
                          and the Program Executive Office for Ground Combat Support Systems,
                          were responsible for different stages of the ammunition life cycle.
                          Consequently, much time was being spent trying to coordinate activities.
                          Additionally, the study found that the government-owned industrial base
                          was becoming less efficient as the volume of work continued to shrink. On
                          the basis of its assessment, Pacific Northwest National Laboratory
                          recommended the following strategy to improve the management of
                          conventional ammunition:




                          5
                           Inactive plants no longer have work directed to them, but their capacity is retained for
                          replenishment or technological reasons.




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• manage ammunition as a major program using Department of Defense
  life-cycle acquisition processes;
• consolidate management responsibilities and financial resources for
  ammunition into a Program Executive Office for Ammunition;6
• convert government-owned production assets to private-sector
  ownership and acquire ammunition from the private sector; and
• apply acquisition reform initiatives already underway in the Department
  of Defense to the ammunition acquisition process to stabilize the
  business environment and encourage industry to invest in the industrial
  base.

To accomplish this strategy, the study listed the following critical actions:

• establish ammunition program managers with full life-cycle
  responsibility for developing and producing items they manage;
• establish full and open competition among qualified suppliers as the
  standard acquisition approach;
• establish an integrated requirements process that includes
  representatives from all services and the industrial base; and
• establish and implement an equitable process for transitioning
  government-owned assets to private ownership.

The report further stated that with an acquisitions-based management
approach, the government could move away from direct ownership and
management of production assets and could instead focus its activities on
the acquisition function, buying end items and replenishment capacity
rather than production facilities and equipment.

The Army agreed with most of these recommendations, and they were
included in a June 1998 Industry Base Policy Letter, 98-1-Ammunition,
which established the Army’s strategy for achieving efficiency in the
ammunition industrial base. There was no agreement on the
recommendation to create a Program Executive Office for Ammunition.
Instead, Army officials chartered a study team, known as the
Organizational Integrated Process Team, to develop other organizational
alternatives to address fragmentation issues. It also established a Business
Case Integrated Process Team to determine how to implement the Pacific


6
 The Program Executive Office for Ammunition would be responsible for integrating
budgets, acquisition strategies, research and development, and life-cycle management
across all ammunition categories that the Army refers to as families.




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                       Northwest National Laboratory’s recommendations for improving
                       operational efficiencies. Subsequently, the Army formed ammunition teams
                       to develop competition and ammunition life-cycle strategies for all
                       categories of ammunition, including Artillery, Fuzes, Mines/Countermines,
                       Mortars, Small Arms, and Tank/Medium Caliber.



Fragmentation Issues   The Army has made limited progress towards addressing the fragmentation
                       of ammunition management because of lack of agreement on where
Remain Unresolved      management of conventional ammunition would fit into the Army’s
                       organization. Although the Army is considering recommendations from
                       both an external and an internal group for improving the management
                       structure of conventional ammunition, to date the Army has taken no
                       action. In the interim, the principal Army commands responsible for
                       management of conventional ammunition have formed an informal
                       coordinating group known as the Armament Triad to deal with common
                       issues that impact conventional ammunition. Because the Triad is an
                       informal group, its prospects for long-term success are uncertain.


Team Recommendations   The Organizational Integrated Process Team focused on the lack of
Are Being Considered   integration in ammunition management. Specifically, the team addressed
                       three problems: (1) fragmented ammunition management, (2) problems
                       with the industrial base, and (3) outdated physical and organizational
                       structures and processes, all of which have resulted in inefficiencies in the
                       production and procurement of conventional ammunition. The team
                       developed four proposals:

                       • Creation of an Ammunition Command. This proposal would centralize
                         decision-making authority under a Major General with responsibility
                         and accountability for integrated life-cycle management of ammunition
                         while maintaining the mission of the Single Manager.
                       • Creation of a Program Manager/Program Executive Office and Merged
                         Major Subordinate Command. This proposal would establish a joint
                         Program Manager at the Brigadier General level for ammunition within
                         the Ground Combat Support Systems Command. This concept would
                         totally integrate ammunition under a single command and provide one
                         voice for the Army’s conventional ammunition. The logistics mission of
                         the Single Manager would be retained.
                       • Creation of a management structure that would integrate industrial base
                         management with weapon systems management under the same




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                              command. The concept is predicated on fully utilizing the private sector
                              for all aspects of the ammunition life cycle.
                            • Creation of a Single Service. This proposal is based on the premise that
                              the Department of Defense would merge into one service and that the
                              requirement for the Single Manager would be eliminated.

                            The team recommended that the Army adopt the second proposal, which
                            would provide a structure similar to that recommended by the Pacific
                            Northwest National Laboratory study. The team found that the Program
                            Manager/Program Executive Office concept scored the highest in attributes
                            such as a clearly defined mission that focuses on total life-cycle
                            management of ammunition.

                            The team briefed Army leadership in July 1998, and its recommendations
                            were taken into consideration by a three-member team representing the
                            Army Materiel Command, the Army’s Office of the Deputy Chief of Staff for
                            Logistics, and the Secretary of the Army for Acquisition, Logistics, and
                            Technology. The Army has not made any decision to reorganize the
                            management of conventional ammunition and has not set milestones to do
                            so. As a result, the three commands that report to the Secretary of the Army
                            through different chains of command can still make independent decisions
                            that impact the industrial base.


Uncertainty Regarding the   Recognizing the need to integrate ammunition management, in October
Triad’s Effectiveness       1998 the Commanding Generals of the three commands (Industrial
                            Operations Command, Tank-automotive and Armaments Command, and
                            Program Executive Office for Ground Combat Support Systems) that deal
                            with conventional ammunition formed an informal coordination group
                            referred to as the Armament Triad. The Commanders signed a
                            memorandum of understanding to work together to coordinate common
                            activities by pursuing a comprehensive and cost-effective approach to the
                            life-cycle management of ammunition.

                            The Triad deals with concerns forwarded by the ammunition teams through
                            an Executive Council. The Triad meets quarterly to discuss and attempt to
                            resolve issues that impact the production and procurement of conventional
                            ammunition. The teams are responsible for developing life-cycle
                            management plans for their individual categories of conventional
                            ammunition. This is to be accomplished through three plans: a business
                            plan, an acquisition plan, and an industrial base plan, which are discussed
                            in detail later in this report. Additionally, the Triad has assumed



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                       responsibility for ensuring total integration of plans being formulated by
                       the various teams.

                       Although the Triad provides overall coordination to the ammunition teams,
                       Triad members have expressed concern about the group’s long-term ability
                       to affect change. For example, members are concerned they will not be
                       able to resolve Army-wide ammunition issues if decisions to do so
                       adversely impact any one individual command. This situation is
                       exacerbated by the fact that the individual Triad members do not report to
                       the Secretary of the Army through the same chain of command. According
                       to senior Army officials, in order for the Triad to be successful, huge
                       cultural, if not organizational, changes would have to take place. They
                       added that Program Managers are more concerned with cost, schedule, and
                       performance than with how their decisions impact government-owned
                       ammunition production facilities. Various officials also suggested that
                       unless the Triad is given permanent status, its future would become less
                       certain as command changes affecting the Triad members occur.



Initial Efforts        While the Army has not addressed the fragmentation issues as they relate
                       to ammunition management, it has made efforts to improve the efficiency
Underway to Improve    of the industrial base as well as the life-cycle management of ammunition.
Management             The Army initially focused on two initiatives: (1) development of a
                       competition strategy for ammunition acquisition, and (2) development of
Efficiencies           life-cycle management plans for individual ammunition categories. The
                       first initiative was developed to facilitate the transfer of government-owned
                       ammunition plants to private-sector ownership. Although two competitions
                       have been carried out, the Army recently decided to base future
                       competitions on the life-cycle management plans that are being developed
                       by ammunition teams.


Competition Strategy   The Business Case Integrated Process Team developed competition
                       strategies for each government-owned plant by assessing the plant’s
                       capabilities, determining the best method of transitioning it to private-
                       sector ownership, and establishing a timeline for completion. A
                       competition for explosive materials was completed in June 1998, and
                       another for small caliber ammunition was completed in July 1999.
                       However, Army officials have recently voiced concerns about the
                       competitions being carried out prior to completion of the life-cycle
                       management plans, which they think should help determine future facility
                       requirements. The Commander, Industrial Operations Command, and the


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                            Deputy Chief of Staff for the Single Manager, both stated they have
                            recognized the value of the family team plans in helping to determine which
                            competitions would be needed. As a result, future competition plans will
                            take into account information contained in life-cycle management plans.


Integration of Life-Cycle   Ammunition teams were formed between November 1998 and January 1999
Management Plans            to integrate the entire ammunition life cycle by including representatives
                            from each of the three commands, as well as from other services and units
                            such as requirements planning and budgeting. These teams are responsible
                            for developing life-cycle management plans for their ammunition items.
                            They expect to do so by developing the following plans:

                            • A business plan is to be developed to include all life-cycle requirements
                              such as environmental technology, maintenance, and demilitarization.
                              This plan must ensure that the necessary industrial capacities, including
                              peacetime production, replenishment capacity, and storage are obtained
                              and maintained in a cost-effective manner.
                            • An acquisition plan is to be developed to document all acquisitions for
                              the ammunition category and determine the cost at each phase of the
                              life cycle. Examples of acquisitions are peacetime production, storage,
                              maintenance, and transportation.
                            • Based on an assessment of the current ammunition production base, an
                              industrial base plan is to be developed to determine what capacity is
                              needed to meet requirements.

                            The plans were due to be completed and submitted to an Integration
                            Planning Team in June 1999. However, according to an Army official, the
                            plans are taking longer to complete than was anticipated because of
                            difficulties in achieving agreement among the team members. The business
                            plans were completed in July 1999, and the remaining plans are to be
                            completed by October 1999.

                            An Integration Planning Team was formed at the same time as the
                            ammunition teams. It is responsible for reviewing teams’ plans to assess
                            their overall impact on the ammunition industrial base. The plans are
                            expected to be reviewed concurrently to eliminate conflicts or negative
                            impacts on the industrial base. According to the Integration Planning Team
                            leader, the team’s goal is to optimize the Army’s procurement and
                            production of conventional ammunition. One way to achieve this,
                            according to the Team leader, is to consolidate ammunition procurement
                            efforts across ammunition categories whenever possible. For example, the



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                  Team and ultimately the Triad may decide that mortar bodies and artillery
                  shells could be included in a single contract to save money and stabilize the
                  industrial base, and the Team could work with the individual teams to
                  achieve that goal. This strategy differs from the current one, in which each
                  of the three commands can make decisions considering only its own
                  individual programs.

                  Additionally, according to various Army officials, the plans would be
                  included in the competition strategies for government-owned plants as well
                  as in future budgetary and requirements plans. This initial effort is
                  scheduled to be presented to the Triad in October 1999. Thereafter,
                  according to the Integration Planning Team leader, these plans are
                  expected to be reviewed annually and modified as conditions change.



Conclusions       Management of the Army’s conventional ammunition program continues to
                  be fragmented despite internal recognition of the problem and efforts to
                  identify alternative solutions. The Army is continuing to review the
                  recommendations of the group that studied the issue; however, no
                  timeframe has been established for taking any formal action. In the interim,
                  the three commands that deal with various aspects of conventional
                  ammunition have established an informal structure and a set of procedures
                  for addressing issues of common interest. While this is a constructive step,
                  it is only an informal process that depends on all parties voluntarily
                  cooperating to improve business practices for the purpose of enhancing
                  operational efficiencies for ammunition production and procurement. The
                  ability to resolve differences caused by competing program goals is
                  exacerbated by the lack of a single chain of command with the ability to
                  force reconciliation among competing interests. Likewise, unless the Triad
                  is given permanent status, its future will become less certain as command
                  changes affecting the Triad members occur. Until actions are taken to
                  address the fragmentation of ammunition management, the area remains
                  vulnerable to inefficiency.



Recommendations   Since management fragmentation can only be resolved through changes in
                  the current organizational structure and reporting relationships, and
                  because of the Defense-wide nature of the issue, we recommend that the
                  Secretary of Defense direct the Secretary of the Army to establish a
                  timeframe for implementing an Army-wide reorganization to integrate the
                  management of conventional ammunition. In considering organizational



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                      alternatives, we recommend that the Secretary of the Army consider a
                      permanent Triad structure as well as other recommended organizational
                      structures. To facilitate efficient operations, until organizational changes
                      occur, we further recommend that the Secretary of Defense direct the
                      Secretary of the Army to put in place a mechanism to address issues the
                      informal Triad is unable to resolve.



Agency Comments and   The Director of Strategic and Tactical Systems in the Office of the Under
                      Secretary of Defense for Acquisition and Technology provided written
Our Evaluation        comments on a draft of this report. They are included in appendix III. While
                      concurring with the report’s assessment of issues and recommendations,
                      the Director stated that the recommendation should be directed to the
                      Secretary of the Army rather than the Secretary of Defense. Ultimately, the
                      Secretary of Defense is responsible for ensuring the economy and
                      efficiency of Defense organizations and operations, and the Secretary of
                      the Army reports to the Secretary of Defense. In this instance, although
                      significant time has passed, the Army has not resolved the long-standing
                      issues identified in this report. Consequently, we continue to believe that
                      action is needed by the Secretary of Defense to achieve a timely resolution
                      of these issues.



Scope and             To identify the Army’s plans for reorganizing the management of
                      conventional ammunition and to determine how this should be
Methodology           accomplished, we reviewed the Pacific Northwest National Laboratory
                      recommendations, Industrial Base Policy Letter, 98-1-Ammunition, and
                      proposals made by the Organizational Integrated Process Team. We
                      reviewed how the Industrial Operations Command, the Tank-automotive
                      and Armaments Command, and the Program Executive Office for Ground
                      Combat Support Systems were established and Department of Defense
                      directives that set out their roles and responsibilities. We interviewed
                      senior officials at the Office of the Secretary of Defense, Washington, D.C;
                      the Office of the Secretary of the Army for Acquisition, Logistics and
                      Technology, Washington, D.C; the Army Materiel Command, Alexandria,
                      Virginia; the Industrial Operations Command, Rock Island, Illinois; the
                      Program Executive Office for Ground Combat Support Systems, Picatinny
                      Arsenal, New Jersey; and the Tank-automotive and Armaments Command,
                      Warren, Michigan. We also discussed ammunition management with
                      representatives of the Munitions Industrial Base Task Force, Arlington,
                      Virginia; the Program Manager for Ammunition, U.S. Marine Corps Systems



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Command, Arlington, Virginia; the Office of Munitions Requirements and
Allocations, U.S. Air Force, Washington, D.C; and the Program Executive
Office for Theater Surface Support, Naval Sea Systems Command,
Arlington, Virginia. To develop the examples of fragmented management
and decision-making, we interviewed the Program Manager, Crusader
Munitions, at the Program Executive Office, Ground Combat Support
Systems, and the Commanding General and Deputy Product Manager,
Mortars, at the Tank−automotive and Armaments Command. We also
interviewed senior officials at the Industrial Operations Command.

To determine how the Army is addressing its business practices to improve
operational efficiencies related to ammunition production and
procurement, we reviewed the proposals of the Business Case Integrated
Process Team and discussed its recommendations with the above officials.

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


We are sending copies of this report to the Honorable William Cohen,
Secretary of Defense; the Honorable Louis Caldera, Secretary of the Army;
the Honorable Jacob Lew, Director, Office of Management and Budget; and
Senator Charles Robb, Ranking Minority Member, Subcommittee on
Readiness and Management Support, Senate Committee on Armed
Services, Representative Floyd D. Spence, Chairman, and Representative
Ike Skelton, Ranking Minority Member, House Committee on Armed
Services. Copies will also be made available to others upon request.

GAO points of contact and other key contributors are listed in appendix IV.

Sincerely yours,




David R. Warren, Director
Defense Management Issues




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Appendix I

Examples of Fragmented Management and                                                            Appendx
                                                                                                       ies




Decision-Making                                                                                   Appendx
                                                                                                        Ii




                     Fragmentation in ammunition program management has led to less than
                     optimum communications, coordination, and decision-making, affecting
                     requirements determination and production. Two programs where some of
                     these problems have been encountered involve Crusader munitions and
                     mortar production.



Crusader Munitions   This example illustrates how lack of communication between two
                     commands led to an industrial base decision based on incomplete
                     information. In 1993, the Army began a program, known as the Crusader, to
                     upgrade its self-propelled howitzer. The munitions for this system use a
                     propellant charge that requires nitroguanidine. According to the Deputy
                     Program Manager for Crusader Munitions, the program will need 14 million
                     more pounds of nitroguanidine than is currently available in the stockpile.
                     However, the Army’s ability to acquire the needed nitroguanidine could be
                     adversely affected by an industrial base decision made by the Industrial
                     Operations Command.

                     In 1997, the Industrial Operations Command requested that the Office of
                     the Secretary of the Army inform Congress that it intended to divest the
                     Sunflower Army Ammunition Plant, the only plant in North America with
                     the production equipment and skills to make nitroguanidine. The Industrial
                     Operations Command based its decision on what it believed were no
                     known future requirements for nitroguanidine and is in the process of
                     transferring the plant to Kansas. Industrial Operations Command officials
                     concede they did not do a very good job of communicating their decision
                     throughout the Army ammunition community; if they had, they would have
                     seen a significant increase in nitroguanidine requirements. As a result, the
                     Army must either locate an alternative supply source for nitroguanidine
                     outside North America or build another plant.



Mortar Production    This example demonstrates how a split in program responsibilities
                     between two commands resulted in years of production delays.
                     Management of the mortar program is divided between the Product
                     Manager, Mortars, at the Tank-automotive and Armaments Command and
                     the Industrial Operations Command. The Product Manager, Mortars, has
                     responsibility for items in the research and development, initial production
                     and fielding, and product improvement phases, and the Industrial
                     Operations Command is responsible for items in later phases of the life
                     cycle such as follow-on production, maintenance, and demilitarization.



                     Page 20                                   GAO/NSIAD-99-230 Defense Management
Appendix I
Examples of Fragmented Management and
Decision-Making




In the early 1990s, the Industrial Operations Command, concerned about
lack of production in the government-owned industrial base, developed a
strategy to preserve critical government-owned capability. Using this
strategy, mortar production was assigned to Milan Army Ammunition Plant.
However, according to Industrial Operations Command personnel and the
Deputy Product Manager, Mortars, Milan had a variety of process problems
and was not able to produce to the Product Manager’s required high quality
levels. Because of these problems, the Deputy Product Manager, Mortars,
tried for several years to convince the Industrial Operation Command not
to direct their work to Milan but rather allow the Product Manager to
identify, through a competitive process, other production sources.

Unable to resolve production issues, the Industrial Operations Command
agreed in June 1997 to allow the Product Manager to seek out other
production sources. This issue took years to resolve because of the split in
program responsibilities and lack of communication between the two
commands.




Page 21                                   GAO/NSIAD-99-230 Defense Management
Appendix II

Army Ammunition Plants                                                                                   Appendx
                                                                                                               iI




              Government-owned, government-operated plants

              • Active Plants
                Crane, Crane, Indiana
                McAlester, McAlester, Oklahoma

              Government-owned, contractor-operated plants

              • Active Plants
                Holston, Kingsport, Tennessee
                Iowa, Middletown, Iowa
                Lake City, Independence, Missouri
                Lone Star, Texarkana, Texas
                Milan, Milan, Tennessee
                Radford, Radford, Virginia
              • Inactive1
                Louisiana, Doyline, Louisiana
                Mississippi, Stennis Space Center, Mississippi
                Riverbank, Riverbank, California
                Scranton, Scranton, Pennsylvania
              • Excess2
                Badger, Baraboo, Wisconsin
                Cornhusker, Grand Island, Nebraska
                Indiana, Charlestown, Indiana
                Joliet, Wilmington, Illinois
                Kansas, Parsons, Kansas
                Longhorn, Marshall, Texas
                Ravenna, Ravenna, Ohio
                Sunflower, DeSoto, Kansas


              1
               Inactive plants are no longer assigned production but are retained to meet replenishment
              requirements. The Army is using the Armament, Retooling, and Support Initiative, which
              allows tenants to lease space at these plants, to reduce operation and maintenance cost. For
              a full discussion of the Armament, Retooling, and Support Initiative see Military Bases:
              Cost to Maintain Inactive Ammunition Plants and Closed Bases Could be Reduced
              (GAO/NSIAD-97-56, Feb. 1997).
              2
               Excess plants are no longer required for assigned mission and are in the process of being
              disposed of. The Army is negotiating the transfer of Sunflower to Kansas. The General
              Services Administration is disposing of Badger, Cornhusker, Joliet, and Longhorn. The Army
              Corps of Engineers is disposing of Indiana under an agreement with the General Services
              Administration. Revenna and Twin Cities are being turned over to the National Guard. The
              Kansas plant will not begin the disposal process until the operating contractor’s commercial
              production contracts expire in 2006.




              Page 22                                            GAO/NSIAD-99-230 Defense Management
Appendix II
Army Ammunition Plants




   Twin Cities, Arden Hills, Minnesota
   Volunteer, Chattanooga, Tennessee




Page 23                                  GAO/NSIAD-99-230 Defense Management
Appendix III

Comments From the Department of Defense                       Appendx
                                                                    Ii




               Page 24      GAO/NSIAD-99-230 Defense Management
                Appendix III
                Comments From the Department of Defense




Now on p. 16.




Now on p. 17.




                Page 25                                   GAO/NSIAD-99-230 Defense Management
Appendix IV

GAO Contacts and Staff Acknowledgments                                                              Appendx
                                                                                                          i
                                                                                                          IV




GAO Contacts          David R. Warren (202) 512-8412
                      Ronald L. Berteotti (214) 777-5702



Acknowledgments       In addition to those names above, Patricia J. Nichol, Kimberly C. Seay, and
                      Frederick T. Lyles, Jr. made key contributions to this report.




(709389)      Leter   Page 26                                  GAO/NSIAD-99-230 Defense Management
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