Navy Inventory: Parts Shortages Are Impacting Operations and	 
Maintenance Effectiveness (31-JUL-01, GAO-01-771).		 
								 
Having spare parts available when needed to perform maintenance  
is critical to the Department of Defense's (DOD) accomplishment  
of its missions. Shortages of spare parts are a key indicator of 
whether the billions of dollars annually spent on these parts are
being used in an effective, efficient, and economical manner. In 
recent years the Navy has testified and reported to Congress that
its aviation systems have significant readiness and supply	 
problems. Since 1990, GAO has designated DOD's management of its 
inventory, including spare parts, as high risk because its	 
inventory management systems and procedures were ineffective.	 
This report, which focuses on the Navy, reviews (1) the impact of
shortages of spare parts for two selected aircraft--the EA-6B	 
Prowler and F-14 Tomcat, (2) the reasons for the shortages, and  
(3) the initiatives that the Navy and the Defense Logistics	 
Agency have in place or planned to address overall spare part	 
shortage issues. GAO found that (1) spare parts shortages for the
two selected aircraft have adversely impacted the Navy's	 
readiness to perform assigned missions and the economy and	 
efficiency of maintenance activities and have contributed to	 
problems retaining military personnel, (2) the primary reasons	 
cited by Navy item managers for spare parts shortages were that  
more parts were required than the Navy originally anticipated and
problems in identifying, quantifying, or contracting with a	 
private company to produce or repair the parts, and (3) the Navy 
and the Defense Logistics Agency have numerous overall logistics 
initiatives under way or planned that are designed to improve the
logistic system and alleviate shortages of spare parts. The	 
initiatives include best commercial inventory practices and	 
generally address the causes GAO identified regarding spare parts
shortages.							 
-------------------------Indexing Terms------------------------- 
REPORTNUM:   GAO-01-771 					        
    ACCNO:   A01232						        
  TITLE:     Navy Inventory: Parts Shortages Are Impacting Operations 
             and Maintenance Effectiveness                                    
     DATE:   07/31/2001 
  SUBJECT:   Combat readiness					 
	     Inventory control systems				 
	     Logistics						 
	     Military aircraft					 
	     Spare parts					 
	     Naval procurement					 
	     Aircraft components				 
	     Aircraft maintenance				 
	     DOD Strategic Logistics Plan			 
	     Navy High Yield Logistics Transformation		 
	     Plan						 
								 
	     Prowler Aircraft					 
	     Tomcat Aircraft					 
	     EA-68 Aircraft					 
	     F-14 Aircraft					 
	     DLA Aging Aircraft Program 			 

******************************************************************
** This file contains an ASCII representation of the text of a  **
** GAO Testimony.                                               **
**                                                              **
** No attempt has been made to display graphic images, although **
** figure captions are reproduced.  Tables are included, but    **
** may not resemble those in the printed version.               **
**                                                              **
** Please see the PDF (Portable Document Format) file, when     **
** available, for a complete electronic file of the printed     **
** document's contents.                                         **
**                                                              **
******************************************************************
GAO-01-771
     
Report to Congressional Committees

United States General Accounting Office

GAO

July 2001 NAVY INVENTORY Parts Shortages Are Impacting Operations and
Maintenance Effectiveness

GAO- 01- 771

Page i GAO- 01- 771 Navy Inventory Letter 1

Results in Brief 2 Background 3 Parts Shortages Adversely Affect Navy
Operations, Maintenance,

and Military Personnel 8 Multiple Reasons for Parts Shortages 14 Overall
Initiatives Exist to Address Problems 25 Agency Comments and Our Evaluation
29 Scope and Methodology 30

Appendix I Management Weaknesses Contribute to Spare Parts Shortages 33

Appendix II Description of EA- 6B and F- 14 Spare Parts Discussed in Report
35

Appendix III Reasons for EA- 6B and F- 14 Spare Parts Shortages 36

Appendix IV Comments From the Department of Defense 37

Related GAO Products 38

Tables

Table 1: Reported Rates of Mission Capability and Parts Shortages for All
Navy Aircraft 4 Table 2: Reported Mission- Capable Goals and Rates for the
EA- 6B 9 Table 3: Reported Mission- Capable Goals and Rates for the F- 14A 9
Table 4: Reported Mission- Capable Goals and Rates for the F- 14B 10 Table
5: Reported Mission- Capable Goals and Rates for the F- 14D 10 Table 6:
Reported Rates at Which EA- 6B and F- 14 Aircraft Were

Not Mission Capable Due to Supply Shortages 11 Table 7: Reported
Cannibalization Rates for All Navy Aircraft and

for the EA- 6B and F- 14 (all models) Aircraft 13 Contents

Page ii GAO- 01- 771 Navy Inventory

Table 8: Reasons for Shortages of 50 Parts for the EA- 6B and F- 14 Aircraft
15

Figures

Figure 1: The EA- 6B Aircraft 6 Figure 2: The F- 14 Aircraft 7 Figure 3:
Repairs Require Two Steps, Cannibalizations Four 12 Figure 4: EA- 6B Landing
Gear 16 Figure 5: F- 14D Television Sensor 17 Figure 6: F- 14 Telescoping
Shaft 18 Figure 7: EA- 6B Air Navigational Computer 19 Figure 8: F- 14
Transmitter 20 Figure 9: F- 14 Actuator 21 Figure 10: F- 14 Aircraft Wing
Fairing 23 Figure 11: F- 14 Power Module 24

Page 1 GAO- 01- 771 Navy Inventory

July 31, 2001 Congressional Committees Having spare parts available when
needed to perform maintenance is critical to the Department of Defense?s
accomplishment of its missions. Shortages of spare parts are a key indicator
of whether the billions of dollars annually spent on these parts are being
used in an effective, efficient, and economical manner. In recent years the
Navy has testified and reported to the Congress that its aviation systems
have significant readiness and supply problems. Since 1990 we have
designated the Department of Defense?s management of its inventory,
including spare parts, as high risk because its inventory management systems
and procedures were ineffective.

The National Defense Authorization Act for Fiscal Year 2000 1 requires us to
evaluate various aspects of the military services? logistics support
capability, including the provision of spare parts. Also, the Chairman,
House Committee on Appropriations, and the Chairman, Subcommittee on
Defense, House Committee on Appropriations, requested that we review issues
related to the quality and availability of spare parts for aircraft, ships,
vehicles, and weapon systems. In response to these requests, we reviewed
known aviation spare parts shortages within the services. For this report,
we focused on the Navy and our objectives were to determine the (1) impact
of shortages of spare parts for two selected aircraft 2 and (2) reasons for
the shortages. Additionally, we identified the overall initiatives that the
Navy and the Defense Logistics Agency have in place or planned to address
overall spare part shortage issues. We will be discussing in separate
reports our reviews on the availability of spare parts in the Army and the
Air Force, the quality of Navy spare parts, funding for spare parts, 3 and
Army war reserve requirements for spare parts. 4

1 P. L. 106- 65, sec. 364. 2 Includes Marine Corps aircraft. 3 Defense
Inventory: Information on the Use of Spare Parts Funding Is Lacking

(GAO- 01- 472, June 11, 2001). 4 Defense Inventory: Army War Reserve Spare
Parts Requirements Are Uncertain

(GAO- 01- 425, May 10, 2001).

United States General Accounting Office Washington, DC 20548

Page 2 GAO- 01- 771 Navy Inventory

To address these objectives, we reviewed readiness indicators for the EA- 6B
Prowler and F- 14 Tomcat aircraft. Also, we determined the reasons for the
shortages for 50 parts that affected the capability of these aircraft to
perform their missions. We selected these aircraft because they are key to
fulfilling Navy missions and were experiencing parts shortages, as reflected
by various supply and readiness indicators. The Navy sets goals to have a
certain percentage of aircraft capable of performing their missions. It
measures the impact of parts shortages on aircraft by determining the
percentage of aircraft that cannot meet mission requirements because repair
parts are unavailable. The Navy and the Defense Logistics Agency are
responsible for managing and providing these parts for Navy aircraft.

Spare parts shortages for the two systems we reviewed have adversely
impacted both the Navy?s readiness to perform assigned missions and the
economy and efficiency of its maintenance activities and have contributed to
problems retaining military personnel. During 1993- 2000, the Navy met its
mission- capable goals for the EA- 6B three times and for the F- 14D only
once, in fiscal year 2000. Further, we recently testified that because of
supply shortages and pressures to meet readiness and operational needs, the
Navy is taking working parts from one aircraft and placing them in other
aircraft. 5 This practice doubles the workload, since maintenance personnel
also have to fix the aircraft that parts are removed from. The rates at
which this practice is used for the EA- 6B and the F- 14 are much higher
than the aggregate rate for all Navy aircraft. Lastly, we also recently
reported that the majority of factors cited as sources of dissatisfaction
and reasons to leave the military were related to work circumstances such as
the lack of parts and materials needed to perform daily job requirements. 6

The primary reasons cited by Navy item managers for spare parts shortages
were that more parts were required than the Navy originally anticipated and
problems in identifying, qualifying, or contracting with a private company
to produce or repair the parts. For example, the average quarterly demand
for EA- 6B landing gear was only one per quarter

5 Military Aircraft: Cannibalizations Adversely Affect Personnel and
Maintenance

(GAO- 01- 693T, May 22, 2001). 6 Military Personnel: Perspectives of
Surveyed Service Members in Retention Critical Specialties (GAO/ NSIAD- 99-
197BR, Aug. 16, 1999). Results in Brief

Page 3 GAO- 01- 771 Navy Inventory

(3 months) but increased to eight for two quarters due to the findings from
a new inspection requirement. In another case, shortages of F- 14
transmitters developed due to delays in finding a company willing to produce
the transmitters and further delays because the company was willing to
produce the transmitters only if the Navy ordered a large quantity. Other
problems included contractors? delays in delivering parts as needed and
delays in repairing parts at military facilities.

The Navy and the Defense Logistics Agency have numerous overall logistics
initiatives under way or planned that are designed to improve the logistic
system and alleviate shortages of spare parts. The initiatives include best
commercial inventory practices and generally address the causes we
identified of spare parts shortages. For example, the Navy has a pilot
program for one type of aircraft that is expected to improve the supply
through more accurate demand forecasting and better planning for repairs.
Another initiative is designed to make greater use of performancebased
contracts to improve the availability of parts and delivery times. We
previously recommended improvements to the management framework for
implementing best commercial practice initiatives based on the principles
embodied in the Government Performance and Results Act. 7 The Navy responded
to these recommendations in an update of the first quarter of fiscal year
2000 that linked the initiatives to the Department of Defense?s Logistics
Strategic Plan. Further, in response to a Defense Department Reform
initiative, the Navy developed a High Yield Logistics Transformation Plan
that is also linked to the Department?s Logistics Strategic Plan. We have an
effort under way to assess the Department?s overall plan for improving the
logistics system.

Because of our prior recommendations on improving the Navy?s management
framework for implementing commercial inventory practices, the Department of
Defense?s efforts to develop an overarching integration plan, and our
ongoing review of the Department?s strategic plan, we are not making new
recommendations at this time. The Department of Defense generally concurred
with this report.

In January 2001, we reported on Department of Defense management challenges
and noted that the Department has had serious weaknesses in

7 P. L. 103- 62, 1993. Background

Page 4 GAO- 01- 771 Navy Inventory

its management of logistics functions and in particular inventory
management. We have identified inventory management as a high- risk area
since 1990. 8 In 1996 and again in 1998, we reported that despite billions
of dollars invested in inventory, the Navy?s logistics system often could
not provide spare parts when and where needed. 9 For example, in fiscal year
1995 about 12 percent of the aircraft were not mission capable due to supply
problems, and mechanics frequently had to remove parts from one aircraft to
make repairs on another. (See app. I for examples from our prior reports on
management weaknesses related to the Navy.) Table 1 shows that during the
last 11 years, the Navy has never achieved its overall goal to have 73
percent of its aircraft capable of performing at least one of its assigned
missions. Further, the rate at which the aircraft could not perform their
missions due to supply shortages has increased from 11.9 percent in fiscal
year 1995 to 12. 9 percent in fiscal year 2000.

Table 1: Reported Rates of Mission Capability and Parts Shortages for All
Navy Aircraft

In percent Fiscal year Aircraft reported as

mission capable Aircraft reported as not

mission capable due to supply problems

1990 69.5 13.5 1991 68.4 13.8 1992 69.1 13.4 1993 71.3 12.7 1994 72.6 11.9
1995 72.0 11.9 1996 70.0 12.5 1997 67.7 12.4 1998 68.0 12.9 1999 68.8 12.1
2000 68.2 12.9

Source: Deputy Chief of Naval Operations for Fleet Readiness and Logistics,
Fleet Readiness Division.

8 Major Management Challenges and Program Risks: Department of Defense

(GAO- 01- 244, Jan. 2001). 9 Inventory Management: Adopting Best Practices
Could Enhance Navy Efforts to Achieve Efficiencies and Savings (GAO/ NSIAD-
96- 156, July 12, 1996) and Inventory Management: DOD Can Build on Progress
by Using Best Practices for Reparable Parts

(GAO/ NSIAD- 98- 97, Feb. 27, 1998).

Page 5 GAO- 01- 771 Navy Inventory

Navy officials have testified that the increased pace of operations and the
resulting accelerated aging of its systems and infrastructure are outpacing
its efforts to improve spare parts supplies and are continuing to affect
readiness. As such, the Navy has efforts under way to better define its
aviation spare parts requirements. The Navy stated in fiscal year 2000 to
the Congress that budget increases for fiscal year 2000 had begun to address
some of the Navy?s most pressing needs but that it would take time for the
positive effects to be reflected throughout the force.

Between fiscal year 1999 and 2000, the Navy increased expenditures for
aircraft parts by $631 million. 10 In 1999 the Defense Department announced
plans to provide $500 million to the Defense Logistics Agency to purchase
spare parts for all the services over fiscal years 2001- 2004. The Navy?s
and the Marine Corps? share of that amount is about $190.7 million, of which
about $62.1 million had been obligated by February 2001. Further, the Navy
and the other services received additional funds in fiscal year 1999 that,
unlike the funds cited above, were included in operation and maintenance
accounts, including $116 million to eliminate backlogs of aviation spare
parts. In a report issued earlier this year, we indicated that current
financial information does not show the extent to which these funds were
used for spare parts. 11 The Department plans to annually develop detailed
financial management information on spare parts funding usage but had not
planned to provide it to the Congress. When we recommended that the
Secretary of Defense routinely provide this information to the Congress as
an integral part of the Department?s annual budget justification, the
Department agreed to do so.

The aviation systems that we reviewed are vital to the Navy?s achievement of
its missions but have had significant parts shortages problems. The EA- 6B,
shown in figure 1, is an all- weather electronic attack aircraft that
operates from aircraft carriers and land bases and is the only Department of
Defense aircraft that can electronically jam enemy antiaircraft radar. These
aircraft were first delivered in 1971 and have had several major upgrades.
These aircraft are heavily deployed for operations and were severely
stressed during the 1999 operation in Kosovo. The F- 14 Tomcat,

10 The $631 million includes a Navy Working Capital Fund increase of $504
million for the repair and procurement of parts, some of which can take 12
to 24 months to obtain, and an increase of $127 million in the Navy?s
procurement account to procure parts to meet increased requirements at
operating units.

11 Defense Inventory (GAO- 01- 472, June 11, 2001).

Page 6 GAO- 01- 771 Navy Inventory

shown in figure 2, is an all- weather fighter that operates from aircraft
carriers and is designed to attack and destroy enemy aircraft, in both day
and night, and is also in high demand for deployed operations. The F- 14A
was first delivered in 1972. The F- 14B and F- 14D models consisted of new
production aircraft and remanufactured F- 14A aircraft and were first
delivered in 1987 and 1990, respectively. The F- 14 has a critical role in
providing air superiority and an ability to launch precision- guided
munitions.

Figure 1: The EA- 6B Aircraft

Source: Defense Visual Information Center.

Page 7 GAO- 01- 771 Navy Inventory

Figure 2: The F- 14 Aircraft

Source: Defense Visual Information Center.

The Navy uses both consumable and reparable spare parts for its weapon
systems. Consumable parts, such as nuts, bearings, and fuses, are discarded
when they fail because they cannot be repaired cost- effectively. The
Defense Logistics Agency manages most consumable parts, and the Defense
Supply Center in Richmond, Virginia, is the lead center for managing
aviation consumable parts. Reparable parts are expensive items, such as
hydraulic pumps, navigational computers, and landing gear, that can be cost-
effectively fixed and used again. The Naval Supply Systems Command, through
its Naval Inventory Control Point, manages and provides central control over
reparable parts.

Page 8 GAO- 01- 771 Navy Inventory

The shortages of spare parts for the two aircraft systems reviewed not only
have affected readiness but also have created inefficiencies in maintenance
processes and procedures and have adversely affected the retention of
military personnel. Specifically, the rates at which the EA- 6B and F- 14
were not mission capable due to spare parts shortages ranged from 4.3
percent to 16.8 percent. Also, the maintenance practice used to mitigate
part shortages masks the true impact of shortages and results in increased
work for maintenance personnel, causing morale problems and dissatisfaction
with military life.

The Navy EA- 6B and F- 14 varied in their achievement of mission- capable
goals during fiscal years 1993- 2000, in part, due to spare parts shortages.
The EA- 6B met its overall goal of 73 percent only three times during the
8year period (see table 2). During the same period, the F- 14A met its
65percent goal only twice, in the most recent 2 years; the F- 14B met its
65- percent goal in 6 of the 8 years; and the F- 14D met its 71- percent
goal only once, in fiscal year 2000 (see tables 3- 5). Although some models
of the F- 14 aircraft have improved their mission- capable rates in recent
years, the Secretary of the Navy reported that the readiness of deployed
forces was being maintained to some degree at the expense of nondeployed
forces, which have often deferred ordering spare parts and delayed or
reduced the scope of maintenance. 12

12 Annual Report to the President and the Congress (2001), Part VI:
Statutory Reports,

Report of the Secretary of the Navy. Parts Shortages

Adversely Affect Navy Operations, Maintenance, and Military Personnel

Parts Shortages Contributed to Two Aircraft Systems? Failure to Achieve
Mission- Capable Goals

Page 9 GAO- 01- 771 Navy Inventory

Table 2: Reported Mission- Capable Goals and Rates for the EA- 6B In percent
Fiscal year Mission- capable

goal Reported missioncapable rate Difference

1993 73 71.6 (1.4) 1994 73 75.5 2. 5 1995 73 78.8 5. 8 1996 73 71.4 (1.6)
1997 73 74.0 1. 0 1998 73 65.7 (7.3) 1999 73 59.9 (13.1) 2000 73 56.9 (16.1)

Source: Deputy Chief of Naval Operations for Fleet Readiness and Logistics,
Fleet Readiness Division.

Table 3: Reported Mission- Capable Goals and Rates for the F- 14A In percent
Fiscal year Mission- capable

goal Reported missioncapable rate Difference

1993 65 58.0 (7.0) 1994 65 60.8 (4.2) 1995 65 64.8 (0.2) 1996 65 64.8 (0.2)
1997 65 58.3 (6.7) 1998 65 58.9 (6.1) 1999 65 66.2 1. 2 2000 65 67.8 2. 8

Source: Deputy Chief of Naval Operations for Fleet Readiness and Logistics,
Fleet Readiness Division.

Page 10 GAO- 01- 771 Navy Inventory

Table 4: Reported Mission- Capable Goals and Rates for the F- 14B In percent
Fiscal year Mission- capable

goal Reported missioncapable rate Difference

1993 65 65.0 0 1994 65 63.3 (1.7) 1995 65 66.5 1. 5 1996 65 69.2 4. 2 1997
65 63.3 (1.7) 1998 65 71.0 6. 0 1999 65 76.5 11.5 2000 65 75.7 10.7

Source: Deputy Chief of Naval Operations for Fleet Readiness and Logistics,
Fleet Readiness Division.

Table 5: Reported Mission- Capable Goals and Rates for the F- 14D In percent
Fiscal year Mission- capable

goal Reported missioncapable rate Difference

1993 71 58.1 (12.9) 1994 71 64.4 (6.6) 1995 71 58.4 (12.6) 1996 71 63.7
(7.3) 1997 71 57.0 (14.0) 1998 71 60.8 (10.2) 1999 71 63.5 (7.5) 2000 71
72.3 1. 3

Source: Deputy Chief of Naval Operations for Fleet Readiness and Logistics,
Fleet Readiness Division.

The Navy reporting system also identifies whether aircraft are not mission
capable due to supply shortages or for maintenance requirements. However,
the Navy has not established specific goals related to the categories of not
mission capable due to supply or maintenance. As shown in table 6, spare
parts shortages have affected the capability of EA- 6B and F- 14 aircraft to
perform their missions. Sometimes unit personnel must wait a long time to
receive the parts they have ordered. For example, as of June 2000, the
average wait time to fill 229 requisitions for mission- related parts for
the F- 14 was 185 days; for the EA- 6B, the average wait time to fill 20
requisitions for parts was 77 days.

Page 11 GAO- 01- 771 Navy Inventory

Table 6: Reported Rates at Which EA- 6B and F- 14 Aircraft Were Not Mission
Capable Due to Supply Shortages

In percent Not mission capable due to supply shortage Fiscal year EA- 6B F-
14A F- 14B F- 14D

1993 11.5 16.1 13.4 16.8 1994 11.8 11.0 11.3 12.8 1995 9.1 10.7 10.5 13.5
1996 13.7 9. 9 8.3 10.0 1997 10.8 9. 5 7.0 11.7 1998 12.2 6. 8 6.3 12.4 1999
12.3 6. 4 4.3 11.1 2000 14.2 7. 5 4.5 7. 6

Source: Deputy Chief of Naval Operations for Fleet Readiness and Logistics,
Fleet Readiness Division.

To compensate for a lack of spare parts, maintenance personnel sometimes
remove usable parts from one aircraft to replace broken parts on others, a
practice called cannibalization (see table 7). According to Navy testimony
and reports, the Navy is ?cannibalizing? nonmissioncapable aircraft to keep
other aircraft flying and to maintain readiness. While the mission- capable
rates of the aircraft that are kept in the air appear to be higher, the
practice masks the impact of the shortages and causes morale problems with
maintenance personnel because of the extra work involved, wastes consumable
parts, and risks damage to the aircraft and its components. Also, a part
removed from one aircraft will not last as long as a part from the supply
system and will require maintenance sooner. We recently testified that the
shortage of parts is the main reason for cannibalizations and that local
commanders are willing to do whatever is necessary to keep readiness ratings
high, even if this requires cannibalizing aircraft constantly and having
personnel routinely work overtime. 13

Cannibalization requires at least twice the maintenance time of normal
repairs because it involves removing and installing components from two
aircraft instead of one (see fig. 3).

13 Military Aircraft: Cannibalizations Adversely Affect Personnel and
Maintenance

(GAO- 01- 693T May 22, 2001). We will provide a report on this issue later
this year to the Chairman, Subcommittee on National Security, Veterans
Affairs, and International Relations, House Committee on Government Reform.
Parts Shortages Cause

Inefficient Maintenance and Hamper Retention of Maintenance Personnel

Page 12 GAO- 01- 771 Navy Inventory

Figure 3: Repairs Require Two Steps, Cannibalizations Four

Source: GAO.

As shown in table 7, the aggregate cannibalization rate (the number of times
maintenance personnel used the practice per 100 flying hours) for Navy
aircraft did not change significantly during fiscal years 1993- 2000. The
aggregate rates are misleading, however, because cannibalizations are
frequently not reported. In 1998 a Navy study group noted that as much as 50
percent of all cannibalizations were not reported. Nevertheless, the
reported cannibalization rates for the EA- 6B and F- 14 were much higher
than the aggregate, and the rate for the EA- 6B rose significantly in fiscal
year 1999, reportedly because of its extensive use during the Kosovo
operation. Aside from the reported rates, Navy personnel?s perception is
that cannibalization has increased. Of 3,711 personnel surveyed by the Naval
Inspector General, 2, 932, or 79 percent, reported that cannibalizations had
increased and that they did not have enough parts to

Page 13 GAO- 01- 771 Navy Inventory

maintain mission- capable rates needed to meet training and operational
requirements. 14

Table 7: Reported Cannibalization Rates for All Navy Aircraft and for the
EA- 6B and F- 14 (all models) Aircraft

Cannibalization rate per 100 flying hours Fiscal year Aggregate Navy

aircraft (rate) EA- 6B (rate) F- 14 (all models) (rate)

1993 9.8 15.3 26.7 1994 9.6 14.1 27.0 1995 8.4 11.7 18.7 1996 9.4 15.7 18.9
1997 9.6 13.0 21.3 1998 9.3 16.1 18.7 1999 9.3 18.1 19.1 2000 8.8 16.7 16.2

Source: Deputy Chief of Naval Operations for Fleet Readiness and Logistics,
Fleet Readiness Division.

The practice of cannibalizing aircraft burdens maintenance personnel and
seriously affects their morale. Cannibalization causes double work, as the
maintenance personnel must remove a part from a donor aircraft and install
it on another aircraft and later install a replacement part on the donor
aircraft. According to maintenance and supply personnel at the units we
visited, supply shortages were a significant problem that caused inefficient
cannibalizations and expedited repairs. During fiscal year 2000, the Navy
reported spending about 441, 000 maintenance hours on cannibalizations. The
EA- 6B and F- 14 accounted for about 34,000 and 27,000 of these
cannibalization hours, respectively.

The effects of inefficient logistics system practices on morale and
retention have been noted in several personnel surveys. According to the
Naval Inspector General survey, 74 percent of the 3,711 personnel surveyed
said that the conditions they work under negatively affected their decision
to stay in the Navy. 15 Similarly, as we testified in March 2000, a
Department of Defense 1999 survey of active duty members showed that

14 Final Report of Naval Aviation Spares and Readiness, Naval Inspector
General (Apr. 28, 2000). 15 Final Report of Naval Aviation Spares and
Readiness, Naval Inspector General (Apr. 28, 2000).

Page 14 GAO- 01- 771 Navy Inventory

retention problems were concentrated in career fields such as equipment
repair. 16 Also, in August 1999, we reported the results of our survey of
about 1,000 of the Department?s active duty personnel in job occupations
that the Department of Defense believed were experiencing retention
problems. 17 We reported that the majority of factors (62 percent)
associated with dissatisfaction and reasons to leave the military were work
circumstances, including the lack of parts and equipment to perform daily
job requirements. Both officers and enlisted personnel ranked the
availability of needed equipment, parts, and materials among the top 2 of 44
quality- of- life factors that caused their dissatisfaction. Finally,
according to a fall 1998 survey of 114 Navy servicemembers and civilian
personnel in the aviation, surface, and submarine communities, over 70
percent of the air community rated spares and repair parts as the area most
in need of improvement. 18 In our recent testimony, we discussed examples of
how cannibalizations may become the source of waste or frustration. In one
case, a major component needed for an EA- 6B aircraft to perform its mission
was removed from or reinstalled on four different aircraft, for a total of
16 times in 6 days.

The primary reasons for shortages of the 50 spare parts for the EA- 6B and
F- 14 aircraft that we reviewed were (1) greater demands than anticipated
for the parts, (2) delays in awarding contracts for the purchase and repair
of parts, (3) contractors? delivery delays, (4) delays in repairs at
military facilities, and (5) other problems. An internal Department of
Defense study found similar reasons for parts shortages. 19

The 50 parts we selected for review were recorded as having the largest
number of unfilled requisitions that had affected the capability of the EA-
6B and F- 14 aircraft to perform their missions. (See app. II for a

16 Military Personnel: Preliminary Results of DOD?s 1999 Survey of Active
Duty Members (GAO/ T- NSIAD- 00- 110, Mar. 8, 2000). The survey of active
duty members is projectable to the entire force.

17 Military Personnel (GAO/ NSIAD- 99- 197BR, Aug. 16, 1999). 18 Fleet
Perceptions of Overall Logistics Support Quality, Center for Naval Analyses,
June 1999. 19 Aviation Spare Parts Inventory Funding for Readiness, Office
of the Secretary of Defense, Program Analysis and Evaluation (Feb. 1, 2001).
Multiple Reasons for

Parts Shortages Shortages of Parts for Two Selected Systems

Page 15 GAO- 01- 771 Navy Inventory

description of the parts discussed in this report.) Because of the
interrelated nature of the supply system, some parts were unavailable for
more than one reason. Table 8 is a summary of the reasons for the shortages
of the 25 problem parts for each aircraft that we identified primarily
through interviews with item management officials and documentation on each
part. (See app. III for a more detailed list of the reasons for the parts
shortages discussed in this report.)

Table 8: Reasons for Shortages of 50 Parts for the EA- 6B and F- 14 Aircraft
Reason EA- 6B a F- 14 b Total

Actual demand exceeded anticipated 11 10 21 Delays in awarding contracts 7 9
16 Contractor problems 6 9 15 Delays in repairing parts at military
facilities 4 8 12 Other 5 2 7

Total 33 38 71

Note: Totals add to more than 50 because some parts in our sample were in
short supply for more than one reason. a The time period for the shortages
was May and June 2000.

b The time period for the shortages was July 2000. Source: GAO analysis of
Naval Inventory Control Point- Philadelphia data.

Twenty- one (42 percent) of the 50 sampled parts had greater demands than
anticipated that contributed to shortages of the parts. Accurately
forecasting the demand for parts is difficult because of the large number of
variables that affect demand, including flying hour frequency and
environment. The Navy forecasts the demand for parts using an average of
historical demands. Although this average is periodically adjusted, it is
subject to some degree of error. Forecasting the demand for a new part is
often more challenging because the part has not been in the Navy supply
system long enough to develop a pattern of demands. 20 Also, according to a
Navy supply official, forecasting for parts with infrequent demands is
particularly difficult. Examples of parts for which there was unanticipated
demand follow:

 Although the average demand for the EA- 6B landing gear (see fig. 4) was
about one per quarter (3 months), there were eight demands for the gear

20 When establishing initial spares for new parts, the Navy uses, in part,
engineering estimates to determine the quantities of spare parts to
purchase. Actual Demand Was

Greater Than Anticipated

Page 16 GAO- 01- 771 Navy Inventory

during the two most recent quarters. The demand exceeded the stock on hand
and contributed to a shortage of the part. The main reason for the increased
demand was a new requirement for inspection of the gear. The purpose of
these inspections was to reduce part failures and improve reliability during
operations. The findings of these new inspections resulted in the
replacement of more parts. As of June 2000, one unfilled requisition was
affecting the capability of an EA- 6B to perform its mission.

Figure 4: EA- 6B Landing Gear

Note: The arrow points to the landing gear. Source: Naval Inventory Control
Point, Philadelphia, Pennsylvania.

Page 17 GAO- 01- 771 Navy Inventory

 A new version of an F- 14D television sensor (see fig. 5) that was
expected to operate 32,000 hours worked much less than anticipated. The
increased failure rate and the associated increase in demand were partially
attributed to improper installation of the sensor by Navy maintenance
personnel. As of July 2000, the Navy was unable to fill 13 requisitions that
affected the mission capability of the F- 14.

Figure 5: F- 14D Television Sensor

Source: Naval Inventory Control Point, Philadelphia, Pennsylvania.

 An unexpected surge in demand for the F- 14 telescoping shaft (see fig.
6), which affects wing control during maneuvers, occurred about March 2000
because of a problem in the shaft that was found during a major engineering
change to strengthen the wing. The shaft had severe corrosion from normal
use and had to be replaced. The Navy repair facility increased its scheduled
number of repairs, but as of July 2000, 11 requisitions were unfilled that
affected the capability of the F- 14.

Page 18 GAO- 01- 771 Navy Inventory

Figure 6: F- 14 Telescoping Shaft

Note: The arrow points to the telescoping shaft. Source: Naval Inventory
Control Point, Philadelphia, Pennsylvania.

Sixteen (32 percent) of the parts we reviewed were in short supply due to
delays in awarding contracts to repair or produce them and were affecting
the capabilities of the EA- 6B and F- 14 to perform their missions. For
example:

 The Navy had difficulties in locating a company that would produce the
aging air navigational computer (see fig. 7) due to obsolescence. The Navy
had planned to replace this computer with a newer model as part of an
aircraft improvement program that was canceled in late 1994 due to funding
constraints. The Navy considered several alternatives and decided that the
most economical solution was to contract for a modification of an even older
version of the computer to substitute for the current version. The first
deliveries of the modified computers are expected in July 2001. As of May
2000, the Navy could not fill two requisitions that affected the capability
of EA- 6B aircraft to perform their missions. Delays in Awarding

Contracts

Page 19 GAO- 01- 771 Navy Inventory

Figure 7: EA- 6B Air Navigational Computer

Source: Naval Inventory Control Point, Philadelphia, Pennsylvania.

 Similarly, the Navy had problems finding a company that would manufacture
F- 14 transmitters (see fig. 8), creating shortages of the part. These
transmitters are designed to transfer signals regarding the aircraft?s
movements and position to the appropriate instruments. The Navy had not
procured the transmitter for at least 10 years, and potential contractors
were reluctant to manufacture the aging part. The only willing manufacture
required a minimum purchase of 100 transmitters. Although the contractor had
an expected delivery date of July 1999, its transmitter had problems passing
a quality test. As of July 2000, the Navy had five unfilled requisitions
that affected the capability of F- 14 aircraft to perform their missions.

Page 20 GAO- 01- 771 Navy Inventory

Figure 8: F- 14 Transmitter

Note: The arrow points to the transmitter. Source: Naval Inventory Control
Point, Philadelphia, Pennsylvania.

The Navy could not find a company to repair an F- 14 filter after the
previous contractor ceased repair operations in 1995- 96. The Navy had not
required repairs for several years because it had enough parts on hand to
fill the few requisitions it received each year. The previous contractor
eventually agreed to reestablish repair capability. However, as of July
2000, four requisitions had been unfilled that affected the capability of F-
14 aircraft to perform their mission.

Contractor delivery delays contributed to shortages of 15 (30 percent) of
the parts we reviewed. Delays in contractor repairs and production of new
parts were due to problems with parts passing quality tests, equipment
failures, and company buy- outs. Problems With Contractors

Page 21 GAO- 01- 771 Navy Inventory

 The repairs of two types of EA- 6B antennas were delayed because the
contractor completely halted repair work from December 1999 to about March
2000 due to a company merger. Later, one of these types of antennas had
problems passing final quality tests, which caused a shortage of the
antenna. As of June 2000, there was an unfilled requisition for each of the
two types of antennas that was affecting the capability of EA- 6B aircraft.

 Contractor repairs of an F- 14 actuator (see fig. 9), which helps to
adjust the aircraft?s wings for takeoff and landing, were delayed for
several reasons. The contractor?s test equipment indicated that repaired
actuators were faulty when they had actually been properly repaired. Also,
the contractor maintained that repairs were delayed because a subcontractor
had not made timely repairs to a subcomponent. However, a Navy supply
manager told us that during a visit to the contractor?s facility he
identified a large number of subcomponents that should have been sent to the
subcontractor. This situation contributed to the contractor?s delays in
repairing the actuators. As of July 2000, there were nine unfilled
requisitions critical to the mission capability of the F- 14 aircraft.

Figure 9: F- 14 Actuator

Note: The arrow points to the actuator. Source: Naval Inventory Control
Point, Philadelphia, Pennsylvania.

One company?s buy- out of another company and a later plant move resulted in
delayed repairs and deliveries of an F14D wave- guide assembly,

Page 22 GAO- 01- 771 Navy Inventory

creating a shortage of the part. Although the buy- out and the plant move
occurred over 2 years ago, deliveries were still slow and below the expected
quantity level. The buy- out also delayed the procurement of more F- 14
wave- guide assemblies. As of July 2000, there were eight unfilled
requisitions for the assembly affecting the capability of the F- 14
aircraft.

Delays in repairing 12 (24 percent) parts at military facilities caused
shortages of the parts. The delays resulted from complications in
establishing and sustaining repair capabilities due to maintenance equipment
and other problems.

 Problems with the equipment used to test an F- 14 axial pump, which
provides power to the aircraft?s flight control system, led to delays. The
repair facility did not resolve these test equipment problems until 5 months
later, in October 2000. As of July 2000, 21 unfilled requisitions were
affecting the mission capability of F- 14 aircraft.

 A military repair facility had problems meeting the repair schedule for an
F- 14 aircraft wing fairing (see fig. 10) because its manufacture of the
parts needed to repair the fairing was delayed. Although the facility was
scheduled to repair 10 parts in the third quarter of fiscal year 2000, it
repaired only 5. Repair problems continued in the fourth quarter of 2000.
The facility was scheduled to repair 13 parts but repaired only 4. As of the
end of July 2000, there were nine unfilled requisitions affecting the
mission capability of F- 14 aircraft. Delays in Repairing Parts

at Military Facilities

Page 23 GAO- 01- 771 Navy Inventory

Figure 10: F- 14 Aircraft Wing Fairing

Note: The arrow points to the aircraft wing fairing. Source: Naval Inventory
Control Point, Philadelphia, Pennsylvania.

 A shortage of EA- 6B special indicators developed because the designated
repair facility did not repair the items as required. After the closure of
one Navy repair facility, repair responsibility for the indicators was
transferred to a different facility. However, this facility never developed
the capability- that is, the parts, equipment, expertise, and staff to
repair the indicators. In the third quarter of fiscal year 1999, the
facility was scheduled to repair six indicators but repaired none. After
discovering the problem, the item manager had the items repaired by a
contractor. As of May 2000, there was one unfilled requisition that was
reportedly affecting the capability of an EA- 6B aircraft in performing its
missions.

Other reasons for shortages of parts included decisions not to purchase
needed parts for economic reasons and nonrecurring problems such as a
pricing error. These varied reasons contributed to spare parts shortages for
seven (14 percent) of the parts we reviewed. Sometimes, item managers made
economical decisions not to purchase additional items because the parts were
to be replaced. For example, the item manager purchased minimal quantities
of an EA- 6B multiport panel because the Navy had decided to redesign the
panel as part of an overall engineering Other Reasons for

Shortages

Page 24 GAO- 01- 771 Navy Inventory

change to the aircraft. A shortage of the panels developed while the
redesign was taking place. As of June 2000, two unfilled requisitions for
the multiport panel were affecting the capability of the EA- 6B aircraft to
perform their missions.

Also, an error in the contract pricing structure for repairs of an F- 14
power module (see fig. 11) resulted in spare parts shortages. During an
evaluation of the requirements for these parts, the item manager identified
an error that would have resulted in customers not being charged the full
cost of repairs. The award of the contract and the associated repairs were
delayed while the contract pricing problem was corrected. As of July 2000,
four unfilled requisitions were keeping F- 14 aircraft from performing any
of their missions.

Figure 11: F- 14 Power Module

Note: The arrow points to the power module. Source: Naval Inventory Control
Point, Philadelphia, Pennsylvania.

Page 25 GAO- 01- 771 Navy Inventory

An internal study conducted by the Department of Defense found similar
reasons for Navy reparable parts shortages. 21 The study examined parts
causing aircraft to be not mission capable and found that there were two
reasons for the shortages. The first was an insufficient inventory of
certain reparable parts. The second was that although there were enough
parts in the system, other constraints prevented the repair facility from
repairing the items in a timely manner. The study states this may happen for
several reasons. The parts may not have been returned from the units to the
repair facility, the repair facility may have lacked capacity in certain key
areas such as repair equipment, the consumable parts required to fix the
repairable item may not have been available, and item managers may not have
requested the repair facility to repair the part because of a lack of
funding. The study recommended that the Navy budget include an additional
$355 million for fiscal years 2004 through 2007 to help address the
inventory shortages. According to a Navy official, the Navy agreed and
included an additional $357 million in its budget.

The Navy and the Defense Logistics Agency have initiatives under way or
planned that may improve the availability of parts, including the use of
best commercial inventory practices. The initiatives are intended to improve
the efficiency and effectiveness of the logistics system and generally
address the specific reasons for the shortages identified by our review.
Under a March 2000 Department of Defense directive, the Navy developed a
High Yield Logistics Transformation Plan, which links its logistics
initiatives to the objectives in the Department?s Logistics Strategic Plan.
The directive requires that these plans include a management framework that
conforms to Government Performance and Results Act requirements. We have, in
the past, made various recommendations to address this issue. 22 We will be
reviewing the transformation plan?s initiatives, once they are more fully
developed, to evaluate their likely effectiveness and to assess whether
additional

21 Aviation Spare Parts Inventory Funding for Readiness, Office of the
Secretary of Defense, Program Analysis and Evaluation (Feb. 1, 2001). 22
Defense Inventory: Improved Management Framework Needed to Guide Navy Best
Practices Initiatives (GAO/ NSIAD 00- 1, Oct. 21, 1999) and Defense
Logistics: Actions Needed to Enhance Success of Reengineering Initiatives
(GAO/ NSIAD- 00- 89, June 23, 2000). Department of Defense

Internal Study Found Similar Reasons for Shortages

Overall Initiatives Exist to Address Problems

Page 26 GAO- 01- 771 Navy Inventory

initiatives are needed. We describe some of the Navy and Defense Logistics
Agency initiatives in the sections that follow.

The Navy?s High Yield Logistics Transformation Plan and its schedule of best
commercial inventory practices identify many initiatives that generally
address the reasons for spare parts shortages that we identified, such as
contract and repair problems. While some have been implemented, many of
these initiatives are now being implemented and it is too soon to tell
whether they will effectively reduce aviation spare parts shortages.

The Navy?s performance- based logistics program is designed to improve
support to customers and reduce total costs. The program is to use a variety
of different long- term, performance- based contracts that will hold
contractors accountable for specific performance requirements, including
delivery times, at a cost that is at or below current system costs. Although
the scope of each contract is somewhat different, the purpose of each is to
solve problems with the unavailability, low reliability, and obsolescence of
parts. Many of these contracts will provide an incentive to a contractor or
require reliability improvements to ensure that the best product is
delivered on time. These contracts also may require a contractor to preempt
and solve problems due to the obsolescence of parts. The Navy will
prioritize systems to be included under this program based on high repair
costs, low reliability, and low availability of the systems. The Navy plans
to assess the success of this program by measuring the time it takes a
contractor to fill a requisition and the percentage of the time a contractor
can satisfy a requirement within contractually specified times.

Under another initiative, the Navy manages the parts but uses long- term
contracts, with performance periods of up to 5 years, to minimize the time
it takes to request and receive parts from contractors. These contracts
allow contractors to procure material ahead of time to reduce their
production times and reduce the Navy?s administrative times. For fiscal year
2000, the Navy reported that these long- term contracts had accounted for
over 30 percent of its funds for contracts and had procurement times of only
35 days compared to 89 days for other types of contracts. The Navy plans to
monitor this initiative and expects long- term contracts to reduce the
Navy?s inventory and increase readiness. Navy Initiatives

Contractor Initiatives

Page 27 GAO- 01- 771 Navy Inventory

The Navy has, among others, the following initiatives designed to improve
its aviation repair facilities operations, including a reduction in repair
times:

 The Navy established business process teams for material management,
planning and scheduling, and the repair of system components at aviation
repair facilities. The three teams have developed processes designed to
improve operations and they are to be implemented at the three Navy repair
facilities by June 2006. As part of this effort, Navy depots are working
with the Defense Logistics Agency to requisition material for repairs in
advance of actual demand, based on a credible forecast. The Navy expects
this effort to reduce the repair times and costs, improve readiness, reduce
inventories, and annually save $39 million by fiscal year 2005.

 The Navy plans to use an automated system to provide planning, scheduling,
capacity, and other information to reduce repair cycle times and improve the
rate at which customer delivery dates are met. The Navy?s goal is to fully
implement the system at its three repair facilities by September 2002.

 The Navy plans to reduce the time it takes to transport inoperable items
from units to repair facilities, especially for parts that are in short
supply. As of June 2000, implementation of this initiative had been delayed
due to problems in implementing a reporting system that accounts for
material in transit between the receiving and sending points.

The Navy has several broad- based initiatives that may reduce spare parts
shortages. One of these is the aviation supply chain/ material management
initiative. The Navy expects this initiative will improve forecasting for
the demand of parts and repair planning. Other features of this initiative
include better tracking of inoperable items and the potential for automatic
induction of parts into the repair cycle. The Navy plans to test the new
process on the E- 2C aircraft starting in December 2001. If the pilot proves
successful, the Navy plans to expand the initiative to all Navy weapon
systems. Estimated costs are $80 million per year from fiscal year 2002
until the break- even point during fiscal year 2006. Performance measures
and baseline data will be developed after July 2001.

Other planned logistics system process improvements include the following:

 The Aviation Maintenance- Supply Readiness Study Group, chartered in March
1998, is to identify specific actions to improve readiness and develop
systemic improvements to increase mission capability rates. The Maintenance
Initiatives

Broad- Based Logistics Initiatives

Page 28 GAO- 01- 771 Navy Inventory

group is addressing problems such as the cannibalization of aircraft parts,
the time that repair facilities take to repair and return parts, and
reliability problems.

 The Department of Defense is planning to use the time that customers wait
for parts as a key measure for evaluating the overall effectiveness of the
logistics system. As such, the Navy intends to track the time it takes from
the ordering of a part to its delivery, develop a strategy for improving the
timeliness of the process at different shore facilities and deployment
sites, and then optimize the Navy?s investment in spare parts.

 The Navy plans to track items by serial number so that it can better
measure reliability, predict parts requirements, identify maintenance
deficiencies, develop solutions, improve readiness, decrease repair time,
and manage warranties. This initiative is expected to cost $8.5 million but
achieve a return on investment of $30 million per year plus labor savings of
about 20,000 hours per year.

The Defense Logistics Agency?s major initiative to reduce aircraft spare
parts shortages is its Aviation Investment Strategy. This initiative, which
started in fiscal year 2000, focuses on replenishing consumable aviation
repair parts identified as having availability problems that affect
readiness. To achieve this initiative within the Navy, the Defense Logistics
Agency plans to invest about $190.7 million in Navy and Marine Corps
aviation spare parts over fiscal years 2000- 2003. As of February 2001,
$62.1 million had been obligated for this purpose, but only $9.9 million
worth of parts had been delivered.

The purpose of the Defense Logistics Agency?s Aging Aircraft Program is to
consistently meet the customers? needs regarding the availability of spare
parts for Army, Navy, and Air Force aviation weapon systems. The program?s
focus will be to (1) provide inventory control point personnel with
complete, timely, and accurate information on current and projected parts
requirements; (2) reduce customers? wait time for parts for which sources or
production capability no longer exist; and (3) create an efficient and
effective management structure and processes for achievement of program
goals. The Defense Logistics Agency plans to spend about $20 million on this
program during fiscal years 2001- 2007. Defense Logistics Agency

Initiatives Aviation Investment Strategy

Aging Aircraft Program

Page 29 GAO- 01- 771 Navy Inventory

To provide a mechanism to improve the potential for successfully
implementing commercial inventory initiatives and measure results, we
recommended in October 1999 that the Secretary of Defense direct the
Secretary of the Navy to improve the management framework for implementing
best practice initiatives based on principles embodied in the Government
Performance and Results Act. The Department of Defense concurred and stated
that the Navy would provide an update in the first quarter of 2000. The
Navy?s updated schedule links its commercial inventory practice initiatives
to the broad objectives of the Department of Defense?s Logistics Strategic
Plan.

We also recommended in June 2000 that the Department develop an overarching
plan that integrates the individual military service and defense agency
logistic reengineering plans to include an investment strategy for funding
the initiatives and details on how the Department plans to achieve its final
logistics system goals. The Department agreed with the recommendation and
stated it plans to integrate the various logistics strategies and service
initiatives. Further, as required by the House Committee on Armed Services
report on the Floyd D. Spence National Defense Authorization Act for Fiscal
Year 2001, 23 we are assessing the methodology the Department of Defense
used in formulating its August 1999 long- range Logistics Strategic Plan.

Because of our prior recommendations on improving the Navy?s management
framework for implementing commercial inventory practices, the Department of
Defense?s efforts to develop an overarching integration plan, and our
ongoing review of the Department?s strategic plan, we are not making new
recommendations at this time.

In written comments on a draft of this report, the Principal Assistant,
Deputy Under Secretary of Defense for Logistics and Material Readiness
indicated that the Department of Defense generally concurred with the
report. The Department?s comments are reprinted in their entirety in
appendix IV.

23 House Report 106- 616, p. 339. The Department of

Defense Is Working to Respond to Our Recommendations for Better Planning

Agency Comments and Our Evaluation

Page 30 GAO- 01- 771 Navy Inventory

To determine the impact of shortages of spare parts for two selected
aircraft, we reviewed April 1999 through December 2000 Department of Defense
Quarterly Readiness Reports to Congress; Navy mission- capable goals and
rates and the rates of not mission capable due to supply and maintenance
problems for fiscal years 1993- 2000; and demand and unfilled requisition
data for major aircraft systems for March and June 2000 from the Naval
Inventory Control Point- Philadelphia, Operations Directorate. We also
discussed supply and maintenance issues with weapon system program managers
at the Naval Air Systems Command. We did not independently verify the
readiness and other data. We also visited maintenance and supply officials
at the Naval Air Station, Oceana, Virginia Beach, Virginia, and the Second
Marine Air Wing, Cherry Point, North Carolina.

To determine the reasons for shortages of mission- related spare parts for
the EA- 6B and the F- 14, we reviewed requisition data at the Naval
Inventory Control Point- Philadelphia and judgmentally selected 50 parts
that affected the capability of the two aircraft to perform their missions.
These parts had the largest number of unfilled requisitions at the time of
our visit: the end of May and June 2000 for the EA- 6B and the end of July
2000 for the F- 14. We interviewed the managers responsible for each
selected part. To obtain customer views of critical parts problems, we also
attended F- 14 and EA- 6B supply conferences. To help validate the reasons
inventory managers provided for the parts shortages, we reviewed inventory
management documents such as the March 2000 stratification reports, the 5-
year demand history, and other relevant supply management documentation,
including repair facility production schedules and completion data for the
fourth quarter of fiscal year1998 through the fourth quarter of fiscal year
2000 from the Naval Inventory Control PointPhiladelphia Industrial Support
Division.

To identify initiatives that the Navy and the Defense Logistics Agency have
under way or planned to address spare parts shortages for all aircraft, we
interviewed Navy and Marine Corps headquarters officials and examined
relevant documentation. Specifically, we reviewed the Navy?s Logistics
Transformation Plan for fiscal year 2000 and the Navy and Marine Corps
reports on the best commercial inventory practices. We also discussed
various initiatives with Naval Supply Systems Command and Naval Inventory
Control Point officials. We reviewed our prior reports and relevant Navy and
Department of Defense reports and studies, including those published by the
Naval Inspector General, the Navy?s Aviation Maintenance- Supply Readiness
Study Group, and the Office of the Secretary of Defense for Program Analysis
and Evaluation. Scope and

Methodology

Page 31 GAO- 01- 771 Navy Inventory

During our audit, we interviewed supply and maintenance officials and
obtained information from the following locations:

 Deputy Under Secretary of Defense for Readiness (Personnel and Readiness),
Arlington, Virginia.

 Joint Chiefs of Staff, Logistics Directorate, Arlington, Virginia.

 Joint Forces Command, Logistics Directorate, Norfolk, Virginia.

 Deputy Chief of Naval Operations, Fleet Readiness and Logistics,
Arlington, Virginia.

 Commander in Chief, U. S. Atlantic Fleet, Logistics Directorate, Norfolk,
Virginia.

 Commander, Naval Air Forces Atlantic Fleet, Logistics Directorate,
Norfolk, Virginia.

 Naval Supply Systems Command, Mechanicsburg, Pennsylvania.

 Naval Inventory Control Point, Philadelphia, Pennsylvania.

 Naval Air Systems Command, Patuxent River, Maryland.

 Naval Air Station, Oceana, Virginia Beach, Virginia.

 Marine Corps Headquarters, Aviation Supply Logistics, Arlington, Virginia.

 Marine Corps Forces, Atlantic, Norfolk, Virginia.

 Second Marine Air Wing and Squadrons, Cherry Point, North Carolina.

 Defense Logistics Agency Headquarters, Alexandria, Virginia, and Defense
Supply Center Richmond, Richmond, Virginia.

We performed our review between February 2000 and June 2001 in accordance
with generally accepted government auditing standards.

We are sending copies of this report to the Secretaries of Defense and the
Navy; the Commandant of the Marine Corps; the Director, Defense Logistics
Agency; and the Director, Office of Management and Budget. We will also make
copies available to others upon request.

Please contact me at (202) 512- 8412 if you or your staff have any questions
regarding this report. Key contributors to this report were Lawson Gist,
Jr.; Dan Omahen; Tracy Whitaker; and Nancy Ragsdale.

David R. Warren Director, Defense Capabilities

and Management

Page 32 GAO- 01- 771 Navy Inventory

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

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

The Honorable Bob Stump Chairman The Honorable Ike Skelton Ranking Minority
Member Committee on Armed Services House of Representatives

The Honorable Bill Young Chairman, Committee on Appropriations House of
Representatives

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

Page 33 GAO- 01- 771 Navy Inventory

Our high- risk series of reports over the past several years noted that the
Department of Defense inventory and financial management weaknesses have
contributed to the unavailability of parts when needed. In January 2001, we
reported on Department of Defense management challenges and noted that it
has serious weaknesses in its management of logistics functions and, in
particular, inventory management. 1 Although not specifically identified
with the systems we reviewed, these management weaknesses directly or
indirectly contribute to the shortages of spare parts the Navy is facing.
For example:

 We reported in January 2001 that nearly half of the Department?s inventory
exceeded war reserve or current operating requirements and that the
Department had inventory on order that would not have been ordered based on
current requirements. 2 Thus, the Department was purchasing items that
exceeded requirements with funds that could be used to purchase needed
parts.

 We have issued several reports on the Navy?s problems in maintaining
adequate oversight of material being shipped to and from military
activities. For example, in March 1999, we reported that during fiscal years
1996- 98, the Navy reported losing accountability of in- transit inventory,
including some classified and sensitive items, worth over $3 billion. 3 In
August 2000, we reported that the Navy had reported on actions that we
believed would improve in- transit inventory management once fully
implemented. 4 Some of the corrective actions had an estimated completion
date of December 2000, while a long- term solution would be to reengineer
the entire in- transit process.

 In November 2000, we reported that the Navy?s processes for setting prices
that customers pay for aviation spare parts had led to the Navy?s seeking
supplemental appropriations and delaying the procurement of needed parts
that could affect readiness. 5

1 Major Management Challenges and Program Risks: Department of Defense

(GAO- 01- 244, Jan. 2001). 2 Major Management Challenges and Program Risks
(GAO- 01- 244, Jan. 2001).

3 Defense Inventory: Navy?s Procedures for Controlling In- Transit Items Are
Not Being Followed (GAO/ NSIAD- 99- 61, Mar. 31, 1999). 4 Defense Inventory:
Status of Navy Initiatives to Improve Its In- Transit Inventory Process
(GAO/ OSI/ NSIAD- 00- 243R, Aug. 24, 2000). 5 Defense Acquisitions: Prices
of Navy Aviation Spare Parts Have Increased

(GAO- 01- 23, Nov. 6, 2000). Appendix I: Management Weaknesses

Contribute to Spare Parts Shortages

Page 34 GAO- 01- 771 Navy Inventory

In addition, the Department of Defense?s long- standing financial management
problems may also contribute to the Navy?s spare parts shortages. As we
recently reported, existing weaknesses in inventory accountability
information can affect supply responsiveness. 6 Lacking reliable
information, the Department of Defense has little assurance that all items
purchased are received and properly recorded. The weaknesses increase the
risk that responsible item managers may request funds to obtain additional
unnecessary items that may be on hand but not reported.

6 Major Management Challenges and Program Risks (GAO- 01- 244, Jan. 2001).

Page 35 GAO- 01- 771 Navy Inventory

Part Description

Landing gear Supports the aircraft while on the ground Air navigational
computer Is a navigation component for the automatic flight control

system Antenna Supports the ALQ- 99 transmitters/ receivers Special
indicator Measures the angle between the longitudinal axis of the aircraft

and the relative wind Multiport panel Loads encrypted data on board
communications systems Television sensor Records mission data from the
heads- up display for mission

playback during post- flight reviews Telescoping shaft Maintains continuous
flap and slat control during aircraft

maneuvers Transmitter Transfers signals regarding the aircraft?s movements
and

positions to the appropriate instruments Filter Is a part of the electronic
countermeasure system and extracts

incoming jamming signals that may disrupt the aircraft?s electronics
Actuator Helps to adjust the aircraft?s wings for takeoff and landing Wave-
guide assembly Used with the F- 14D radar set, connects low power output to

the transmitter Axial pump Provides power to the aircraft flight control
system Aircraft wing fairing Protects the fuel lines and some hydraulics and
helps maintain

airflow integrity over the aircraft Power module Provides backup hydraulic
power to the control surfaces in the

event of a failure in the primary hydraulic system

Appendix II: Description of EA- 6B and F- 14 Spare Parts Discussed in Report

Page 36 GAO- 01- 771 Navy Inventory

Reason for shortage EA- 6B part F- 14 part

Actual demand was greater than anticipated 1. Air navigational computer

2. Movable canopy 3. Actuating cylinder 4. Multiport panel 5. Access cover
6. Structural panel 7. Cylinder assembly 8. Landing gear 9. Hydraulic swivel
assembly 10. Engine duct assembly 11. Indicating light panel

1. Television camera 2. Hydraulic servovalve 3. Television sensor 4.
Telescoping shaft 5. Aircraft wing fairing #1 6. Aircraft wing fairing #2 7.
Frequency converter 8. Landing gear 9. Air- gas drier #1 10. Regulating
valve

Delays in awarding contracts 1. Air navigational computer 6. Structural
panel 12. Exhaust pipe- older version 13. Landing gear door 14. Exhaust
pipe- new version 15. Countermeasure control 16. Gearbox assembly

1. Television camera 8. Landing gear 11. Axial pump 12. Solenoid valve 13.
Air- gas drier #2 14. Wave- guide assembly 15. Aircraft oxygen system 16.
Transmitter 17. Filter Problems with contractors 5. Access cover

13. Landing gear door 17. Switch box 18. Antenna #1 19. Accelerometer 20.
Antenna #2

2. Hydraulic servovalve 10. Regulating valve 11. Axial pump 12. Wave- guide
assembly 18. Video sensor 19. Actuator 20. Pressure sensor #1 21. Pressure
sensor #2 22. Motor generator Delays in repairing parts at military
facilities 7. Cylinder assembly

21. Right hand horn 22. Special indicator 23. Shouldered shaft

5. Aircraft wing fairing #1 6. Aircraft wing fairing #2 8. Landing gear 9.
Air- gas drier# 1 11. Axial pump 12. Solenoid valve 23. Fin tip assembly 24.
Accelerometer Other Item tracking problem 24. Receiver- transmitter 3.
Television sensor Purchased limited quantity 4. Multiport panel

15. Countermeasure control 24. Receiver- transmitter Procedural error 25.
Solenoid valve Internal pricing error 25. Power module

Note: Part numbers assigned to identify each part. Part with the same name
has more than one reason for shortages.

Source: Naval Inventory Control Point- Philadelphia.

Appendix III: Reasons for EA- 6B and F- 14 Spare Parts Shortages

Page 37 GAO- 01- 771 Navy Inventory

Appendix IV: Comments From the Department of Defense

Page 38 GAO- 01- 771 Navy Inventory

Major Management Challenges and Program Risks: Departments of Defense,
State, and Veterans Affairs (GAO- 01- 492T, Mar. 7, 2001).

Tactical Aircraft: Modernization Plans Will Not Reduce Average Age of
Aircraft (GAO- 01- 163, Feb. 9, 2001).

Major Management Challenges and Program Risks: A Governmentwide Perspective
(GAO- 01- 241, Jan. 2001).

High- Risk Series: An Update (GAO- 01- 263, Jan. 2001).

Defense Acquisitions: Prices of Navy Aviation Spare Parts Have Increased
(GAO- 01- 23, Nov. 6, 2000).

Defense Acquisitions: Price Trends for Defense Logistics Agency?s Weapon
System Parts (GAO- 01- 22, Nov. 3, 2000).

Defense Inventory: Status of Navy Initiatives to Improve Its In- Transit
Inventory Process (GAO/ OSI/ NSIAD- 00- 243R, Aug. 24, 2000).

Contingency Operations: Providing Critical Capabilities Poses Challenges
(GAO/ NSIAD- 00- 164, July 6, 2000).

Defense Inventory: Process for Canceling Inventory Orders Needs Improvement
(GAO/ NSIAD- 00- 160, June 30, 2000).

Defense Logistics: Actions Needed to Enhance Success of Reengineering
Initiatives (GAO/ NSIAD- 00- 89, June 23, 2000).

Defense Inventory: Plan to Improve Management of Shipped Inventory Should Be
Strengthened (GAO/ NSIAD- 00- 39, Feb. 22, 2000).

Department of the Navy: Breakdown of In- Transit Inventory Process Leaves It
Vulnerable to Fraud (GAO/ OSI/ NSIAD- 00- 61, Feb. 2, 2000).

Defense Inventory: Opportunities Exist to Expand the Use of Defense
Logistics Agency Best Practices (GAO/ NSIAD- 00- 30, Jan. 26, 2000).

Defense Inventory: Management of Repair Parts Common to More Than One
Military Service Can Be Improved (GAO/ NSIAD- 00- 21, Oct. 20, 1999).
Related GAO Products

Page 39 GAO- 01- 771 Navy Inventory

Military Operations: Some Funds for Fiscal Year 1999 Contingency Operations
Will Be Available for Future Needs (GAO/ NSIAD- 99- 244BR, Sept. 21, 1999).

Department of Defense: Status of Financial Management Weaknesses and Actions
Needed to Correct Continuing Challenges

(GAO/ T- AIMD/ NSIAD- 99- 171, May 4, 1999).

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

Defense Reform Initiative: Organization, Status, and Challenges

(GAO/ NSIAD- 99- 87, Apr. 21, 1999).

Defense Inventory: Status of Inventory and Purchases and Their Relationship
to Current Needs (GAO/ NSIAD- 99- 60, Apr. 16, 1999).

Defense Inventory: Continuing Challenges in Managing Inventories and
Avoiding Adverse Operational Effects (GAO/ T- NSIAD- 99- 83, Feb. 25, 1999).

High- Risk Series: An Update (GAO/ HR- 99- 1, Jan. 1999).

Major Management Challenges and Program Risks: Department of Defense (GAO/
OCG- 99- 4, Jan. 1999).

Navy Inventory Management: Improvements Needed to Prevent Excess Purchases
(GAO/ NSIAD- 98- 86, Apr. 30, 1998).

Defense Depot Maintenance: DOD Shifting More Workload for New Weapon Systems
to the Private Sector (GAO/ NSIAD- 98- 8, Mar. 31, 1998).

Defense Inventory: Management of Surplus Usable Aircraft Parts Can Be
Improved (GAO/ NSIAD- 98- 7, Oct. 2, 1997).

(709528)

The first copy of each GAO report is free. Additional copies of reports are
$2 each. A check or money order should be made out to the Superintendent of
Documents. VISA and MasterCard credit cards are also accepted.

Orders for 100 or more copies to be mailed to a single address are
discounted 25 percent.

Orders by mail:

U. S. General Accounting Office P. O. Box 37050 Washington, DC 20013

Orders by visiting:

Room 1100 700 4 th St., NW (corner of 4 th and G Sts. NW) Washington, DC
20013

Orders by phone:

(202) 512- 6000 fax: (202) 512- 6061 TDD (202) 512- 2537

Each day, GAO issues a list of newly available reports and testimony. To
receive facsimile copies of the daily list or any list from the past 30
days, please call (202) 512- 6000 using a touchtone phone. A recorded menu
will provide information on how to obtain these lists.

Orders by Internet

For information on how to access GAO reports on the Internet, send an e-
mail message with ?info? in the body to:

Info@ www. gao. gov or visit GAO?s World Wide Web home page at: http:// www.
gao. gov

Contact one:

 Web site: http:// www. gao. gov/ fraudnet/ fraudnet. htm

 E- mail: fraudnet@ gao. gov

 1- 800- 424- 5454 (automated answering system) Ordering Information

To Report Fraud, Waste, and Abuse in Federal Programs
*** End of document. ***