Defense Inventory: Air Force Needs to Improve Control of Shipments to Repair Contractors (07/01/2002, GAO-02-617}

-------------------------Indexing Terms-------------------------
REPORTNUM:   GAO-02-617
    TITLE:   Defense Inventory: Air Force Needs to Improve Control of Shipments to Repair Contractors
     DATE:   07/01/2002



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United States General Accounting Office: 
GAO: 

Report to Congressional Requesters: 

July 2002: 

Defense Inventory: 

Air Force Needs to Improve Control of Shipments to Repair Contractors: 

GAO-02-617: 

Contents: 

Letter: 

Results in Brief: 

Background: 

Procedures to Control Shipped Inventory Are Not Being Followed or Are 
Ineffective: 

Contractors Given Unrestricted Access to Government-Furnished Material: 

Quarterly Shipment Reports Not Provided: 

Contractors Not Posting Government-Furnished and Manager-Directed 
Material Receipts: 

Contractors Not Reporting Shipment Discrepancies: 

Procedures for Following Up on Unconfirmed Material Receipts Are 
Ineffective: 

Air Force Has Not Established Integrated Financial Management System: 

Air Force Program Oversight Is Insufficient: 

Conclusions: 

Recommendations for Executive Action: 

Agency Comments and Our Evaluation: 

Appendix I: Scope and Methodology: 

Appendix II: Comments from the Department of Defense: 

Appendix III: GAO Staff Acknowledgments: 

Related GAO Products: 

Tables: 

Table 1: Fiscal Year 2000 Shipments by Number, Value, and Type: 

Table 2: Types of Shipments in Fiscal Year 2000: 

Table 3: Status of Material Receipt, from GAO Review of Shipments in 
Fiscal Year 2000: 

[End of section] 

United States General Accounting Office: 
Washington, DC 20548: 

July 1, 2002: 

The Honorable Richard J. Durbin: 
The Honorable Tom Harkin: 
United States Senate: 

The Honorable Peter A. DeFazio: 
The Honorable Carolyn B. Maloney: 
House of Representatives: 

This is one in a series of reports addressing defense inventory
vulnerabilities to fraud, waste, and abuse. (A list of related GAO 
products appears at the end of this report.) Since at least 1990, our 
office has considered Department of Defense inventory management to be 
a high-risk area because inventory management systems and procedures are
ineffective. A lack of control over inventory shipments increases their
vulnerability to undetected loss and theft and substantially increases 
the risk that millions of dollars will be spent unnecessarily. In 
response to your request, this report evaluates the Air Forceï¿½s 
inventory control procedures for material shipped to contractors for 
repair or for use in repair. Specifically, we assess the Air Forceï¿½s 
adherence to procedures designed to safeguard this material. 

The Air Force contracts with private companies (i.e., repair and
production contractors) to produce, maintain, and repair its equipment. 
In some cases, the Air Force furnishes from its inventories some or all 
of the parts necessary to perform the contracts. Control responsibility 
for this material is the shared responsibility of the Air Force 
Materiel Command and its three inventory control points, the Defense 
Logistics Agency, and repair contractors. The Air Force Materiel 
Command administers the Air Forceï¿½s supply system and provides 
management policies and procedures. Through its three inventory control 
points, the command authorizes inventory movement from Defense Logistic 
Agency storage depots Footnote 1] to repair contractors. The Defense 
Logistics Agencyï¿½which operates and manages 24 storage depotsï¿½receives, 
stores, and issues Air Force inventory and maintains Air Force 
inventory records. In addition, the Defense Contract Management Agency, 
through its property administrators, assesses the accuracy of repair 
contractor records and determines whether all government property is 
accounted for. Contractors are responsible for establishing and 
maintaining systems to control, protect, preserve, and maintain all 
government property. 

To assess adherence to procedures, we examined shipments valued at 
about $2.6 billion to the Air Forceï¿½s repair contractors in fiscal year 
2000. These shipments included classified, sensitive, pilferable, and 
unclassified items. [Footnote 2] We primarily focused our work at the 
three Air Force inventory control points and 12 selected Air Force 
repair contractors (associated with 14 repair contracts). More details 
about our scope and methodology appear in appendix I. 

Results in Brief: 

The Air Force and contractor personnel have largely not complied with
Department of Defense and Air Force inventory control procedures
designed to safeguard material shipped to contractors, placing items 
worth billions of dollars at risk of fraud, waste, and abuse. The 
following items identify inadequate procedures and departures from 
required procedures: 

* The Air Forceï¿½s three inventory control points have not restricted 
repair contractorsï¿½ access to the specific items and quantities of 
government-furnished material [Footnote 3] needed to accomplish the 
contract. This practice could allow contractors to obtain unneeded and 
unauthorized material. 

* The inventory control points have not sent quarterly reports on the 
status of shipped material to property administration officials at the 
Defense Contract Management Agency. Without the quarterly reports, these
officials cannot independently verify that contractors have accounted 
for government-furnished material. 

* Contractors receiving shipped material have not (1) properly entered 
the receipt of shipments into their records and into the inventory 
control pointsï¿½ reporting systems or (2) routinely reported shipment
discrepancies. These failures impair the Air Forceï¿½s ability to account 
for shipments worth millions of dollars. Unaccounted-for inventory 
included items that warrant a high degree of protection and control, 
such as circuit card assemblies and navigation set control units. 

* Air Force procedures for following up on shipments that contractors 
have not confirmed as received are ineffective, leaving the exact 
status of the shipments uncertain. 

* The Air Force has not provided adequate program oversight because it
does not request and analyze data on contractor shipment discrepancies 
to identify the extent and cause of discrepancies so that corrective 
action may be taken. This lack of oversight impedes the Air Forceï¿½s 
ability to improve its supply operations and to determine which 
activities are responsible for lost or misplaced items. 

We are recommending that the Secretary of Defense direct the Secretary
of the Air Force to improve compliance with existing procedures for
controlling shipped inventory and to improve the procedures themselves.
In written comments on a draft of this report, the Department of Defense
concurred with six recommendations, non-concurred with one 
recommendation, and partially concurred with three recommendations. The 
main point the Department makes is that it has corrected problems with 
an automated internal control system for loading stock numbers and 
quantities and screening them against contractor requisitions. 
Therefore, we modified our recommendations, stating that the 
effectiveness of this automated internal system must be demonstrated. 

Background: 

Inventory shipped for repair or in support of repairs typically 
involves the following types of material: 

* Manager-directed material, which item managers direct to be shipped 
to a contractor for repair, alteration, or modification. 

* Government-furnished material, which contractors requisition in 
support of repairs, alterations, or modifications. Generally, this 
material is incorporated into or attached onto deliverable end items 
(final products such as aircraft) or consumed or expended in performing 
the contract. 

For fiscal year 2000, Air Force logistics records for all inventory 
control points showed the following number, value, and type of material 
had been shipped to contractors (see table 1). 

Table 1: Fiscal Year 2000 Shipments by Number, Value, and Type: 

Manager-directed material: 
Universe of shipments, Number of shipments: 12,222; 
Universe of shipments, Value: $2,371,663,119. 

Government-furnished material: 
Universe of shipments, Number of shipments: 9,222; 
Universe of shipments, Value: $252,406,484. 

Total: 
Universe of shipments, Number of shipments: 21,444; 
Universe of shipments, Value: $2,624,069,603. 

Source: Item Manager Wholesale Requisition Process System. 

[End of table] 

Table 2 shows a breakdown of all shipments to contractors in fiscal year
2000 by the security type, number of items, and dollar value of 
shipments. 

Table 2: Types of Shipments in Fiscal Year 2000: 

Classified military items: 
Number of shipments: 7,110; 
Number of items: 57,920; 
Value: $1,613,289,625. 

Sensitive items: 
Number of shipments: 1; 
Number of items: 48; 
Value: $50,884. 

Pilferable items: 
Number of shipments: 132; 
Number of items: 440; 
Value: 7,248,022. 

Nonsensitive items: 
Number of shipments: 13,491; 
Number of items: 102,767
Value: $944,960,004. 

Items with unknown security classification: 
Number of shipments: 710; 
Number of items: 1,305; 
Value: $58,521,065. 

Total: 
Number of shipments: 21,444
Number of items: 162,480
Value: $2,624,069,603. 

Source: GAO analysis. 

[End of table] 

Department of Defense (DOD) policy contains specific internal control
procedures to help ensure that shipped inventory is accounted for. When
an item is shipped, a shipping notification should be sent to the 
receiving contractors. The intended recipient of the material is 
responsible for notifying the inventory control point once the item has 
been received or if a discrepancy exists (e.g., the item was not 
received or the quantity received was less than expected). The 
notification of receipt and discrepancy reporting processes are 
internal controls designed to account for all shipped assets. If within 
45 days of shipment the inventory control point has not been notified 
that a shipment has arrived, it is required to follow up with the 
intended recipient. The rationale behind this requirement is that until 
receipt is confirmed, the exact status of the shipment is uncertain and 
therefore vulnerable to fraud, waste, and abuse. 

Procedures to Control Shipped Inventory Are Not Being Followed or Are
Ineffective: 

As a result of departures from required procedures or ineffective
procedures, the Air Forceï¿½s shipped inventory is vulnerable to loss or 
theft. First, the Air Force has allowed repair contractors access to 
government-furnished material not needed to fulfill the repair 
contract. Second, inventory control points have not provided property 
administrators with the required government-furnished material status 
reports to use in verifying contractor records of government-furnished 
material received. Third, contractors have not adequately recorded 
receipt of items and reported receipt to inventory control points. 
Fourth, contractors have not routinely reported discrepant shipments to 
the designated shipping activity. Fifth, Air Force procedures for 
following up on shipments that contractors have not confirmed as 
received are ineffective. Sixth, the Air Force has not provided 
adequate oversight of shipments to contractors. 

Contractors Given Unrestricted Access to Government-Furnished Material: 

DOD requires inventory control points to establish one or more internal
control systems (i.e., management control activities) to restrict 
contractor access to government-furnished material. Among other things 
intended, the control systems are to screen all repair contractor 
requisitions for validation and approval and to restrict contractor 
access to government-furnished material to the specific items and 
quantities listed in the repair contract. However, the inventory 
control pointsï¿½ systems generally screen and restrict access to 
government-furnished material by a federal stock class or stock group 
rather than by stock number and quantity. [Footnote 4] Also, the 
contracts we reviewed generally did not specify, as required, both the
items and the quantities of material that the inventory control points 
had agreed to furnish to contractors. [Footnote 5] As long as 
contractors requisition items within an authorized federal stock class 
or stock group, government-furnished material is automatically provided 
whether or not it is needed to fulfill the repair contract. 

In a July 1997 memorandum, the Air Force Materiel Command reiterated
the requirement that the inventory control points screen all repair
contractor requisitions by stock number and quantity for validation and 
approval, and it developed procedures for an automated method of loading
stock numbers and quantities into the control systems. Air Force 
officials indicate that the major obstacle now is that the procedures 
for the automated method of loading stock numbers do not work as 
designed. For this reason, the Air Force Materiel Command waived the 
requirement for screening by stock number and quantity and allowed 
inventory control points to continue to screen contractor requisitions 
for government-furnished material at the federal stock class or stock 
group level. 

The following example illustrates the weakness in the current screening
process. A contract we reviewed listed 14 specific, stock-numbered 
partsï¿½from seven different stock classesï¿½that were required to repair
the end item (an electronic countermeasures system for the B-52H 
aircraft). However, because the inventory control pointï¿½s system 
screened and restricted the contractorï¿½s access to government-furnished 
material by federal stock class, the contractor could requisition any 
item from the seven different stock classes in which the 14 parts are 
grouped. The seven stock classes contain over 502,900 other stock-
numbered parts that are not needed to repair the end item. The 
contractor could requisition any of these parts, in any quantity, and 
the improper requisition could pass through the inventory control 
pointï¿½s screening system and be approved. 

We did not determine whether contractors had obtained unauthorized
material as a result of their access to material by federal stock class 
or group. However, these control weaknesses are the same as those
identified in earlier reports as having allowed contractors to obtain
unneeded and unauthorized material. For example, in a 1998 report on the
adequacy of government oversight over government-furnished material to
a contractor, the Air Force Audit Agency reported 2,978 of the 5,569
validated requisitions were not needed to accomplish the contract. The
unneeded requisitions included 1,090 stock numbers valued at $17.4
million. Similarly, a 1995 DOD inspector general report on management
access to the DOD supply system concluded that granting contractors
access to government-furnished material in the DOD supply system by
federal stock class continued to be a material internal control weakness
that placed DOD material at undue risk. 

Quarterly Shipment Reports Not Provided: 

To independently verify that contractors have accounted for all
government-furnished material received, DOD policy requires inventory
control points to provide to property administrators at the Defense
Contract Management Agency quarterly status reports showing all
shipments of Air Force material to contractors. Inventory control point 
officials responsible for distributing the reports to property 
administrators told us that the reports have not been sent. 

We found that existing Air Force procedures governing distribution of 
the quarterly status reports do not assign responsibility for 
distributing these reports to officials at inventory control points and 
are outdated (e.g., the systems for generating the reports no longer 
exist). Air Force officials acknowledge that the procedures are not 
current and stated that they are in the process of updating them. 

Proper distribution of government-furnished material status reports has
been a long-standing issue. For example, a 1995 Department of Defense
inspector general audit report on management access to the DOD supply
system stated that the Air Force should take the distribution of its 
status report more seriously, ensuring that the report is issued each 
quarter. The audit report asserts that property administrators are the 
last line of defense in protecting material resources and, as such, 
they need an independent record of the government-furnished material 
shipped to contractors. The Air Forceï¿½s quarterly status report 
provides such a record; without it, property administrators must rely 
entirely on contractorsï¿½ records. 

Contractors Not Posting Government-Furnished and Manager-Directed 
Material Receipts: 

Department of Defense and Air Force policies contain specific procedures
governing the notifications that contractors should send to their 
inventory control points when they receive shipped inventory. The 
policies state that, upon receipt of an item, a receiving contractor 
must enter the shipment into its inventory records and notify the 
inventory control point of material receipt. To accomplish notification 
of receipt, the Air Force requires contractors to enter receipts into a 
reporting system at the appropriate inventory control point. The 
notification of receipt is an internal control designed to account for 
all shipped assets. 

During fiscal year 2000, the Air Force shipped thousands of items with a
reported value at about $2.6 billion to contractors. As part of our 
review, we sought to determine whether items reportedly shipped to 
repair contractors had in fact been received and entered into both the
contractorsï¿½ records and the inventory control pointsï¿½ reporting 
systems. 

Our review indicated that contractors are not following policies 
governing receipt notification. Of the $2.6 billion of inventory 
shipped to contractors in fiscal year 2000, we judgmentally selected 
and reviewed 9,003 items valued at $814.2 million. We found that 
contractors had not always properly posted material receipts for these 
items into their records or into the inventory control pointsï¿½ 
reporting systems. Specifically, 48 percent of these items had been 
received and properly posted by contractors to the inventory control 
pointsï¿½ reporting systems; 19 percent of the shipped items had been 
received but were either improperly posted or not posted by contractors 
to their records and/or the inventory control pointsï¿½ reporting 
systems; and 33 percent of items reportedly had not been received by 
contractors or lacked sufficient documentation to prove that they had 
been accounted for by the contractors. The items unaccounted for 
included those that warrant a high degree of protection and control 
because of their high value and/or their security classification, such 
as circuit card assemblies and navigation set control units. This lack 
of documentation is in itself an internal control weakness. For 
example, the federal acquisition regulation requires that contractorsï¿½ 
property control records provide a complete, current, and auditable 
record of all transactions involving government property. Table 3 
presents more detailed information on the items in our review. 

Table 3: Status of Material Receipt, from GAO Review of Shipments in 
Fiscal Year 2000: 

Shipment properly posted to the reporting system: Contractor received 
items and entered items into the reporting system using the correct
document number, stock number, and quantity: 
Number of items: 4,315; 
Value: $247,510,461. 

Shipment properly posted to the reporting system: Subtotal: 
Number of items: 4,315; 
Value: $247,510,461. 

Shipment improperly posted or not posted to reporting system but 
accounted for: Contractor received items but entered items into the 
reporting system using an incorrect document number, stock number, 
and/or quantity: 
Number of items: 543; 
Value: $69,573,954. 

Shipment improperly posted or not posted to reporting system but 
accounted for: Contractor received item and entered item into inventory 
record, but it is not reflected in the reporting system: 
Number of items: 1,096; 
Value: $436,277,575. 

Shipment improperly posted or not posted to reporting system but 
accounted for: Other: 
Number of items: 71; 
Value: $13,485,901. 

Shipment improperly posted or not posted to reporting system but 
accounted for: Subtotal: 
Number of items: 1,710; 
Value: $519,337,431. 

Shipment not posted and not accounted for: Contractors did not retain 
inventory records of shipment receipts or clearly document receipt 
transactions: 
Number of items: 1,145; 
Value: $23,086,538. 

Shipment not posted and not accounted for: Contractor reportedly did 
not receive items: 
Number of items: 1,829; 
Value: $24,211,946. 

Shipment not posted and not accounted for: Other: 
Number of items: 4; 
Value: $9,739. 

Shipment not posted and not accounted for: Subtotal: 
Number of items: 2,978; 
Value: $47,308,224. 

Total: 
Number of items: 9,003; 
Value: $814,156,116. 

Source: GAO analysis. 

[End of table] 

No dominant cause for these failures to properly account for shipment
receipts emerged in our discussions with contractor officials. However, 
in our interviews with contractor personnel, they identified a number of
factors: 

* inadequate training/instruction on how to use and enter information 
into the reporting system; 

* lack of awareness of reporting procedures; 

* data transmission problems (e.g., transactions entered by the 
contractors did not show up in the reporting system); 

* data input errors made while attempting to enter information into the
system, and; 

* data deleted from the reporting system because of data storage
constraints. 

In addition, two contracts in our review did not contain a reporting
requirement. 

Because of these reporting problems, the inventory control pointsï¿½ 
reporting systems contained inaccurate information on large numbers of 
shipment receipt notifications, thus reducing the value of the 
information as a means of accurately and adequately accounting for all 
shipped assets. Inventory control point personnel indicated that they 
are often forced to work around the reporting systems, and they expend 
considerable time and effort to collect, maintain, and analyze receipt 
information that should be readily available to them in these automated 
systems. Visibility over shipped material depends in part on accurate 
contractor reporting of material receipts; without adequate reporting, 
the Air Force cannot readily account for shipped material, making it 
vulnerable to theft or loss. 

Contractors Not Reporting Shipment Discrepancies: 

Air Force policy also requires contractors to notify the shipping 
activity if a discrepancy exists between items shipped and items 
received. The purpose of discrepancy reporting is to determine the 
cause of discrepancies, effect corrective action, and prevent 
recurrence. Such reports also provide (1) support for adjustment of 
property and financial inventory accounting records, (2) information as 
a basis for claims against contractors, and (3) information for 
management evaluations. 

As table 3 shows, 1,829 of the items (valued at about $24.2 million) we
reviewed had reportedly not been received, but only 8 of the items were
reported as discrepancies and resolved. For the remaining 1,821 items, 
we found a number of problems in discrepancy reporting. 

* Contractor personnel did not report the discrepancies. According to 
most contractor personnel, this situation occurred primarily because the
shipping activity did not notify them of impending shipments, thus they
did not expect the shipment and could not monitor its status. Others
indicated that they simply never report any discrepancies. 

* Contractor personnel reported the discrepancies, but they did not 
route the discrepancy reports to the appropriate shipping activity 
personnel who could investigate and resolve the discrepancies. Although 
we found that contractor personnel did not properly route shipping 
discrepancies to the appropriate shipping activity, they were under the 
impression that they had. 

* Contractor personnel reported the discrepancies, but did not follow up
when no response was received from the shipping activity. They did not
follow up because they planned to reorder the material that they had not
received. 

* Contractor personnel reported the discrepancies, but when they later
determined that the materials had been received, they did not cancel the
discrepancy reports. 

This failure to comply with Air Force procedures undermines the Air
Forceï¿½s ability to determine the cause of discrepancies, effect 
corrective action, and prevent recurrence. This situation can also 
result in loss of control over material, lost recovery rights, and 
material remaining in a questionable status for long periods of time. 

Procedures for Following Up on Unconfirmed Material Receipts Are
Ineffective: 

To ensure proper reporting and accounting of material receipts, DOD
policy requires that inventory control points follow up with the 
contractor within 45 days from the date of shipment if they have not 
been notified that a shipment has arrived. The rationale behind this 
requirement is that until receipt is confirmed, the exact status of the 
shipment is uncertain and therefore vulnerable to fraud, waste, and 
abuse. 

At present, Air Force procedures do not ensure adequate follow-up on
unconfirmed receipts. According to Air Force officials, inventory 
control points send electronic inquiries to contractors to follow up on 
all shipments. However, the Air Force has not yet established a system 
by which (1) the inventory control points can reconcile material 
shipped to contractors with material received by contractors to 
determine unconfirmed receipts and (2) contractors can respond to the 
follow-up inquiries to confirm receipts or discrepancies. Consequently, 
inventory control points assume that all material shipped to 
contractors is received by them, and they close the record on the 
shipments without contractor confirmation of material receipt. The 
inventory control point does not become aware that material has not 
been received unless the contractor inquires about the shipment. The 
result is a situation in which unconfirmed receipts are officially 
considered delivered, an assumption that, in turn, places this material 
at risk of fraud, waste, abuse, and theft. 

The following example illustrates how the lack of adequate follow-up on
unconfirmed receipts places this material at risk. In June 2000, the
Defense Distribution Depot in Warner Robins, Georgia, reportedly issued
and delivered 85 electron tubes to an Air Force repair contractor, but,
according to contractor personnel, the shipment was never received and
the contractor never reported the discrepancy to the inventory control
point. In January 2002, we requested proof of issuance and delivery from
the Warner Robins depot. The depot provided proof of issuance but could
not confirm delivery. According to depot personnel, a delivery signature
was not obtained from the contractorï¿½s receiving personnel at the time 
of delivery. Nevertheless, the inventory control point closed the 
record on this $3.5 million shipment, assuming the electron tubes had 
been received. The electron tubes remain unaccounted for. 

To address its deficiencies relating to proper reporting and accounting 
of material receipts, the Air Force plans to transition to the 
Department of Defense Commercial Asset Visibility System (CAV II). This 
will require a 2-year scheduled transition starting in fiscal year 2003 
and ending in fiscal year 2004. 

Air Force Has Not Established an Integrated Financial Management 
System: 

Another weakness preventing effective accountability over shipped 
inventory relates to the Air Forceï¿½s financial management system. The
Chief Financial Officers Act of 1990 requires a plan for the 
integration of agency financial management systems. The Federal 
Financial Management Improvement Act of 1996 built upon the 1990 act 
and required agencies to maintain an integrated system (i.e., an 
integrated general ledger controlled system). With such a system, 
accounting records and logistics records (i.e., records from the supply 
and repair side of inventory control points) should be updated 
automatically when inventory items are purchased and received. Any 
differences between these two sets of records should be identified 
periodically and research conducted to alert management at the 
inventory control points to possible undetected loss or theft of shipped
items. 

As part of the its latest efforts to reform its financial operations, 
the Department of Defense has stated that it will develop Defense-wide
integrated systems. [Footnote 6] If effectively designed and 
implemented, these systems will be integral to ensuring effective 
accountability over the Air Forceï¿½s shipped inventories. 

Air Force Program Oversight Is Insufficient: 

To evaluate and improve supply operations and reporting performance, 
Air Force policy requires shipping activities to record, summarize, and
report to Air Force headquarters the volume and dollar value of shipment
discrepancies, and headquarters is required to analyze this data to 
identify the causes, sources, and magnitude of discrepancies so that 
corrective actions can be taken. This policy is consistent with federal 
government standards for internal controls that require ongoing 
oversight to assess the quality of performance over time and to ensure 
that findings of audits and other reviews are promptly resolved. 

Air Force headquarters acknowledges that it has not requested nor
collected contractor shipment discrepancy data, and, as of February 
2002, had not developed a definite plan of action or a target date for 
full implementation. The lack of program oversight may represent 
inadequate management emphasis. Even if the Air Force were collecting 
the contractor shipment discrepancy data, it would not be meaningful
because, as shown earlier, contractors are not reporting discrepancies
accurately. The lack of this information impedes the Air Forceï¿½s 
ability to evaluate and improve supply operations as well as its 
ability to determine which activities are responsible for lost or 
misplaced items. 

Conclusions: 

Inventory worth billions of dollars has been vulnerable to fraud, waste,
and abuse because the Air Force either did not adhere to control
procedures or did not establish effective procedures. Because of these
control weaknesses, repair contractors have access to items and 
quantities of items not specified in their contracts, and the Defense 
Contract Management Agency does not have the quarterly reports on 
shipment status that it needs to independently verify that contractors 
have accounted for shipments of government-furnished material. In 
addition, contractor receipt posting and discrepancy reporting 
practices produce incomplete and inaccurate information, impairing the 
ability of the Air Force to monitor shipments. Even if contractor 
records on shipment receipts were accurate, the Air Forceï¿½s system 
cannot reconcile material shipped to contractors with material received 
by contractors, so the Air Force cannot readily identify shipments with 
unconfirmed receipts. Consequently, the Air Force cannot readily 
account for these shipments, which include classified, sensitive, and 
pilferable items. Finally, the Air Force has not exercised the required 
extent of program oversight by collecting data on contractor shipment 
discrepancies and using it to assess practices for safeguarding shipped 
inventory; as a result, it cannot identify the extent and cause of 
contractor shipment discrepancies or take corrective action. 

Recommendations for Executive Action: 

To improve the control of inventory being shipped, we recommend that
the Secretary of Defense direct the Secretary of the Air Force to 
undertake the following: 

* Improve processes for providing contractor access to government-
furnished material by: 
- listing specific stock numbers and quantities of material in repair
contracts (as they are modified or newly written) that the inventory
control points have agreed to furnish to contractors; 
- demonstrating that automated internal control systems for loading and
screening stock numbers and quantities against contractor requisitions
perform as designed; 
- loading stock numbers and quantities that the inventory control points
have agreed to furnish to contractors into the control systems manually
until the automated systems have been shown to perform as designed;
and; 
- requiring that waivers to loading stock numbers and quantities
manually are adequately justified and documented based on cost-effective
and/or mission-critical needs. 

* Revise Air Force supply procedures to include explicit responsibility 
and accountability for: 
- generating quarterly reports of all shipments of Air Force material to
contractors; and; 
- distributing the reports to Defense Contract Management Agency
property administrators. 

* Determine, for the contractors in our review, what actions are needed 
to correct problems in posting material receipts. 

* Determine, for the contractors in our review, what actions are needed 
to correct problems in reporting shipment discrepancies. 

* Establish interim procedures to reconcile records of material shipped 
to contractors with records of material received by them, until the Air 
Force completes the transition to its Commercial Asset Visibility 
system in fiscal year 2004. 

* Comply with existing procedures to request, collect, and analyze
contractor shipment discrepancy data to reduce the vulnerability of
shipped inventory to undetected loss, misplacement, or theft. 

Agency Comments and Our Evaluation: 

In written comments on a draft of this report (see app. II), the 
Department of Defense concurred with six of the recommendations, non-
concurred with one recommendation, and partially concurred with three
recommendations. DOD did not concur with our second recommendationï¿½to 
improve processes for controlling contractor access to government-
furnished material by developing automated internal control systems for 
loading stock numbers and quantities and screening them against 
contractor requisitions. DOD states that the Air Force Special Support 
Stock Control system already has the recommended capability in place. 
Although the Air Force Special Support Stock Control system may be 
capable of loading stock numbers and quantities and screening them 
against contractor requisitions, we found that in practice the system 
was not able to carry out this function as designed. A January 2002 
software change implemented to address the issue did not resolve it, 
and Air Force officials acknowledged in April 2002 that this system was 
still not working properly. To correct the weakness in its current 
automated internal control systems, Air Force officials stated that in 
April 2002 the Air Force Materiel Command planned to revise its 
existing procedures for an automated method of loading stock numbers 
into the current control systems. We believe that the Air Forceï¿½s 
actions to correct its internal control systems deficiencies are a step 
in the right direction, and, if the revised procedures do work as 
designed, they will improve the process for controlling contractor 
access to government-furnished material. Based on DODï¿½s comments, we 
modified our recommendation to emphasize the need to demonstrate that 
automated internal control systems for loading and screening stock 
numbers and quantities against contractor requisitions perform as 
designed. 

DOD partially concurred with the recommendation to load stock numbers 
and quantities for items requisitioned by contractors into the control
systems manually until the automated system is implemented. DOD again
stated that the Air Force Materiel Commandï¿½s current control systems 
already provide the capability for loading and screening national stock
numbers and quantities against contractor requisitions. However, DOD
directed the Air Force to determine the feasibility of establishing an
interim capability until all repair contracts are written in compliance 
with Air Force policies and procedures. We continue to believe our
recommendation will be valid until the previously discussed automated
internal control system for loading stock numbers and quantities and
screening them against contractor requisitions is proven to work as
designed. 

DOD partially concurred with the recommendation to require that waivers
to loading stock numbers and quantities manually are adequately 
justified and documented based on cost-effective and/or mission-
critical needs. DOD reiterated that the current Air Force control 
systems already provide the capabilities for loading stock numbers and 
quantities and screening them against contractorï¿½s requisitions. DOD 
further states that it will direct Headquarters, Air Force 
Installations and Logistics, to ensure that future decisions affecting 
validation of contractor orders involving government-furnished materiel 
or equipment are based on cost-effectiveness and/or mission-critical 
needs and that requests are processed in accordance with DOD policies 
and procedures. We agree with DOD that any future waivers should be 
justified and documented. However, we continue to believe our 
recommendation will be valid until the waiver is rescinded, because the 
waiver allows for the inventory control point to continue to load and 
screen contractor requisitions at the federal stock class or stock 
group levels rather than loading contracts at the required national 
stock number level. 

Finally, DOD partially concurred with the recommendation to comply with
existing procedures to request, collect, and analyze contractor shipment
discrepancy data to reduce the vulnerability of shipped inventory to
undetected loss, misplacement, or theft. DOD stated that in February 
2001, Headquarters, Air Force Installations and Logistics, directed all 
Air Force major commands to collect and analyze these types of supply
discrepancies for possible trends. DOD added that each major command
was tasked to provide Air Force Installations and Logistics a semi-
annual report of its findings (negative reports were not required). DOD 
recently directed Headquarters, Air Force Installations and Logistics, 
to reemphasize this requirement to all major commands and to require 
that all major commands submit a report on their findings for the last 
12 months. Moreover, a negative report will be required if no supply 
discrepancies were received. While we believe this is a step in the 
right direction, we also believe the DOD response to our recommendation 
does not address the contractor discrepancy reporting issues raised in 
this report. Although some Air Force major commands may actually be 
collecting and analyzing shipment discrepancies at their Air Force 
bases, we found that similar contractor shipment discrepancy data has 
not been requested nor collected. As we stated in this report, Air 
Force headquarters acknowledges that it has neither requested nor 
collected these contractor discrepancy report data for shipments, and, 
as of February 2002, had not developed a definite plan of action or a 
target date for full implementation. We continue to believe the 
conditions we reported on and our recommendation are still valid and 
should be addressed by DOD. Based on DODï¿½s comments, we have made it 
clear that the shipment discrepancy data referred to in this report and 
in the related recommendation was provided by the contractors. 

Appendix I contains the scope and methodology for this report. DODï¿½s
written comments on this report are reprinted in their entirety in
appendix II. 

As arranged with your offices, unless you publicly announce its contents
earlier, we plan no further distribution of this report until 30 days 
from its issue date. At that time, we will send copies of this report 
to the appropriate congressional committees; the Secretary of Defense; 
the Secretary of the Air Force; the Director, Office of Management and
Budget; and the Director, Defense Logistics Agency. We will also make
copies available to others upon request. 

Please contact me at (202) 512-8412, or Lawson Gist, Jr. (202) 512-
4478, if you or your staff have any questions concerning this report. 
Other GAO staff acknowledgments are listed in appendix III. 

Signed by: 

David R. Warren: 
Director: 
Defense Capabilities and Management: 

[End of section] 

Appendix I: Scope and Methodology: 

To assess the Air Forceï¿½s and its repair contractorsï¿½ adherence to
procedures for controlling shipped inventory, we took the following 
steps: 

* To identify criteria for controlling shipped inventory, we reviewed
Department of Defense and Air Force policies and procedures, obtained
other relevant documentation related to shipped inventory, and discussed
inventory management procedures with officials at the following 
locations: Headquarters, Department of the Air Force, Washington, D.C.;
the Air Force Materiel Command, Wright-Patterson Air Force Base, Ohio;
the Oklahoma City Air Logistics Center, Tinker Air Force Base, Oklahoma;
the Ogden Air Logistics Center, Hill Air Force Base, Utah; the Warner
Robins Air Logistics Center, Robins Air Force Base, Georgia; the Defense
Contract Management Agency, Alexandria, Virginia; and the Defense
Logistics Management Standards Office, Fort Belvoir, Virginia. 

* To identify the number, value, and types of shipped inventory, we 
obtained computerized supply-side records of all government-furnished 
material shipments and manager-directed material shipments between 
October 1999 and September 2000 from the Air Force Materiel Command at 
Wright-Patterson Air Force Base, Ohio. The records contained descriptive
information about each shipment, including the document number, 
national stock number, and quantity shipped. We excluded broken items
shipped from end-user activities to contractor repair facilities and 
repaired material returned from a contractor repair facility to a 
storage activity or end user because the Air Force Materiel Command 
could not readily identify and provide the descriptive information. To 
determine the security type of selected shipments in fiscal year 2000, 
we identified the national stock number for all shipments of government-
furnished material and manager-directed material. We then matched the 
national stock number with security classification codes in the 
Department of Defense Federal Logistics Information System. 

* To select contractors and items shipped to them, we used computerized
shipment data obtained from the Air Force Materiel Command. To develop
our methodology, we conducted a preliminary review using three
judgmentally selected contractors; two contractors were chosen on the
basis of their proximity to the inventory control points, and the third 
was selected because of the substantial volume of shipments between it 
and all of the inventory control points. For these initial contractors, 
we selected 214 government-furnished material items and 1,159 manager-
directed material items, based on such factors as the national stock 
number of the items and the number of items and/or dollar value of the 
shipments. Subsequently, we judgmentally selected an additional nine 
repair contractors, three for each inventory control point, that had 
either the largest dollar value or the largest number of government-
furnished and manager-directed items shipped to them. For these 
contractors, we then selected 188 government-furnished material items 
and 7,442 manager-directed material items based on the military 
sensitivity of the items in the shipments and the unit price and/or 
dollar value of the shipments. Because the number of selected 
contractors and shipments was limited and judgmentally selected, the 
results of our analysis cannot be projected to all Air Force repair 
contractors and shipments. 

* To assess whether shipments had been received and entered into the
inventory control pointsï¿½ repair-side reporting system, we obtained from
the inventory control points their computer-generated shipment receipt
histories. The receipt histories contained descriptive information about
each shipment, including the document number, national stock number,
and quantity reported as received. 

* We did not independently verify the overall accuracy of the databases 
for which we obtained data, but used them as a starting point for 
selecting shipments that we then tracked back to records and documents 
on individual transactions. Because our conclusions are based only on 
those shipments for which we tracked back to documents, use of this 
data is reasonable for our purposes. 

* To determine whether contractors had accounted for our selected
shipments, we then matched the Air Force Materiel Command supply-side
records of shipments to inventory control pointsï¿½ repair-side receipt
histories. When we identified discrepancies, we followed up with the
repair contractors and inventory control points by tracking items back 
to contractor inventory records and by holding discussions with 
officials at the following locations: BAE Flight Systems, Mojave, 
California; Boeing, San Antonio, Texas; Boeing Electronic Systems, 
Heath, Ohio; Heroux, Inc., Quebec, Canada; ITT Avionics, Clifton, New 
Jersey; Lockheed Martin, Marietta, Georgia; Lockheed Martin, San 
Antonio, Texas; Lockheed Martin Lantirn, Warner Robins, Georgia; 
Northrop Grumman, Baltimore, Maryland; Northrop Grumman, Warner Robins, 
Georgia; PEMCO Aeroplex, Birmingham, Alabama; Teledyne Electronic 
Technologies, Warner Robins, Georgia; and the Defense Distribution 
Depots (located in Warner Robins, Georgia, and Oklahoma City, 
Oklahoma). 

* To determine what happened to selected items that had reportedly not
been received by contractors, our Office of Special Investigations 
followed up with commercial carriers by obtaining proof of delivery 
information and by holding discussions with officials at the following 
locations: ABF Freight Systems, Inc., Fort Smith, Arkansas; Associated 
Global Systems, Inc., New Hyde Park, New York; CorTrans Logistics, LLC, 
Wooddale, Illinois; Emery Worldwide, Ontario, California; Federal 
Express Corporation, Somerset, New Jersey; and United Parcel Service, 
Washington, D.C. 

* To learn whether issues associated with unaccounted-for shipments were
adequately resolved, we reviewed Department of Defense, Air Force, and
Air Force Materiel Command implementing guidance. Such information 
provided the basis for conclusions regarding the adherence to procedures
for controlling shipped inventory. 

* To determine whether the Air Force had emphasized shipped inventory as
part of its assessment of internal controls, we reviewed assessments 
from the Department of the Air Force, the Oklahoma City Air Logistics 
Center, the Ogden Air Logistics Center, and the Warner Robins Air 
Logistics Center for fiscal years 1999 and 2000. 

Our work was performed from May 2001 through April 2002 in accordance
with generally accepted government auditing standards. We conducted our
other investigative work during March 2002 and April 2002 in accordance
with investigative standards established by the Presidentï¿½s Council on
Integrity and Efficiency. 

[End of section] 

Appendix II: Comments from the Department of Defense: 

Deputy Under Secretary Of Defense For Logistics And Materiel Readiness: 
3500 Defense Pentagon: 
Washington, DC 20301-3500: 

June 17, 2002: 

Mr. David R. Warren: 
Director, Defense Capabilities Management: 
U.S. General Accounting Office: 
Washington, D.C. 20548: 

Dear Mr. Warren: 

This is the Department of Defense (DoD) response to the General 
Accounting Office (GAO) draft report, "Defense Inventory: Air Force 
Needs to Improve Control Over Shipments to Repair Contractors," May 7, 
2002 (GAO Code 350079). 

The Department concurs with the six of the recommendations in the draft 
report, partially concurs with three of the recommendations and 
nonconcurs with Recommendation 2, in which the Air Force already has 
the recommended capability in place and operating. In fact, the Air 
Force has taken immediate steps to improve compliance with controls 
already in place over shipments to repair contractors. 

The Department's detailed comments to the recommendations are enclosed. 
The Department appreciates the opportunity to comment on the draft 
report. 

Sincerely, 

Signed by: 

Allen W. Beckett: 
Principal Assistant: 

Enclosure: 

GAO Code 350079/GAO-02-617: 

"Defense Inventory: Air Force Needs To Improve Control Over Shipments 
To Repair Contractors" 

Recommendation 1: The GAO recommended that the Secretary of Defense 
direct the Secretary of the Air Force to improve processes for 
providing contractor access to government-furnished material by listing 
specific stock numbers and quantities of material in repair contracts 
(as they are modified or newly written) that the inventory control 
points have agreed to furnish to contractors. (p. 13/GAO Draft Report) 

DoD Response: Concur. 

a. DoD will direct Headquarters Air Force Materiel Command/Logistics 
(HQ AFMC/LG) to: 

(1) Establish management oversight to ensure that the Air Logistics 
Centers comply with AFMCI 23-113, which already requires that repair 
contracts authorizing Government Furnished Material and Equipment be 
written at the stock number and quantity level. 

(2) Develop a plan to modify existing contracts and provide a schedule 
to ensure full compliance by 2004. 

Estimated Completion Date (ECD): 14 Jun 02. 

b. DoD will direct HQ AFMC/LG to change Section H, AFMAN 23-110, Volume 
III, Part One, Chapter 9, to emphasize that appendix B of all contracts 
authorizing Government Furnished Materiel and/or Equipment must be 
written and validated at the stock number and quantity level. 

ECD: 31 Jan 03. 

Recommendation 2: The GAO recommended that the Secretary of Defense 
direct the Secretary of the Air Force to improve processes for 
providing contractor access to government-furnished material by 
developing automated internal control systems for loading and screening 
stock numbers and quantities against contractor requisitions. (p. 
13/GAO Draft Report) 

DoD Response: Non-concur. The Air Force Special Support Stock Control 
(SSSC) D035D System already has this capability at both the contract 
and DoD Activity Address Code level via user interface and a mass 
contract upload feature. This enables an automated check between 
requisitions and stock numbers. 

Recommendation 3: The GAO recommended that the Secretary of Defense 
direct the Secretary of the Mr Force to improve processes for providing 
contractor access to government-furnished material by manually loading 
stock numbers and quantities that the inventory central points have 
agreed to furnish to contractors into the control systems until the 
implementation of the automated systems is complete. (p. 13/GAO Draft 
Report) 

DoD RESPONSE: Partially concur. The Air Force Materiel Command Materiel 
Control Activity process already provides user and mass contract stock 
number/quantity upload capabilities for those contracts written IAW 
AFMCI 23-113. DoD will direct Headquarters Air Force Installations and 
Logistics (HQ AF/IL) to determine the feasibility of establishing an 
interim maintenance interface capability until all repair contracts are 
written in compliance with AFMCI 23-113. 

ECD: 14 Jun 02. 

Recommendation 4: The GAO recommended that the Secretary of Defense 
direct the Secretary of the Air Force to improve processes for 
providing contractor access to government-furnished material by 
requiring that waivers to manually loading stock numbers and quantities 
are adequately justified and documented based on cost-effective and/or 
mission critical needs. (p. 13/GAO Draft Report) 

DoD Response: Partially concur. The problem cited by the GAO was 
specific to a software problem in 1999-2000 between the Air Force 
Materiel Command's contract provisioning and materiel control activity 
systems which has since been resolved. DoD will direct the HQ AF/IL to 
ensure that future decisions affecting validation of contractor orders 
involving Government Furnished Materiel or Equipment be based on cost 
effectiveness and/or mission critical needs and requests processed IAW 
DoD 4140.1-R and DoD 4000.25-1-M. 

ECD: 14 Jun 02. 

Recommendation 5: The GAO recommended that the Secretary of Defense 
direct the Secretary of the Air Force to revise Air Force supply 
procedures to include explicit responsibility and accountability for 
generating quarterly reports of all shipments of Air Force material to 
contractors. (p. 13/GAO Draft Report) 

DoD Response: Concur. 

a. DoD will direct HQ AF/IL to formalize responsibility and 
accountability for the generation of required quarterly reports to the 
applicable Defense Contract Management Agency (DCMA) office by updating 
AFMAN 23-110, Volume III, Part 8, Chapter 15. 

ECD: 14 Jun 02. 

b. DoD will direct HQ AFMC/LG to publish interim policy and procedures. 

ECD: 28 Jun 02. 

Recommendation 6: The GAO recommended that the Secretary of
Defense direct the Secretary of the Air Force to revise Air Force 
supply procedures to include explicit responsibility and accountability 
for distributing the reports to DCMA property administrators. (p. 
13/GAO Draft Report) 

DoD Response: Concur. 

a. DoD will direct AF/IL to formalize responsibility and accountability 
for the distribution of required quarterly reports to the applicable 
DCMAs by updating AFMAN 23-110, Volume III, Part 8, Chapter 15. 

ECD: 14 Jun 02. 

b. DoD will direct HQ AFMC/LG to publish interim policy and procedures. 

ECD: 28 Jun 02. 

Recommendation 7: The GAO recommended that the Secretary of Defense 
direct the Secretary of the Air Force to determine, for the contractors 
in the GAO review, what actions are needed to correct problems in 
posting material receipts. (p. 14/GAO Draft Report) 

DoD Response: Concur. DoD will direct HQ AF/IL to determine, for the 
contractors in the GAO review, actions required to correct materiel 
receipt posting problems. 

ECD: 14 Jun 02. 

Recommendation 8: The GAO recommended that the Secretary of Defense 
direct the Secretary of the Air Force to determine, for the contractors 
in the GAO review, what actions are needed to correct problems in 
reporting shipment discrepancies. (p. 14/GAO Draft Report) 

DoD Response: Concur. DoD will direct HQ AF/IL to determine, for the 
contractors in the GAO review, actions required to ensure that 
contractor personnel are aware of procedures in submitting supply and 
transportation discrepancy reports. 

ECD: 14 Jun 02. 

Recommendation 9: The GAO recommended that the Secretary of Defense 
direct the Secretary of the Air Force to establish interim procedures 
to reconcile records of material shipped to contractors with records of 
material received by them, until the Air Force completes the transition 
to the Department of Defense Commercial Asset Visibility system in 
fiscal year 2004. (p. 14/GAO Draft Report) 

DoD Response: Concur. DoD will direct HQ AF/IL to establish interim 
procedures to reconcile records of Government Furnished Materiel and 
Equipment shipped to repair contractors and records of materiel 
acknowledged received by them. 

ECD: 14 Jun 02. 

Recommendation 10: The GAO recommended that the Secretary of Defense 
direct the Secretary of the Air Force to comply with existing 
procedures to request, collect, and analyze shipment discrepancy data 
to reduce the vulnerability of shipped inventory to undetected loss, 
misplacement, or theft. (p. 14/GAO Draft Report) 

DoD Response: Partially concur. In Feb 2001, HQ AF/IL directed all Air 
Force major commands to collect and analyze these types of supply 
discrepancies for possible trends. Each major command was tasked to 
provide AF/IL a semi-annual report of their findings. Negative reports 
were not required. DoD will direct HQ AF/IL to re-emphasize this 
requirement to all major commands and require all major commands submit 
a report on their findings for the last 12 months. A negative report 
will be required if no supply discrepancies were received. 

ECD: 31 Jul 02. 

[End of enclosure] 

[End of section] 

Appendix III: GAO Staff Acknowledgments: 

Acknowledgments: 

Key contributors to this report include Sandra F. Bell, George Surosky,
Susan Woodward, Jay Willer, David Fisher, Norman M. Burrell, and John
Ryan. 

[End of section] 

Related GAO Products: 

Performance and Accountability Series: Major Management Challenges
and Program Risksï¿½Department of Defense. GAO-01-244. Washington,
D.C.: January 2001. 

High-Risk Series: An Update. GAO-01-263. Washington, D.C.: January
2001. 

Defense Inventory: Plan to Improve Management of Shipped Inventory
Should Be Strengthened. GAO/NSIAD-00-39. Washington, D.C.: February
22, 2000. 

Department of the Navy: Breakdown of In-Transit Inventory Process 
Leaves It Vulnerable to Fraud. GAO/OSI/NSIAD-00-61. Washington, D.C.:
February 2, 2000. 

Defense Inventory: Property Being Shipped to Disposal Is Not Properly
Controlled. GAO/NSIAD-99-84. Washington, D.C.: July 1, 1999. 

DOD Financial Management: More Reliable Information Key to Assuring 
Accountability and Managing Defense Operations More Efficiently. GAO/T-
AIMD/NSIAD-99-145. Washington, D.C.: April 14, 1999. 

Defense Inventory: DOD Could Improve Total Asset Visibility Initiative 
With Results Act Framework. GAO/NSIAD-99-40. Washington, D.C.: April 
12, 1999. 

Defense Inventory: Navy Procedures for Controlling In-Transit Items Are 
Not Being Followed. GAO/NSIAD-99-61. Washington, D.C.: March 31, 1999. 

Performance and Accountability Series: Major Management Challenges and 
Program Risksï¿½Department of Defense. GAO/OCG-99-4. Washington, D.C.: 
January 1999. 

High-Risk Series: An Update. GAO/HR-99-1. Washington, D.C.: January 
1999. 

Department of Defense: Financial Audits Highlight Continuing Challenges 
to Correct Serious Financial Management Problems. GAO/TAIMD/NSIAD-98-
158. Washington, D.C.: April 16, 1998. 

Department of Defense: In-Transit Inventory. GAO/NSIAD-98-80R. 
Washington, D.C.: February 27, 1998. 

Inventory Management: Vulnerability of Sensitive Defense Material to 
Theft. GAO/NSIAD-97-175. Washington, D.C.: September 19, 1997. 

Defense Inventory Management: Problems, Progress, and Additional 
Actions Needed. GAO/T-NSIAD-97-109. Washington, D.C.: March 20, 1997. 

High-Risk Series: Defense Inventory Management. GAO/HR-97-5. 
Washington, D.C.: February 1997. 

High-Risk Series: Defense Financial Management. GAO/HR-97-3. 
Washington, D.C.: February 1997. 

[End of section] 

Footnotes: 

[1] Air Force inventory is also issued to contractors from warehouses 
at Air Force bases. 

[2] Classified items are those that require the highest degree of 
protection in the interest of national security; sensitive items are 
those that require a high degree of protection and control because of 
their high value and/or hazardous or technical nature; and pilferable
items have a ready resale value or a civilian application and are 
therefore especially subject to theft. 

[3] Government-furnished material is that which contractors requisition 
in support of repairs, alterations, and modifications. Generally, this 
material is incorporated into or attached onto deliverable end items 
(final products such as aircraft) or consumed or expended in performing 
the contract. 

[4] Only 12 of the 14 contracts we reviewed authorized the contractors 
to requisition government-furnished material. Of those 12 contracts, 9 
are screened by federal stock class or stock group rather than by stock 
number and quantity. 

[5] Only 12 of the 14 contracts in our review authorized the contractor 
to requisition government-furnished material. Of those 12 contracts, 8 
did not specify both the items and the quantities of material the 
inventory control points had agreed to furnish to contractors. 

[6] Under 10 U.S.C. 2222, the Department is to submit to the Congress 
an annual strategic plan for improving financial management. The 
Departmentï¿½s plan was submitted in January 2001. 

[End of section] 

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