Defense Inventory: Improved Industrial Base Assessments for Army War Reserve Spares Could Save Money (07/12/2002, GAO-02-650}

-------------------------Indexing Terms-------------------------
REPORTNUM:   GAO-02-650
    TITLE:   Defense Inventory: Improved Industrial Base Assessments for Army War Reserve Spares Could Save Money
     DATE:   07/12/2002



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United States General Accounting Office: 
GAO: 

Report to Congressional Committees: 

July 2002: 

Defense Inventory: 

Improved Industrial Base Assessments for Army War Reserve Spares Could 
Save Money: 

GAO-02-650: 

Contents: 

Letter: 

Results in Brief: 

Background: 

Army Industrial Base Assessments Do Not Use Current Industry Data: 

Opportunities Exist to Improve the Reliability of the Armyï¿½s Industrial 
Base Capability Assessments: 

Conclusions: 

Recommendations for Executive Action: 

Agency Comments and Our Evaluation: 

Scope and Methodology: 

Appendix I: Defense Logistics Agency Industrial Base Planning: 

Data Collection Tool: 

Analytical Tool: 

Appendix II: Comments from the Department of Defense: 

Appendix III: Staff Acknowledgments: 

Tables: 

Table 1: Industrial Base Assessment Attribute Comparison between 
Defense Logistics Agency and Army: 

Table 2: The Armyï¿½s Fiscal Year 2003-2007 War Reserve Spare Parts Plan: 

Table 3: Production Lead times for Selected War Reserve Spare Parts: 

Table 4: Industrial Base Assessment Attribute Comparison between DLA 
and Army: 

Table 5: Program Data Fields and Descriptions: 

Figure: 

Figure 1: Armyï¿½s Steps for Determining War Reserve Spare Parts 
Shortfalls: 

[End of section] 

United States General Accounting Office: 
Washington, DC 20548: 

July 12, 2002: 

Congressional Committees: 

This report follows up on our May 2001 recommendation that the 
Secretary of the Army develop improved estimates of private industryï¿½s
spare parts production capability for meeting currently projected 
wartime scenarios. [Footnote 1] We made this recommendation after we 
found that the Army relied on internally generated data rather than on 
current data from industry to develop its industrial base capability 
assessments. [Footnote 2] The Army concurred with our recommendation 
and cited actions it intends to take. Improvements to industrial base 
capability assessments could lead to increased readiness and to reduced 
costs for unneeded wartime spare parts inventories. 

In this report, we address whether (1) the Army has begun to collect and
use current industrial base data and (2) opportunities exist to improve 
the reliability of the Armyï¿½s industrial base capability assessments. 

To accomplish this review, we interviewed Army officials who are 
responsible for estimating the requirements and developing budgets for
war reserve spare parts and for assessing what portion of those 
requirements private industry is capable of providing. We also talked 
with officials from the Defense Logistics Agency about its industrial 
base assessment program. 

Results in Brief: 

The Armyï¿½s approach for assessing wartime spare parts industrial base
capability still does not use current data from industry. Instead, the 
Army uses historical parts procurement data because its prior efforts 
to collect current data from industry were not successful due to poor 
response rates. The Armyï¿½s assessments depend on historical data and 
resulting lead-time factors to project industryï¿½s contribution to 
satisfying wartime spare parts requirements. Without current data on 
industryï¿½s capability, assessments could be unreliable, resulting in 
reduced readiness due to critical spare parts shortfalls in wartime or 
inflated and costly war reserve spare parts inventories in peacetime. 
Moreover, the Armyï¿½s budget requests to Congress for war reserve spare 
parts risk being inaccurate. [Footnote 3] 

Opportunities exist to improve the Armyï¿½s industrial base capability
assessments. After issuing our May 2001 report, we identified a program 
in the Defense Logistics Agency that has several attributes reflecting 
sound management practices that are required for reliable industrial 
base capability assessments. Our analysis of the approach used by the 
Army compared to the Defense Logistics Agencyï¿½s spare parts industrial 
base assessment program revealed that the Armyï¿½s approach can be 
improved in three areasï¿½data collection, data analysis, and management 
strategies. Table 1 highlights the key attributes where there are 
opportunities to improve the Armyï¿½s assessments, based on the program 
used by the Defense Logistics Agency (DLA). 

Table 1: Industrial Base Assessment Attribute Comparison between Defense
Logistics Agency and Army: 

Attribute: Data collection: Collects current data from industry; 
DLA: Yes; 
Army: No. 

Attribute: Data collection: Uses Internet based survey; 
DLA: Yes; 
Army: No. 

Data collection: Data analysis: Models current production capability; 
DLA: Yes; 
Army: No. 

Data collection: Data analysis: Identifies problems for future 
management actions; 
DLA: Yes; 
Army: No. 

Data collection: Management strategies: Creates acquisition strategies; 
DLA: Yes; 
Army: No. 

Data collection: Management strategies: Targets industrial base 
investments; 
DLA: Yes; 
Army: No. 

Source: GAOï¿½s analysis. 

[End of table] 

Although DLAï¿½s program is in its early stages of implementation, DLA has
been able to successfully collect current data directly from private
industry on thousands of parts. Further, DLA is analyzing that data to
identify actual or potential parts availability problems. From this 
analysis, it has created management strategies for changing its 
acquisition procedures and making targeted investments in material and 
technology resources to reduce production lead times. For example, DLA 
identified an unusually long lead time of 360 days for an electronic 
part that, with a targeted investment, it was able to reduce to 30 
days, saving approximately $600,000. 

We are making recommendations to the Secretary of Defense for the Army
to create management strategies for improving wartime spare parts
availability that can save money, improve readiness, and provide more
realistic budget requests to Congress. The Department of Defense (DOD)
partially concurred with our recommendations because it did not agree
with details about how the attributes we cited could enhance the Armyï¿½s
current process for assessing industrial base capabilities. Its concerns
principally centered on the need for the Army to have flexibility in
implementing the program and the additional resources required to
maintain more accurate data. As discussed in the agency comments
section of this report, we continue to believe our recommendations
provide an opportunity to enhance the Armyï¿½s program while allowing this
flexibility. 

Background: 

DODï¿½s current policy calls for each military service to determine its
requirements and acquire sufficient war reserve materiel for the 
execution of current wartime scenarios and to be able to sustain these 
operations until being re-supplied. [Footnote 4] Thus, in developing 
their plans, the services must consider the availability of spare parts 
in their peacetime operating stocks, their war reserve spare parts 
inventories, and from the industrial base, and then estimate what 
additional materiel they need to buy. The Armyï¿½s industrial base and 
stationing strategies and DODï¿½s regulations reflect the importance of 
the industrial base in supporting wartime operations and require the 
services to rely on the industrial base to the maximum extent possible. 
[Footnote 5] In addition, the Army is required to maintain a viable 
capability to monitor and assess the health of the industrial base and 
identify potential risks. [Footnote 6] 

The U.S. Army Materiel Command is responsible for determining the 
Armyï¿½s requirements for war reserve spare parts, as well as the Armyï¿½s
estimate of what private industry can be expected to provide during
wartime, in order to derive the war reserve spare parts shortfall. 
[Footnote 7] It receives technical expertise from the Army Materiel 
Systems Analysis Agency in determining its war reserve requirements and 
an estimate of what can be expected from private industry. The 
Commandï¿½s major subordinate commands are responsible for purchasing 
specific types of materiel, such as aviation, tank, automotive, and 
communications parts, and they have a limited number of industrial base 
specialists who can be assigned to provide data for assessments. Figure 
1 illustrates the steps that the Army follows to determine its war 
reserve shortfall. 

Figure 1: Armyï¿½s Steps for Determining War Reserve Spare Parts 
Shortfalls: 

[See PDF for image] 

The following data is depicted: 

Begin with: 
War materiel requirement. 

Fulfilled by: 
Peacetime inventory on hand; 
War reserve inventory on hand; 
Industrial base production. 

Results in:
Total war spare parts shortfall. 

Source: GAO analysis. 

[End of figure] 

To plan how much war reserve materiel it needs to buy, the Army 
develops estimates of when spare parts will be available from the
industrial base during wartime so that it can determine how much war
reserve materiel it needs to buy and put into its war reserve 
inventory. In preparing its estimates, the Army first calculates the 
total amount of war materiel that it needs to support current wartime 
scenarios. Specifically, it calculates its requirements by using a 
computer model that considers several factors, such as spare parts 
usage and breakage rates. Next, it determines the amount of peacetime 
and war reserve inventories that are available to meet that 
requirement. The Army then applies the amount it estimates the 
industrial base can be expected to provide during wartime. The 
remaining amount is considered the total spare parts shortfall. The
total shortfall can then be divided into the amount for which Congress 
has authorized funding, any amounts budgeted for future years, and an
additional amount the Army has not yet requested from Congress. 

As table 2 shows, in preparation for its fiscal year 2003 budget 
submission to Congress (part of the fiscal year 2003-2007 out-of-cycle 
Program Objective Memorandum), the Army calculated that it required 
$3.30 billion for its wartime spare parts. Of this amount, it estimated 
that $1.93 billion worth of spare parts would be available from 
peacetime and war reserve inventories. Another $0.13 billion expected 
to be available from private industry was applied. The resulting total 
spare parts shortfall was $1.24 billion. Of this amount, the Army has 
been funded $0.11 billion for fiscal years 2000-2002 and expects to 
request $0.47 billion in fiscal years 2003-2007. Overall the Army 
reports a total spare parts shortfall of approximately $0.66 billion. 
[Footnote 8] 

Table 2: The Armyï¿½s Fiscal Year 2003-2007 War Reserve Spare Parts Plan
(Dollars in billions): 

Calculated costs of required wartime spare parts: 
Subtotal: [Empty]; 
Total: 3.30. 

Peacetime inventory on hand: 
Subtotal: 0.63; 
Total: [Empty]. 

War reserve inventory on hand: 
Subtotal: +1.30; 
Total: [Empty]. 
 
Inventory to be available: 
Subtotal: 1.93; 
Total: -1.93. 

Remaining unfilled requirement: 
Subtotal: [Empty]; 
Total: 1.37. 

Estimated amount from private industry: 
Subtotal: [Empty]; 
Total: -0.13. 

Estimated amount still needed to fulfill requirement (spare
part shortfall): 
Subtotal: [Empty]; 
Total: 1.24. 

Funding for fiscal years 2000-02: 
Subtotal: [Empty]; 
Total: -0.11. 

Expected funding for fiscal years 2003-07: 
Subtotal: [Empty]; 
Total: -0.47. 

Shortfall remaining: 
Subtotal: [Empty]; 
Total: 0.66. 

Source: Fiscal Years 2003-07 Program Objective Memorandum for the Army. 

[End of table] 

Army Industrial Base Assessments Do Not Use Current Industry Data: 

The Armyï¿½s approach for assessing wartime spare parts industrial base
capability still does not use current data from industry. Rather, the 
Armyï¿½s assessments of industryï¿½s capability to produce spare parts in 
wartime depend on historical data and lead-time factors that the Army 
develops itself. Without current data on industryï¿½s capability, 
assessments could be unreliable, resulting in reduced readiness due to 
critical spare parts shortfalls in wartime or inflated and costly war 
reserve spare parts inventories in peacetime. Moreover, the Armyï¿½s 
budget requests to Congress for war reserve spare parts risk being 
inaccurate. 

In the past, the Army collected data directly from private industry 
through paper questionnaires to industry representatives that were up 
to 22 pages long. [Footnote 9] It stopped this practice primarily 
because of the poor response rates. According to Army Materiel Command 
officials, industry representatives said they saw no apparent direct 
benefit from filling in the lengthy questionnaires and, moreover, felt 
they should be compensated for their time and effort. We were told that 
command officials themselves do not believe that collecting current 
data from industry is cost-effective. 

Now, rather than collecting current data from private industry, the Army
uses data that it acquired several years ago from private industry to 
create lead-time factors for estimating its wartime industrial base 
capability. These factors are based on out-of-date industry data. 
Furthermore they were developed from a limited range of spare part 
items but were applied to all parts needed for war. For example, in 
developing its fiscal year 2003 budget submission to Congress, the Army 
used a formula with wartime lead-time factors that were derived from 
estimated accelerated peacetime administrative lead times and 
production lead times. [Footnote 10] These accelerated lead-time 
factors of 85 and 61 percent, respectively, were based on data obtained 
prior to 1998 for specific items, such as howitzers, that were managed 
by the Army Tank and Automotive Commandï¿½s Rock Island facility. 
According to an Army document, [Footnote 11] this method of calculating 
lead times fails to account for variations that exist from item to item 
and can lead to unrealistic industrial base capability estimates. For 
example, a 1998 Army study found that 44 of 86 parts assumed to be 
supported by industry could not be and that 176 of 218 parts that were 
assumed not to be supported by the industrial base were. 

Partly in response to the recommendation in our prior report, the Army
has several initiatives underway to improve its industrial base 
capability assessments, but these initiatives continue to focus on 
historical, rather than current industry data. In one initiative, the 
Army is developing a new approach to calculate its wartime spare parts 
requirements, in part, from data collected from private industry during 
1998. In another, the Army Materiel Command has designed a toolï¿½called 
the Industrial Base Hub [Footnote 12]ï¿½that brings together in one Web-
based automated system a broad range of existing industrial base data. 
The data consist of war reserve requirements, producer capabilities, 
contract awards and actions, contractor businesses, and commercial 
businesses and finances. The Industrial Base Hub relies on historical 
data rather than on current data from industry. In a third initiative, 
the Army Materiel Systems Analysis Agency has proposed periodically 
collecting data on production lead times for the 100 costliest spare 
parts, which account for 70 percent of the total dollar value of the
entire wartime spare parts requirement. The Army Materiel Systems 
Analysis Agency believes that collecting current data periodically from 
the private manufacturers of the top 100 costliest spare parts could be 
a reasonable way to get a cost-effective, reliable industrial base 
offset estimate. 

Opportunities Exist to Improve the Reliability of the Armyï¿½s Industrial
Base Capability Assessments: 

The Army could improve the reliability of its industrial base 
assessments by considering several key attributes present in DLAï¿½s 
industrial base assessment program. These include the collection of up-
to-date industry data, the timely analysis of data to develop current 
and reliable industrial base assessments, and the use of analytical 
data to create management strategies aimed at reducing spare parts 
costs and the risk of shortfalls. 

DLAï¿½s Assessment Program: 

To improve its management of spare parts for the services, and thus 
reduce costs and inventory, DLA re-engineered its industrial base 
capability assessment program. DLAï¿½s assessment program, called the
Worldwide Web Industrial Capabilities Assessment Program, was started
in the fall of 1999. It consists of a data collection tool and an 
analytical tool, which is used to create management strategies. (See 
appendix I for a more detailed description.) The data collection tool 
provides the capability to gather new and updated information directly 
from private companies via the Internet. Company representatives 
voluntarily respond to a series of on-line survey questions that, 
depending on how answered, are self-tailored to that company to 
simplify and speed up the survey process. 

Private companies provide information on what spare part items they can
provide (or are willing to provide); what quantities they can produce; 
how long it will take to produce them under different scenarios (e.g., 
normal or crisis conditions); and what potential bottlenecks (e.g., 
availability of certain materials, or equipment constraints) exist that 
could limit the production of certain spare parts. DLA validates this 
information as part of its assessment process before acting on the 
information. 

The programï¿½s analytical tool provides analysts with immediate access to
the automated data collected from industry. This provides the 
capability to develop timely and reliable assessments of industryï¿½s 
ability to provide various spare parts in peacetime as well as wartime. 
In addition, it provides the capability to use the analytical data to 
identify actual or potential parts availability problems (e.g., items 
with unusually long lead times or items that are involved in 
bottlenecks) and, based on this information, to create a management 
strategy for resolving these problems, for example, by changing its 
acquisitions procedures or targeting investments in material and 
technology resources to reduce production lead times. 

Benefits of DLAï¿½s Assessment Program: 

Although DLAï¿½s industrial base assessment program is relatively new, it
provides a number of examples that illustrate the effectiveness of
collecting current data directly from the industrial base. Table 3 
shows the impact on production lead time when it is based on up-to-date 
industry data. For example, clamp couplings for tanks, aircraft, and 
aircraft engines have a production lead time of 35 days during a crisis 
(surge) situation rather than a lead time of 156 days (lead time of 
record) previously estimated by DLA for normal, or peacetime, 
situations. 

Table 3: Production Lead Times for Selected War Reserve Spare Parts: 

Weapon system: Helicopters, aircraft engines; 
Spare part item: Resilient mount; 
Industry surge lead time[A]: 70; 
Lead time of record[B]: 163. 

Weapon system: Communications satellite terminal; 
Spare part item: Centrifugal fan; 
Industry surge lead time[A]: 56; 
Lead time of record[B]: 109. 

Weapon system: Communications; 
Spare part item: Tube axial fan; 
Industry surge lead time[A]: 45; 
Lead time of record[B]: 125. 

Weapon system: Tanks, aircraft, and aircraft engines; 
Spare part item: Clamp coupling; 
Industry surge lead time[A]: 35; 
Lead time of record[B]: 156. 

Weapon system: Aircraft; 
Spare part item: Clamp coupling; 
Industry surge lead time[A]: 35; 
Lead time of record[B]: 65. 

Weapon system: Aircraft and support equipment; 
Spare part item: Clamp coupling; 
Industry surge lead time[A]: 35; 
Lead time of record[B]: 49. 

[A] The surge production lead-time estimate, based on industryï¿½s 
response to DLAï¿½s survey, refers to the best possible production lead 
time (in days) for an item in a crisis situation which is date of 
contract award to date of receipt of first significant delivery. 

[B] The production lead time of record estimate is a computed new 
average production lead time (in days) that factors in the latest 
actual production lead time, the number of days from contract award to
date of contract delivery and subsequently the receipt date of first 
significant delivery, and the old production lead time of record in the 
system. It is designed for normal, or peacetime, situations. 

Source: DLA Worldwide Web Industrial Capabilities Assessment Program. 

[End of table] 

This more reliable information could result in greater economy in
purchasing decisions. For example, private industry says it can provide 
a resilient mount within 70 days during a crisis rather than in the 163 
days that DLA previously estimated. The war reserve requirement for 
this item occurs during the first 3 months of a war. The reduction in 
production lead time from 163 to 70 days means that the third month 
could be covered with a savings of $4,810 by not buying the items. 
[Footnote 13] Likewise, the war reserve requirement for the centrifugal 
fan spreads over the first 6 months of a war with the bulk occurring 
during the last 3 months. The lead-time reduction from 109 days to 56 
days means that months 2-6 could be covered with a savings of $62,560 
by not buying the items. 

Additional benefits from the assessment program stem from evaluating
currently collected and analyzed information to identify potential
problems with production and create various management strategies to
resolve them. For example, by identifying an unusually long lead time 
for a cesium lamp and examining the reasons for this, DLA was able to
ultimately reduce the lampï¿½s lead time of 360 days to only 30 days. The
lamp is used on several types of Navy, Marine Corps, and Air Force
aircraft in electronic counter measure systems to defeat infrared 
missiles. The lamp cartridge, which is a critical element used in these 
systems, is made of exotic materials and operates at extreme 
temperatures and power levels. 

An industrial capabilities assessment concluded that the lead time of
record for this item was 360 days. Negotiations with the vendor, 
however, reduced this to 300 days. The lead time of 300 days is due to 
the use of highly technical processes and several long-lead-time 
materials in its production. Because of the unique nature of the cesium 
lamp, additional measures were needed to reduce the lead time further. 
As part of a targeted investment, DLA awarded a contract to preposition 
and rotate long-lead materials and partially finished components, 
resulting in a further 270-day reduction in lead time to 30 days. As a 
result, DLA is spending $530,000 for this investment, compared with the 
$1.1 million it would cost to purchase and store an equivalent amount 
of finished product to meet war reserve requirements, saving 
approximately $600,000. 

Army Industrial Base Capability Assessments Can Be Improved: 

The Armyï¿½s approach for assessing wartime spare parts industrial base
capability can be improved. A comparative analysis of DLAï¿½s program to
the Armyï¿½s approach shows opportunities to improve, specifically in the
areas of data collection, data analysis, and management strategies. 
Table 4 compares the DLA and Army industrial base assessment approaches 
for the three key attributes. 

Table 4: Industrial Base Assessment Attribute Comparison between DLA 
and Army: 

Attributes: Data collection: Collects current data from industry; 
DLA: Yes; 
Army: No. 

Attributes: Data collection: Maintains a deliberate, ongoing program to 
collect current data; 
DLA: Yes; 
Army: No. 

Attributes: Data collection: Conducts follow-up to encourage 
participation; 
DLA: Yes; 
Army: No. 

Attributes: Data collection: Uses Internet based survey rather than 
paper; 
DLA: Yes; 
Army: No. 

Attributes: Data collection: Saves input time through a self tailoring 
survey instrument; 
DLA: Yes; 
Army: No. 

Attributes: Data collection: Uses a unique classification strategy to 
group industry items; 
DLA: Yes; 
Army: No. 

Attributes: Data analysis: Incorporates current data into Internet 
based analytical tool; 
DLA: Yes; 
Army: No. 

Attributes: Data analysis: Allows immediate access to current industry 
data; 
DLA: Yes; 
Army: No. 

Attributes: Data analysis: Uses current and historical data to model 
industry capability; 
DLA: Yes; 
Army: No. 

Attributes: Data analysis: Identifies item shortfalls for further 
analysis; 
DLA: Yes; 
Army: No. 

Attributes: Management strategies: Meets requirement to assess 
industrial base capability; 
DLA: Yes; 
Army: No. 

Attributes: Management strategies: Creates acquisition strategies; 
DLA: Yes; 
Army: No. 

Attributes: Management strategies: Targets industrial base investments; 
DLA: Yes; 
Army: No. 

Attributes: Management strategies: Reduces lead times and saves money; 
DLA: Yes; 
Army: Unknown. 

Attributes: Management strategies: Links results of analysis to its 
strategy; 
DLA: Yes; 
Army: No. 

Source: GAO analysis. 

[End of table] 

By focusing on the above attributes, DLAï¿½s industrial base capability 
assessment program has become an improved, simplified, time-saving 
process for companies to provide current production capability data. For
example, the process uses a streamlined Internet based data collection
tool that industry representatives say is an improvement over the old
paper process. Also DLA uses follow-up letters and phone calls to
encourage use of the online data collection tool. Companies can then
participate with DLA in creating management strategies to reduce lead
times, which can reduce required war reserve inventories. 

Conclusions: 

Industrial base capability assessments designed to have current data 
such as DLAï¿½s create opportunities for sound decision making regarding 
the planning for and purchase of Army war reserve spare parts. The 
Armyï¿½s approach to industrial base capability assessments lacks key 
attributes that include the collection of current industry data, the 
analysis of that data and the creation of management strategies for 
improving wartime spare parts availability. Out-of-date data could 
result in reduced readiness and inflated or understated war reserve 
spare parts funding requests within budget submissions to Congress. 
Without a process that provides such analysis, the Army cannot identify 
long lead times and create management strategies to reduce lead times 
and thus the amount of inventory needed. 

Recommendations for Executive Action: 

In order to improve the Armyï¿½s readiness for wartime operations, achieve
greater economy in purchasing decisions, and provide Congress with
accurate budget submissions for war reserve spare parts, we recommend
that the Secretary of Defense direct the Secretary of the Army to have 
the Commander of Army Material Command take the following actions to
expand or change its current process consistent with the attributes in 
this report: 

* establish an overarching industrial base capability assessment 
process that considers the attributes in this report; 

* develop a method to efficiently collect current industrial base 
capability data directly from industry itself; 

* create analytical tools that identify potential production capability
problems such as those due to surge in wartime spare parts demand; and; 

* create management strategies for resolving spare parts availability
problems, for example, by changing acquisition procedures or by 
targeting investments in material and technology resources to reduce 
production lead times. 

Agency Comments and Our Evaluation: 

DOD partially concurred with the overall findings and recommendations.
However, it nonconcurred with specific points in several of our
recommendations relating to the need to improve the capability of the
Armyï¿½s approach to assessing industrial base capabilities. Our 
evaluation of the Departmentï¿½s specific comments on each recommendation 
follows. DOD agreed with the overall point of our first recommendation 
that it establish an overarching industrial base assessment process 
relying on the most accurate information available. However, it did not 
concur that the Army should change its current process to be consistent 
with attributes of the DLA program. It stated that the Armyï¿½s current 
system already applies many of these attributes and must have the 
flexibility to do so in its own manner consistent with its specific 
requirements and resources. As we reported, our analysis shows the 
Armyï¿½s program does not have all the key attributes such as collecting 
current industrial base capability data from industry. Furthermore, we 
considered the Armyï¿½s need for flexibility in managing and executing 
its program when developing our recommendation by stating that the Army 
should be consistent withï¿½not necessarily mirror the attributes of 
DLAï¿½s program. Therefore, we continue to believe our recommendation is 
appropriate. 

DOD agreed with the underlying premise of our second recommendation
that the most accurate data lead to the most accurate estimates. 
However, it stated that we provided no evidence that more current data 
would result in a more accurate forecast of industryï¿½s capability to 
provide parts for war. As pointed out in our report, DLA provided 
examples of how it could save money by using current data it collected 
from industry, such as over $62,000 on the centrifugal fan. 
Furthermore, we noted that a study done by the Army in 1998 showed that 
data collected at that time about actual industrial base capability 
significantly disagreed with the Armyï¿½s estimated industrial base 
capability. The department also did not agree to a comprehensive data 
collection effort because keeping more current data does not warrant 
additional resources and stated that it will direct the Army examine 
the feasibility of attempting to proactively collect production data 
for a limited number of items. We recognized the potential for such an 
initiative in our report and stated that the Army Materiel Systems 
Analysis Agency believes that periodically collecting current data on 
the top 100 costliest spare parts could be a reasonable approach. 
Although this is a good first step, a comprehensive effort to collect 
current industrial base capability data directly from industry is basic 
to the recommendationï¿½s underlying premise and is a best practice. 
Therefore we continue to believe that our recommendation has merit. 

DOD concurred with the point of our third recommendation that there is a
need to identify potential production capability problems such as those
resulting from a wartime surge in demand for spare parts. However, it 
did not agree that the Army does not have such a process. While the 
Armyï¿½s approach may have many analytical features, it does not provide 
specific analyses of production capability. Such analyses contribute to 
identifying possible production capability problems and could enhance 
the Armyï¿½s management decisions. Therefore, we continue to recommend 
that the Army create such analytical tools. Furthermore, in response to 
DODï¿½s comment about the need to validate survey data on production 
capability before taking action, we added information to our report 
stating that DLA does validate its industry surveys as part of its 
process. 

With regard to our fourth recommendation, DOD concurred with the
concept that management strategies are needed to resolve spare parts
availability problems. But, it disagreed with the implication that the 
Army has no such strategies. While the Army does have some processes at 
the individual command level that identify and address spare parts 
availability problems, we did not find an overarching process to create 
management strategies designed to reduce lead times and inventories. 
Therefore, we continue to believe that our recommendation is 
appropriate. 

Scope and Methodology: 

To determine whether the Army is using current industrial base data for
assessing wartime spare parts industrial base capability, we interviewed
Army officials responsible for war reserve spare parts planning,
requirements development, and estimation of industrial base capability 
in the Office of the Army Deputy Chief of Staff for Logistics in 
Washington, District of Columbia; the Army Materiel Command in 
Alexandria, Virginia; the Army Aviation and Missile Command at Redstone 
Arsenal, Alabama; and the Army Materiel Systems Analysis Agency at 
Aberdeen Proving Grounds, Maryland. 

To determine whether opportunities exist to improve the reliability of 
the Armyï¿½s industrial base capabilities assessments, we compared the 
Armyï¿½s approach to key attributes of the DLAï¿½s program by interviewing 
DLA officials in the Supplier Assessment and Capability Division at Fort
Belvoir, Virginia, and the Defense Supply Centers in Richmond, Virginia,
and Columbus, Ohio, that are responsible for an industrial base data
collection and analysis activity using information from private 
industry to improve spare parts management. We also reviewed the 
processes used by the Army and DLA to assess industrial base 
capability. 

We performed our review between October 2001 and May 2002 in accordance 
with generally accepted government auditing standards. 

We are sending copies of this report to the Secretary of Defense and the
Secretary of the Army. We will also make copies available to others upon
request. In addition, the report will be available at no charge on the 
GAO Web site at [hyperlink, http://www.gao.gov]. 

Please contact me on (202) 512-8412 if you or your staff has any 
questions concerning this report. 

Signed by: 

David R. Warren, Director: 
Defense Management Issues: 

List of Congressional Committees: 

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

[End of section] 

Appendix I: Defense Logistics Agency Industrial Base Planning: 

The Defense Logistics Agencyï¿½s (DLA) industrial base assessment program
operates within the Supplier Assessment and Capability Division in the
Acquisition Management and Logistics Policy Directorate. Among the
divisionï¿½s objectives are: (1) to provide information tools to assess 
the capabilities of suppliers and (2) to identify potential readiness 
shortfalls and mitigate them through various business practices such as 
investing in long-lead materials and by taking advantage of 
manufacturing commonalities. 

To achieve these objectives, the division has developed a variety of 
tools to assess the supplier base in each of its major product 
categoriesï¿½weapon systems and hardware, construction, medical supplies,
subsistence items, and clothing and textiles. Using these tools, DLA is 
able to evaluate suppliersï¿½ capabilities to provide items in both 
peacetime and wartime, to take actions to mitigate quantifiable risks, 
and to examine broad industrial base issues and trends, using 
statistically valid information. The tools allow assessments to be made 
by individual item or grouped by items, product family, sector or 
subsector, weapon system or platform, or supplier. 

One of these tools, the Worldwide Web Industrial Capabilities Assessment
Program, was designed for assessing supplier resources available to the
Defense Department. The program is an automated, interactive, Web-based
program that allows the gathering of information from industrial 
suppliers and the use of this data to assess the industrial sectorï¿½s
capabilities for supplying various items. It also enables information 
to be analyzed in a wide variety of formats in order to identify 
strategies directed toward reducing costs and providing wartime 
readiness. 

Developed in 1997, the Worldwide Web Industrial Capabilities Assessment
Program replaced the old data collection process, which relied on mass
mailings of lengthy (up to 22 pages), cumbersome questionnaires that
suppliers had to fill out by hand. The response rate from industry was
typically too low to allow any statistically relevant analysis. In 
addition, the narrative answers to key questions were incompatible with 
computer analysis, and thus the information that industry provided 
could not be acted upon. 

The development of the program changed both the way information is
collected from industrial suppliers and the way that information is 
used to conduct industrial base assessments and analyses. 

Data Collection Tool: 

The data collection tool was built specifically for industrial base
assessments. It resides on a Web site that can be easily accessed by
industry representatives. It uses an interactive survey format to 
collect information directly from a company about its ability to supply 
certain items. A companyï¿½s representative checks in and fills out, or 
updates, a survey questionnaire for each item or group of items that is 
supplied. Depending on how a user answers a question, the questionnaire
automatically adjusts itself to remain as short as possible but still 
collect the essential information that is needed for analysis. The 
survey information is saved in a permanent database, which eliminates 
the need for a company to reenter information when it is updated. 

The program identifies each item by the supplierï¿½s own part number
grouped by an industry standard classification code. This simplifies 
input of information for multiple items that might use the same 
production line or equipment. It requests a wide range of information 
about the industryï¿½s ability to supply an item, including high and low 
estimates of production time, capacity, potential constraints and 
bottlenecks, and inventory on-hand. See table 5 for a list of the data 
fields. 

Table 5: Program Data Fields and Descriptions: 

Data field: Previous year (production data); 
Description of data: The actual quantity of the item (in units) 
produced during the previous calendar year. 

Data field: Current year (production data); 
Description of data: The actual/estimated quantity of the part produced 
at the responding manufacturing site during the current calendar year. 

Data field: Next year (production data); 
Description of data: The projected quantity of the item (in units) to 
be produced during the next calendar year. 

Data field: Low estimate (production for U.S. government end use); 
Description of data: Estimate the minimum amount of the portion of 
current production (in percent) of the item that will be sold directly 
to the U.S. government or included in some other product that is sold 
to the U.S. government. If you have precise knowledge of the final use 
of the surge item, the minimum and maximum estimates will be identical. 

Data field: High estimate (production for U.S. government end use); 
Description of data: Estimate the maximum amount of the portion of 
current production (in percent) of the item that will be sold directly 
to the U.S. government or included in some other product that is sold 
to the U.S. government. If you have precise knowledge of the final use 
of the surge item, the minimum and maximum estimates will be identical. 

Data field: Constraints (surge data); 
Description of data: Specify the major constraints to larger production 
quantities. 

Data field: First article test; 
Description of data: Needed for items requiring Department of Defense 
(DOD) certification. Clicking yes means your facility has been approved 
by DOD to manufacture items with rigid specifications. 

Data field: Technical data package; 
Description of data: Clicking yes indicates you possess the technical 
drawings/specifications for the item. 

Data field: Current lead time; 
Description of data: The current minimum time between order and 
delivery of a listed part. 

Data field: Priority lead time; 
Description of data: The estimated time between order and delivery of a 
listed part (supplied from new production, not finished inventory), if 
the part were given priority treatment over all other production. 

Data field: Finished inventory; 
Description of data: Average inventory of finished parts under normal 
operating conditions. 

Data field: Production resource category; 
Description of data: The survey focuses on five production resource 
categories: production equipment, test equipment, tooling, skilled 
labor, and materials. For each listed part, provide bottleneck and 
throughput data for those categories that were identified in the 
ï¿½Constraintsï¿½ section as limiting increased production of the part. 

Data field: Bottleneck; 
Description of data: The specific production equipment, tooling, test 
equipment, labor, or material that would limit output of a part in 
response to a sudden substantial increase in demand. 

Data field: Maximum throughput during one hour of operation; 
Description of data: The maximum units of a part that can be processed 
through a specific bottleneck during one hour of operation. 

Data field: Materials special definition; 
Description of data: For material bottlenecks, provide the maximum 
number of this part that can be produced from the average ï¿½on hand 
quantityï¿½ of the specified bottleneck material. This answer should be 
consistent with the average inventory reported for materials in the 
capacity section of this tool. If Average On-Hand Inventory was 
reported equal to 0, provide number of material bottleneck required to 
produce one unit of the surveyed item. 

Data field: Quantity of item; 
Description of data: The estimated quantity of the item that can be 
processed through the identified bottleneck during one hour of 
utilization. 

Data field: Critical resources; 
Description of data: The piece of equipment that would be the first 
bottleneck limiting increased output of the item. (Ignore bottlenecks 
that are not the direct result of equipment constraints and ignore 
competing demands for the equipment used to produce items other than 
the item.) 

Data field: Quantity from inventory; 
Description of data: The amount of units of the item that could be 
produced using only materials currently in inventory. Assume that all 
applicable materials currently in inventory could be dedicated to 
production of the item. In other words, ignore any conflicting material 
needs for the production of other items. If the current inventory 
levels are abnormally high or low, base your calculations on an average 
inventory level. Include any finished quantities of the item 
currently/normally held in inventory in the total. 

Data field: Number of equipment/staff; 
Description of data: Provide the unit count for each type of equipment, 
tooling, or skilled labor category. For skilled labor, express the unit 
count in terms of full-time equivalents. ï¿½Full-time equivalentï¿½ is the 
number of hours entered in the ï¿½Current capacityï¿½ column. For example, 
if ï¿½Current capacityï¿½ is a 40-hour workweek, two half-time employees 
who work 20-hour workweeks should be counted as one full-time 
equivalent. 

Data field: Current capacity; 
Description of data: The hours per week that constitute 100 percent 
utilization of the listed production resource under normal operating 
conditions. For skilled labor, this number should be normal weekly 
hours for a full-time employee. 

Data field: Capacity utilization; 
Description of data: The current utilization rate (in hours per week) 
of the listed production resource. 

Data field: Utilization for government end use; 
Description of data: The average hours per week the listed production 
resource is utilized to produce items for government end use. Your 
response should include both items sold directly to the U.S. government 
and items included in other products sold to the U.S. government. If 
you do not track final use of some or all items produced with this 
production resource, provide
your ï¿½best guess.ï¿½ 

Data field: Surge capacity; 
Description of data: The maximum hours of operation per week 
(sustainable over several months) that the listed production resource 
could be utilized under emergency conditions. 

Data field: Normal lead time (current lead time); 
Description of data: If a customer placed an order with you today for a 
quantity of the item, how many days from today would you promise 
delivery (from new production, not from off-the-shelf)? 

Data field: Lead time to bring new capacity on-line; 
Description of data: What is the ï¿½order-to-first productionï¿½ lead time 
for the listed production resource. If you were to order/hire the 
production resource today, how soon (in days) would you expect this 
production resource to be operational? 

Data field: Shortest lead time to bring new capacity on-line; 
Description of data: What is the shortest ï¿½orderï¿½to-first productionï¿½ 
lead time for the listed production resource, if your order for this 
production resource were given top priority. (In other words, assume 
that your order would be placed at the top of your supplierï¿½s delivery 
queue.) If you were to order/hire the production resource today, how 
soon (in days) would you
expect this production resource to be operational? 

Data field: New item production; 
Description of data: In response to an emergency need, the length of 
time it would take to produce that item after receiving the technical 
data (in days). Assumptions: (1) the item is similar in complexity to 
the item addressed in your previous responses and (2) the item can be
produced using the same production equipment, test equipment, and 
skilled labor currently used for production of that item. 

Data field: Surge lead time; 
Description of data: Given crisis planning what is your best possible 
production lead time (PLT) for this item? 

Data field: Facility name; 
Description of data: This is the legal name for the location about 
which information is being provided. Include all qualifiers such as 
division and subsidiary. 

Data field: Street address; 
Description of data: The street address includes the post office box 
number, if used, as well as a physical street address. 

Data field: City; 
Description of data: The city (mailing) address for the facility. 

Data field: State; 
Description of data: The state address for the facility. Use the 
standard, two-character abbreviations for states. Use the province name 
if Canadian. 

Data field: Zip code; 
Description of data: Nine-digit zip codes are preferred for U.S. 
addresses, and 10-digit codes are preferred for Canadian addresses. 

Data field: Country; 
Description of data: USA or Canada. 

Data field: DUNS number; 
Description of data: This is a nine-character number assigned by Dun & 
Bradstreet Financial Services that identifies corporate entities. 

Data field: CAGE code; 
Description of data: CAGE is the abbreviation for Commercial and 
Government Entity. This five-character alphanumeric identifier is 
assigned by the government to companies doing business with the 
government. (The CAGE Code was formerly known as FSCM.) 

Data field: DODAAC number; 
Description of data: This is the DOD Activity Address Code for the DCMC 
representative (DCMAO or DPRO). The DODAAC listing is contained in DOD 
4000.25-6-M, DOD Activity Address Directory. 

Data field: Name; 
Description of data: Enter your name. 

Data field: Job title; 
Description of data: Enter your job title. 

Data field: Telephone number; 
Description of data: Enter your telephone number, including area code. 
Enter the extension number in the extension field. 

Data field: Fax number; 
Description of data: Enter your fax number, including area code. 

Data field: Email address; 
Description of data: Enter your email address. 

Data field: Company name; 
Description of data: If known, include qualifiers such as divisions and 
subsidiary. 

Data field: Street address; 
Description of data: The street address includes the post office box 
number, if used, as well as a physical street address. 

Data field: City; 
Description of data: The city (mailing) address for the key supplier. 

Data field: State; 
Description of data: The state (mailing) address for the key supplier. 
Use the standard two-character abbreviations for states. Use the 
appropriate mailing designation instead of state if the supplier is 
foreign. 

Data field: Zip code; 
Description of data: Nine-digit zip codes are preferred for U.S. 
addresses, and ten-digit zip codes are preferred for Canadian 
addresses; use the appropriate mailing designation instead of the zip 
code if the supplier is foreign. 

Data field: Country; 
Description of data: The country where the key supplier resides. 

Data field: Material name; 
Description of data: Identify the material/item supplied by this 
supplier. 

Data field: Part number/grade of material; 
Description of data: Enter a unique identifier for the material/item. 

Data field: Inventory; 
Description of data: Your facilityï¿½s average inventory of the material 
or pass through item. 

Data field: Unit of measure; 
Description of data: The standard measure of material or item quantity, 
such as ï¿½each,ï¿½ ï¿½100-ct box,ï¿½ ï¿½pounds,ï¿½ ï¿½100-lb ingot,ï¿½ ï¿½55-gal 
barrel,ï¿½ etc. 

Data field: Material lead time (normal); 
Description of data: The current order-to-delivery lead time (days) for 
this material/item. 

Data field: Monthly supply (normal); 
Description of data: The average monthly supply of the material or part 
acquired from this vendor under normal conditions or the average 
quantity ordered if ordered only on intermittent demand or 
periodically. 

Data field: Material lead time (surge); 
Description of data: The order-to-delivery lead time (days) for this 
material/item, if your supplier were required to place your order at 
the top of the order queue. 

Data field: Maximum monthly supply (surge); 
Description of data: Your estimate of the maximum monthly supply of the 
material or item that could be acquired from this vendor under 
emergency conditions. Assume your order for the material or item would 
be given priority treatment by your vendor. 

Data field: Delete; 
Description of data: Deletes the connection between the material 
bottleneck or PTI and company listed on the row. 

Data field: Contact name; 
Description of data: Enter the name of your contact person with the 
company. 

Data field: E-mail address; 
Description of data: Enter the contactï¿½s email address. 

Data field: Phone number; 
Description of data: Enter the contactï¿½s phone number. 

Source: Worldwide Web Industrial Capabilities Assessment Program survey 
instrument. 

[End of table] 

Analytical Tool: 

While the data collection tool interfaces with industry via the Web to
gather data, the analytical tool, also Web-based, is a centralized tool 
that is available to all approved personnel regardless of location. The 
analytical tool allows analysts to assess what is needed in the way of 
industrial items and what the industrial base is capable of providing. 
It does this by combining the current information supplied by industry 
with existing DLA legacy data (e.g., item purchase histories, and 
previous item shortfalls). Analysts can use this integrated database to 
examine information at various levels (e.g., individual item, family 
groups, sector and subsector, weapon system and platform, or supplier) 
and to graphically depict this information in a range of formats and 
export the data to external files for further complex analysis. They 
can create statistically valid samples of discrete data to analyze. 
With this information, they are able to identify acquisition strategies 
that take advantage of similar manufacturing processes and affect 
changes in peacetime buying practices as a low-cost way of providing 
wartime readiness. 

[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: 

July 8, 2002: 

Mr. David R. Warren: 
Director, Defense Management Issues: 
U.S. General Accounting Office: 
441 G Street, N.W. 
Washington, D.C. 20548: 

Dear Mr. Warren: 

This is the Department of Defense (DoD) response to the General 
Accounting Office (GAO) draft report entitled, "Defense Inventory: 
Improved Industrial Base Assessments for Army War Reserve Spares Could 
Save Money," dated May 31, 2002 (GAO Code 350069/GAO-02-650). 

The DoD comments on the draft report are enclosed. 

Please contact John Becker, (703) 614-8578, of my staff if additional 
information is required. 

Sincerely, 

Signed by: 

Allen W. Beckett: 
Principal Assistant: 

Enclosure: As stated: 

GAO Draft Report Dated May 31, 2002: 
GAO Code 350069/GAO-02-650: 

"Defense Inventory: Improved Industrial Base Assessments For Army War 
Reserve Spare Could Save Money" 

Department Of Defense Comments To The Recommendation: 

Recommendation: The GAO recommended that the Secretary of Defense 
direct the Secretary of the Army to have the Commander of the Army 
Materiel Command take the following actions to expand or change its 
current process consistent with the attributes in this report: 

1. Establish an overarching industrial base capability assessment 
process that considers the attributes of this report; 

2. Develop a method to efficiently collect current industrial base 
capability data directly from industry itself; 

3. Create analytical tools that identify potential production 
capability problems such as those due to surge in wartime spare parts 
demand; and; 

4. Create management strategies for resolving spare parts availability 
problems, for example, by changing acquisition procedures or by 
targeting investments in material and technology resources to reduce 
production lead times. 

DOD Response: Overall, we concur with GAO finding that the Army's 
approach for assessing wartime spare parts base capabilities does not 
rely on current data from industry to the maximum extent possible. And, 
while it is intuitively appealing to think that more current data would 
result in more accurate forecasts, there is no evidence in the report 
that this would be the case. Further, monetary savings may be achieved 
by deferring expenditures, as described in the draft, based on shorter 
lead times reported by suppliers. However, for critical war reserve 
spares, such actions should not be taken until supplier-related lead 
times are verified; the Defense Logistics Agency (DLA) system cited as 
an example may include this step, but it was not apparent from the 
report. 

DOD Response 1: Partially concur. The Office of the Secretary of 
Defense (OSD) agrees with the need to have an overarching industrial 
base assessment process, analytical tools to identify potential 
production capability problems, and management strategies for resolving 
spare parts availability problems. We further agree that such a process 
should rely on the most accurate information available. We nonconcur 
with the GAO recommendation that the Army Materiel Command (AMC) change 
its current process to be consistent with the attributes of the DLA 
program, as described in the GAO report. We agree with Army claim that 
their processes already apply many of the attributes addressed in this 
GAO report and that, while there are differences between the two 
approaches, Army and DLA must have the flexibility to manage and 
execute their War Reserve and Industrial Base Programs in a manner 
consistent with their specific requirements and resources. Army and DLA 
should continue to share information so each can obtain leverage from 
the efforts of the other. Army has in fact developed an automated
web-based tool, the IB Hub, to facilitate industrial base analysis. 
Because this initiative was too early in its infancy, when GAO was 
working on the earlier report, Defense Inventories: Army War Reserve 
Spare Parts Requirements Are Uncertain (GAO-01-425, Washington, D.C., 
May 10, 2001), the Army chose not to discuss this tool with GAO at the 
time. Subsequently, when GAO was working on the current report, the 
Army did brief GAO on its web-based efforts. The IB Hub utilizes many 
of the same data elements that GAO lists in their report. 

DOD Response 2: Partially concur. We concur with the underlying premise 
that the most accurate data leads to the most accurate estimates. The 
GAO report references the Army's experience with a volunteer system for 
collecting data, which resulted in data of poor quality. While the data 
collected from suppliers via the internet may be more current, there is 
no reason to believe the resultant data will be any more accurate and 
thus, we are surprised to see GAO recommending such a system. The Army 
developed the IB Hub system specifically to overcome the problem 
associated with collecting data directly from industry by integrating 
available and relevant data from multiple sources. In developing the I-
tub, Army included a mechanism for collecting industrial base 
production data in a web-based form directly from industry. However, 
Army did not follow up by starting a comprehensive collection effort 
because of concerns over voluntary industry participation, validity of 
data, the perishable nature of the data, and the potential resources to 
maintain decision quality data. Army populates the IB Hub with 
production data on a case-by-case basis as data become available. Given 
that the War Reserve processes use estimates to look seven-years into 
the future, a planning estimate for industrial base production does not 
warrant the additional resources that would be required to keep more 
data more current. OSD will direct the Army to examine the feasibility 
of attempting to pro-actively collect production data for a limited 
number of items that represent the greatest risk to the Army. 

DOD Response 3: Partially concur. We concur with the need to identify 
potential production capability problems such as those due to surge in 
wartime spare parts demand. However, we noncur with the GAO assertion 
that the Army does not have such a process. Even though the war reserve 
requirements are based on looking out seven-years into the future to 
the end of the Program Objectives Memorandum (POM), the IB Hub does 
have visibility into current logistics and procurement data, including 
war reserve requirements, as well as current financial data for 
producers. While this look does not provide specific production 
capability, it does help establish a level of risk from which the Army 
can make decisions whether more detailed data is needed. 

DOD Response 4: Partially concur. We agree with the need to have 
management strategies for resolving spare parts availability problems. 
We nonconcur with the GAO report assertion that the Army does not have 
such strategies. The Army has processes separate from the requirements 
determination discussed in the report to manage and execute the War 
Reserve Program. 

[End of section] 

Appendix III: Staff Acknowledgments: 

Acknowledgments: 

Key contributors to this report were Richard Payne, Paul Gvoth, Leslie
Gregor, Douglas Mills, and Nancy Benco. 

[End of section] 

Footnotes: 

[1] This work was undertaken in response to a mandate in section 364 of 
the National Defense Authorization Act for Fiscal Year 2000, which 
resulted in the report Defense Inventory: Army War Reserve Spare Parts 
Requirements Are Uncertain, GAO-01-425 (Washington, D.C.: May 10, 
2001). 

[2] The industrial base includes both privately owned and government-
owned assets. In this report, we use the term industrial base to refer 
only to private industry and commercial sources. 

[3] War reserves are stocks of materiel amassed during peacetime to 
meet increased military requirements following the outbreak of war. The 
reserves are intended to provide the Army with interim support to 
sustain its operations until the Army can be resupplied with materiel 
from the industrial base. 

[4] DOD Directive 3110.6, War Reserve Materiel Policy, November 9, 
2000. 

[5] DOD 4140.1-R, DOD Materiel Management Regulation, May 1998. 

[6] This requirement comes from the Armyï¿½s 2001 Industrial Base 
Strategy and its Stationing Strategy. 

[7] The Army uses the term industrial base offset to mean its estimate 
of what private industry can be expected to provide during wartime. 

[8] We did not attempt to verify the validity of the requirements 
estimates. 

[9] DOD Form 2737, Industrial Capabilities Questionnaire. 

[10] Administrative lead time is defined as the interval between 
initiation of procurement action and letting of contract or placing of 
order. Production lead time is defined as the time interval between the 
placement of a contract and receipt into the supply system of materiel 
purchased. 

[11] This document, an engineering change request (XLGWRA13713), dated 
December 15, 1999, proposes changes to this estimating method. 

[12] The Industrial Base Hub is composed of three components: 
Industrial Base Automated Rating System, Industrial Base Activity 
System, and Industrial Base Information System. 

[13] DLA calculated the savings based on the number of units that would 
not need to be purchased for war reserves multiplied by the cost per 
unit. 

[End of section] 

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