    Defense Logistics: Improved Oversight and Increased Coordination
    Needed to Ensure Viability of the Army's Prepositioning Strategy
    (15-FEB-07, GAO-07-144).

    Prepositioned military equipment and supplies on ships and
    overseas on land have become an integral part of the U.S. defense
    strategy. However, the Army's program has faced long-standing
    management challenges, including equipment excesses and
    shortfalls, invalid or poorly defined requirements, and
    maintenance problems. In Public Law 109-163, Congress required
    the Army to conduct an assessment of its prepositioning programs
    and required GAO to assess (1) whether the Army's report
    addressed the areas required by Congress, and (2) the major
    challenges the Army continues to face in its prepositioning
    program. GAO analyzed the Army's report and other information it
    obtained from the Joint Staff, the Army, and its subordinate
    commands to identify the issues affecting the Army's
    prepositioning program. GAO also visited prepositioned equipment
    sites in South Carolina, Europe, South Korea, and Kuwait.
    -------------------------Indexing Terms-------------------------
    REPORTNUM:   GAO-07-144
        ACCNO:   A65965
      TITLE:     Defense Logistics: Improved Oversight and Increased
    Coordination Needed to Ensure Viability of the Army's
    Prepositioning Strategy
         DATE:   02/15/2007
      SUBJECT:   Army facilities
    	     Combat readiness
    	     Defense capabilities
    	     Equipment maintenance
    	     Equipment management
    	     Facility management
    	     Intergovernmental relations
    	     Program evaluation
    	     Program management
    	     Reporting requirements
    	     Requirements definition
    	     Strategic planning
    	     Army supplies

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    GAO-07-144

         * [1]DEFENSE LOGISTICS
         * [2]Improved Oversight and Increased Coordination Needed to Ensu
         * [3]Contents

              * [4]Results in Brief

                   * [5]Background
                   * [6]The Army's April 2006 Report to Congress Addressed the
                     Areas

                        * [7]Army Report Addresses Areas Required by Congress
                        * [8]Army Prepositioning Stocks Strategy 2012 Is No
                          Longer Viable

                   * [9]The Army Faces Major Strategic and Management Challenges
                     As

                        * [10]Alignment between Army's Prepositioning Strategy
                          and Anticip
                        * [11]Despite Recent Efforts to Improve Requirements
                          Setting for S
                        * [12]Army Lacks a Comprehensive Prepositioning Storage
                          and Mainte

                             * [13]Outdoor Storage of Equipment Results in
                               Millions of Dollars
                             * [14]Future Facility Requirements for the Army
                               Prepositioning Pro

                        * [15]Maintenance Oversight of Prepositioned Stocks Has
                          Improved i

                   * [16]Conclusions
                   * [17]Recommendations for Executive Action
                   * [18]Agency Comments and Our Evaluation

              * [19]Appendix I: Scope and Methodology
              * [20]Appendix II: Past Products Identifying Challenges Facing the
              * [21]Appendix III: Comments from the Department of Defense

                   * [22]GAO's Responses to DOD's Technical Comments:

              * [23]Appendix IV: GAO Contact and Staff Acknowledgments

                   * [24]GAO Contact
                   * [25]Acknowledgments

                        * [26]Order by Mail or Phone

    Report to Congressional Committees

    United States Government Accountability Office

    GAO

    February 2007

    DEFENSE LOGISTICS

    Improved Oversight and Increased Coordination Needed to Ensure Viability
    of the Army's Prepositioning Strategy

    GAO-07-144

    Contents

    Letter 1

    Results in Brief 3
    Background 7
    The Army's April 2006 Report to Congress Addressed the Areas Required, but
    the Army's Strategy Is Evolving 9
    The Army Faces Major Strategic and Management Challenges As It Revises and
    Implements Its Prepositioning Program 11
    Conclusions 21
    Recommendations for Executive Action 22
    Agency Comments and Our Evaluation 23
    Appendix I Scope and Methodology 26
    Appendix II Past Products Identifying Challenges Facing the Army and DOD
    Regarding Prepositioning Programs 28
    Appendix III Comments from the Department of Defense 34
    Appendix IV GAO Contact and Staff Acknowledgments 44

    Tables

    Table 1: Status of Facilities at Selected Army Prepositioned Stock
    Locations 20
    Table 2: GAO Products 28
    Table 3: Other Products 32

    Figures

    Figure 1: Existing Outdoor Storage in Kuwait 16
    Figure 2: Overview of Military Construction Project at Camp Livorno, Italy
    19

    This is a work of the U.S. government and is not subject to copyright
    protection in the United States. It may be reproduced and distributed in
    its entirety without further permission from GAO. However, because this
    work may contain copyrighted images or other material, permission from the
    copyright holder may be necessary if you wish to reproduce this material
    separately.

    United States Government Accountability Office

    Washington, DC 20548

    February 15, 2007

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

    The Honorable Ike Skelton
    Chairman
    The Honorable Duncan L. Hunter
    Ranking Minority Member
    Committee on Armed Services
    House of Representatives

    With fewer troops permanently stationed overseas, the prepositioning of
    stocks of equipment and supplies has become integral to the ability of the
    Department of Defense (DOD) to project forces into conflict areas faster.
    DOD has acknowledged the need to reorient its capabilities to respond to a
    wider range of challenges. In the 2005 National Defense Strategy, the
    department indicated that prepositioning will continue to be an important
    aspect of DOD's force posture in the future.^1 Additionally, a DOD
    analysis undertaken to support the achievement of operational timelines
    during major combat operations reaffirmed the relevance of prepositioned
    stocks.^2 As a result of this mobility analysis as well as recommendations
    arising from a September 2005 GAO report on prepositioning, DOD determined
    that it would reassess its existing prepositioning program to identify the
    optimal mix of capabilities needed to support the defense strategy in the
    future.^3123With fewer troops permanently stationed overseas, the
    prepositioning of stocks of equipment and supplies has become integral to
    the ability of the Department of Defense (DOD) to project forces into
    conflict areas faster. DOD has acknowledged the need to reorient its
    capabilities to respond to a wider range of challenges. In the 2005
    National Defense Strategy, the department indicated that prepositioning
    will continue to be an important aspect of DOD's force posture in the
    future. Additionally, a DOD analysis undertaken to support the achievement
    of operational timelines during major combat operations reaffirmed the
    relevance of prepositioned stocks. As a result of this mobility analysis
    as well as recommendations arising from a September 2005 GAO report on
    prepositioning, DOD determined that it would reassess its existing
    prepositioning program to identify the optimal mix of capabilities needed
    to support the defense strategy in the future.

    ^1 DOD, The National Defense Strategy of the United States of America
    (March 2005).

    ^2 This analysis was performed in the Mobility Capabilities Study,
    released in December 2005.

    ^3 GAO, Defense Logistics: Better Management and Oversight of
    Prepositioning Programs Needed to Reduce Risk and Improve Future Programs,
    [27]GAO-05-427 (Washington, D.C.: Sept. 6, 2005).

    The Army, the Marine Corps, and the Air Force have drawn heavily from
    their prepositioned stocks to support Operations Iraqi Freedom and
    Enduring Freedom. As we testified in March 2006, these sustained military
    operations are taking a toll on the condition and readiness of military
    equipment, and the Army and Marine Corps face a number of ongoing and
    long-term challenges that will affect the timing and cost of equipment
    repair and replacement.^4 A number of reports in recent years by GAO and
    other audit agencies (see app. II) have highlighted numerous long-standing
    problems facing DOD's prepositioning programs, including a lack of
    centralized operational direction; unreliable reporting of the readiness
    of prepositioned equipment sets; inaccurate reporting of the maintenance
    condition of equipment; equipment excesses at some prepositioned
    locations; systemic problems with the requirements determination and
    inventory management; and some Army prepositioned stocks having a
    maintenance condition that was considerably below the goal of 90 percent
    mission capability. In our September 2005 report, we recommended that DOD
    develop a DOD-wide strategy and that the Army repair equipment in poor
    maintenance condition.^5

    The National Defense Authorization Act for Fiscal Year 2006 directed the
    Army to conduct an assessment of its prepositioning programs, and the Army
    did so. The Army's report, submitted in April 2006, focused on specific
    items required by the law including how such programs were configured to
    support the evolving goals of the Army, including key operational
    capabilities; whether there were any shortfalls, and if so, how the Army
    planned to mitigate them; the maintenance condition of prepositioned
    equipment and supplies, including the procedures used to ensure that
    maintenance was performed; the adequacy of storage and maintenance
    facilities; and the adequacy of oversight mechanisms and internal
    management reports. The Army's report was based on the Army Prepositioned
    Stocks Strategy 2012, the Army's underlying strategy at that time, which
    laid out a strategic roadmap for the Army's prepositioning program through
    2012. Strategy 2012 called for the prepositioning of five heavy brigade
    combat team sets, multiple support units, and associated sustainment
    stocks to provide the strategic responsiveness required to attain the DOD
    joint swiftness objectives. These stocks are prepositioned around the
    world, primarily at land sites in Europe, Northeast Asia, and Southwest
    Asia, and aboard prepositioning ships afloat near Guam and Diego Garcia.
    During the course of our review and subsequent to the Army's issuance of
    its April 2006 report to Congress, however, the Army began revising its
    prepositioning program and drafting a revised strategy, the Army
    Prepositioned Stocks Strategy 2013. These changes were still under way as
    we completed our work.

    ^4 GAO, Defense Logistics: Preliminary Observations on Equipment Reset
    Challenges and Issues for the Army and Marine Corps, [28]GAO-06-604T
    (Washington, D.C.: Mar. 30, 2006).

    ^5 [29]GAO-05-427 .

    The 2006 Authorization Act also required GAO to assess the Army's report
    and identify any issues facing the program for the future.^6 We provided a
    briefing to your staff on our preliminary assessment of the Army's report
    and issues facing the program. The present report expands and updates that
    information by assessing (1) whether the Army's report addressed the areas
    required by Congress, and (2) major challenges the Army continues to face
    in its prepositioning program.

    Our work is based on our analysis of the Army's report and other key
    documents identifying equipment shortfalls and maintenance condition,
    facility shortfalls, and contractor oversight; discussions with senior
    Army officials and commanders; and site visits to Army prepositioning
    sites in Charleston, South Carolina; Europe; South Korea; and Kuwait. We
    determined that the data we used were sufficiently reliable for the
    purpose of this report. We performed our work from February 2006 through
    October 2006 in accordance with generally accepted government auditing
    standards. A more detailed discussion of our scope and methodology is
    contained in appendix I.

    Results in Brief

    While the Army's April 2006 report to Congress on the status of its
    prepositioned program addressed the areas required by Congress, the report
    is now outdated because the Army has shifted its prepositioning strategy.
    As required by the National Defense Authorization Act for Fiscal Year
    2006, the April 2006 report included descriptions of operational
    capabilities as outlined in the Army Prepositioned Stocks Strategy 2012,
    as well as inventory shortfalls expressed in terms of procurement costs.
    The report estimated that the Army would need well over $4 billion to
    procure new equipment and replenish spare parts and other items, as well
    as provide new facilities in Kuwait, South Korea, and Charleston, South
    Carolina. The report also addressed the maintenance condition of
    prepositioned equipment, which had been a concern based on GAO's past
    work. The Army reported that stocks in South Korea had been repaired since
    GAO's previous review was performed. The Army's report also noted recent
    efforts to improve management and maintenance oversight of the program,
    including forming an independent team to inspect equipment and maintenance
    operations. However, since the report was submitted to Congress, the Army
    has been reexamining its overall prepositioning strategy. Based on recent
    reprogramming decisions as part of a DOD program review, its
    identification of servicewide equipment shortfalls, and insights gained
    from the 2006 Quadrennial Defense Review, the Army concluded in the summer
    of 2006 that its Prepositioned Stocks Strategy 2012 was no longer viable.
    It began work on a revised strategy in late August 2006.^7 According to
    Army officials, the proposed strategy includes significant changes to the
    program, including less reliance on heavy combat equipment afloat, and the
    expansion of heavy combat equipment in Kuwait and Italy, along with
    continued reliance on stocks in South Korea. The Army is seeking to have
    an implementation plan for its new strategy in place by the end of 2006.

    ^6 The Act (Pub.L. No. 109-163, S 351 (2006)) specifically required the
    Comptroller General to (1) determine whether the Army's report
    comprehensively addressed the required reporting items, and (2) determine
    the extent to which any shortfall or other issues reported by the
    Secretary of the Army or identified by the Comptroller General had been
    addressed including an assessment of any related plans to address
    shortfalls in the future.

    The Army faces major strategic and management challenges as it revises and
    implements its prepositioning program, including:

               o Inability to gauge its alignment with DOD-wide prepositioning
               strategy: The Army's plan to implement its prepositioning strategy
               by the end of 2006 could result in investments for the
               prepositioning program that do not align with the anticipated
               DOD-wide prepositioning strategy because it will be several months
               ahead of overarching DOD-wide efforts. Strategy should be shaped
               from the top down. One of the key recommendations from our
               September 2005 report was that the department needed joint
               doctrine and an overarching strategy to lay a foundation for the
               programs of the services to ensure jointness and avoid duplication
               across the services. Consistent with our recommendation, DOD began
               a study with a broad charter in mid-2006 to evaluate a range of
               future prepositioning options, but that study was still underway
               when we completed our work. The John Warner National Defense
               Authorization Act for fiscal year 2007 required DOD to establish
               the strategic policy on the programs of DOD for the prepositioning
               of materiel and equipment mid-April 2007.^8 At the time we
               finished our work the Army was planning to implement its strategy
               by the end of 2006--months ahead of the DOD-wide effort. The most
               significant problem resulting from this timing is that the Army
               cannot be assured that its efforts will be aligned with DOD-wide
               efforts still ongoing. Even though DOD and Army officials told us
               they have coordinated their prepositioning plans, the timing of
               the two strategies is not synchronized. As a result, DOD could be
               restricted in developing an optimal DOD-wide strategy because the
               Army strategy already exists or the Army could be at risk of
               filling requirements that will be superseded when the DOD-wide
               strategy is issued. Moreover, prepositioning is interconnected
               with airlift, sealift, and basing, so the Army's decisions will
               have an as-yet undetermined effect on lift requirements and
               basing. Such potential problems are avoidable if the strategies
               are synchronized.

    ^7 The new strategy will be the Army Prepositioned Stock Strategy 2013.

               o Need to determine sound secondary item and operational project
               stock requirements and systematically measure and report
               readiness: Despite recent efforts to improve requirement setting,
               the Army has not yet determined reliable secondary item and
               operational project stock requirements. In its efforts to reassess
               secondary item requirements, the Army ran its
               requirements-determination model, called the Army War Reserve
               Automated Process, in 2005. It had not previously run the model
               since 1999, even though Army guidance at that time called for
               requirements to be updated every 2 years. Further, operational
               project stock requirements must be revalidated every 5 years, but
               the most recent revalidation for many of the projects was last
               conducted in 1998. However, in response to our recommendation in
               2005 that this long-standing problem be addressed, the Army
               initiated a revalidation of its Operational Project Stocks in
               April 2006. The revalidation was still ongoing when we completed
               our work in October 2006. Also, while the Army measures readiness
               of prepositioned equipment programs by assessing inventory levels
               against requirements and the maintenance condition of on-hand
               equipment, the Army does not systematically measure or report
               readiness for the secondary item and operational project programs.
               This situation is largely unchanged since 1998, when we
               recommended that the Army develop readiness-reporting mechanisms
               for these programs.^9 Without sound requirements or reporting
               mechanisms, the Army cannot reliably assess the impact of any
               shortfalls, the readiness of its programs, or make informed
               investment decisions about them.

    ^8 Pub. L. No. 109-364, S 351 (2006).

    ^9 GAO, Military Prepositioning: Army and Air Force Programs Need To Be
    Reassessed, [31]GAO/NSIAD-99-6 (Washington, D.C.: Nov. 16, 1998).

               o Need to identify maintenance and storage facility requirements:
               The Army currently lacks a comprehensive prepositioning storage
               and maintenance facilities plan. The maintenance and storage
               facility shortages it reported to Congress were based on the now
               obsolete Army Prepositioning Strategy 2012. Army policy calls for
               the long-term storage of prepositioned equipment in
               controlled-humidity facilities, because outdoor storage results in
               substantially increased maintenance costs.^10 Yet currently in
               Kuwait, storage facilities are being used to house command staff
               personnel while equipment is being stored outside, in harsh
               environmental conditions. The Army estimates that maintenance
               costs an extra $24 million per year for the heavy brigade set in
               Kuwait because equipment is stored outside. In South Korea,
               despite an intensive effort to repair prepositioned assets and
               correct long-standing problems, almost one-third of the equipment
               continues to be stored outside, resulting in increased maintenance
               and costly corrosion. In contrast, part of the Army's new strategy
               includes a plan to store heavy equipment at a newly constructed
               site in Italy, to make use of a facility that had previously been
               left without a mission. Before these existing facilities problems
               can be addressed, however, the Army must determine how
               prepositioned equipment will be utilized and where it needs to be
               located. Army officials are considering using prepositioned
               equipment in Kuwait, South Korea, and Italy to support a
               rotational presence and training in these regions even as they
               continue to develop a prepositioning implementation plan based on
               existing space and storage. According to Army officials, utilizing
               prepositioned equipment to support a rotational presence or for
               training increases the maintenance requirement and, therefore, the
               maintenance facilities needed. Depending on how the rotation is
               scheduled, however, it may concurrently reduce the requirement for
               humidity-controlled storage space. Furthermore, since an alternate
               South Korean prepositioning site is being considered, the Army may
               be constructing facilities at its existing prepositioning site at
               Camp Carroll that it does not need. Without a comprehensive
               facilities plan, the Army will not know the types and quantities
               of facilities it will need to store and maintain equipment at each
               location.

               o Lack of maintenance oversight: The Army reported to Congress
               that oversight of the program is provided by the Army Materiel
               Command and external agencies tasked with evaluating the program,
               and that readiness is accurately reported. In our 2005 report, we
               found that a lack of oversight in South Korea resulted in a
               deterioration of the maintenance condition of prepositioned
               equipment. In response to our report, the Army established
               oversight of the maintenance process in South Korea and repaired
               the equipment. However, in Kuwait, our review of recent
               inspections by Army inspectors of contractor-maintained equipment
               raised significant concerns about its true maintenance condition.
               These concerns are the result of inadequate management of
               contractor performance. Specifically, over one-quarter of the
               prepositioned equipment presented by the contractor failed the
               government quality assurance inspection between June 2005 and June
               2006.

    ^10 Army Regulation 740-1, Storage and Supply Activity Operations (Sept.
    9, 2002).

               We are recommending that the Army take steps to synchronize its
               prepositioning strategy with the DOD-wide strategy in order to
               ensure that future investments made for the Army's prepositioning
               program align with the DOD prepositioning strategy. Once the
               Army's strategic direction is aligned, we are recommending that
               the Army develop an implementation plan that maintains ongoing
               reevaluation of the secondary item and operational project stock
               requirements; establishes systematic readiness measurement and
               reporting of these requirements; identifies the optimal mix of
               storage and maintenance facilities at each location; and
               prescribes oversight requirements for the maintenance of
               prepositioned equipment.

               In written comments on a draft of this report, DOD generally
               concurred with our recommendations but stated that it had already
               taken steps to address the recommendations and that further
               actions are not needed. We acknowledge that the Army and the
               department have taken some initial steps; however, we continue to
               believe that our recommendations have merit and that additional
               actions and sustained management attention will be needed to
               ensure the viability of the Army's prepositioning program as part
               of the overall departmentwide effort to meet mobility needs.

    			  Background

               Prepositioning is an important part of DOD's overall strategic
               mobility framework. It allows DOD to field combat-ready forces in
               days rather than the weeks it would take if the forces and all
               necessary equipment and supplies had to be brought from the United
               States to the location of the conflict. The U.S. military can
               deliver equipment and supplies in three ways: by air, by sea, or
               by prepositioning. While airlift is fast, it is expensive to use
               and impractical for moving all of the material needed for a
               large-scale deployment. Although ships can carry large loads, they
               are slower than airlift. Prepositioning lessens the strain of
               using expensive airlift and reduces the reliance on slower sealift
               deliveries. The value of prepositioned stocks was demonstrated
               during operations in Iraq. The military used equipment and
               supplies stored at land sites in the region and offloaded much of
               the stocks from its prepositioning ships. Having the equipment
               prepositioned allowed troops to fly in, deploy rapidly, and train
               with prepositioned equipment before beginning combat operations in
               Iraq. As the ongoing war has depleted those items, the Army is in
               the process of reconstituting its prepositioned equipment and
               supplies.

               The Department of the Army provides strategic-level guidance for
               the Army's prepositioned stock program and allocates funding for
               prepositioned stock requirements. The Army Materiel Command
               provides the overall management of the Army's prepositioned stocks
               program. Within Army Materiel Command, the Army Sustainment
               Command manages the operations and maintenance of the program, and
               issues the stocks in theater in support of contingency operations
               or exercises. At each prepositioned stock location, the Army
               Sustainment Command also provides an Army Field Support brigade
               and battalion for day-to-day maintenance and operational
               management of the program.

               The Army's prepositioning program involves three primary
               categories of stocks stored at land sites and aboard
               prepositioning ships: combat brigade sets, war reserve sustainment
               stocks, and operational projects as described below.

               o Army Combat brigade sets

                            o Are designed to support 3,000 to 5,000 soldiers.
                            o Include heavy weaponry such as tanks and Bradley
                            fighting vehicles.
                            o Include support equipment such as trucks and High
                            Mobility Multi-purpose Wheeled Vehicles.
                            o Include spare parts and other sustainment stocks to
                            support the early stages of a conflict.

               o War reserve sustainment stocks include

                            o Items to sustain the battle unit until resupply can
                            be ramped up to wartime levels and arrive in theater.
                            o War Reserve Secondary Items include rations,
                            clothing and textiles, construction and barrier
                            materiel, medical supplies, repair parts, and major
                            assemblies (reparables and consumables).

               o Operational project stocks include

    			  					o Authorized material above unit authorizations designed
    								to support Army operations or contingencies.
    								o Equipment and supplies for special operations forces,
    								bare base sets, petroleum and water distribution,
    								mortuary operations, and prisoner-of-war operations,
    								among others.

               The Army�s April 2006 Report to Congress Addressed the Areas
    			  Required, But the Army�s Strategy is Evolving

               The Army's April 2006 report to Congress on the status of its
               prepositioned program addressed the areas required by Congress,
               but the Army has significantly shifted its prepositioning strategy
               since then. The Army's report included descriptions of operational
               capabilities as outlined in the Army Prepositioned Stocks Strategy
               2012; addressed the maintenance condition of prepositioned
               equipment; and noted recent efforts to improve management and
               maintenance oversight of the program, including forming an
               independent inspection team. However, since the report's
               publication, the Army has begun a reexamination of its overall
               prepositioning strategy. According to the Army, this shift was
               based on insights gained from the 2006 Quadrennial Defense Review,
               but Army officials told us that recent budget reprogramming
               decisions and worsening Army-wide equipment shortfalls also
               influenced the reexamination. The Army concluded that its
               Prepositioned Stocks Strategy 2012 was no longer viable and began
               work on a revised strategy that was approved by Army leaders in
               late August 2006 and is expected to be completed by the end of
               2006.

    			  Army Report Addresses Areas Required by Congress

               The Army's report to Congress addressed the required areas
               included in the National Defense Authorization Act for Fiscal Year
               2006. The Army determined that over $4 billion would be needed to
               fill equipment, secondary item, and facility shortfalls. The Army
               reported that additional covered storage and maintenance space was
               needed at prepositioning sites in Southeast and Northeast Asia as
               well as at the Charleston, South Carolina, facilities used to
               maintain afloat stocks envisioned under the 2012 strategy.
               Further, it indicated that the facilities in Europe would be
               sufficient to meet the prepositioned requirements once the
               construction project in Italy was completed. The equipment sets at
               each location were at a high percentage of mission capability, it
               reported, with the exception of Kuwait. The equipment sets in
               Kuwait had been issued in support of Operation Iraqi Freedom and
               Operation Enduring Freedom, and by 2006 had a low
               mission-capability rate. It did stipulate, however, that the
               equipment set was undergoing repair, recapitalization, and
               replacement.

               Regarding the program's management and maintenance oversight, the
               report acknowledged that weaknesses in the quality control program
               had been revealed by both internal and external audits, including
               GAO's September 2005 report. The Army Sustainment Command created
               the Logistics Support and Evaluation Team to address identified
               quality control problems. According to the Army report, the team
               provides an additional layer of review to ensure that the Army
               Prepositioned Stock readiness levels reported are accurate and
               that sufficient quality assurance measures are in place.

    			  Army Prepositioning Stocks Strategy 2012 Is No Longer Viable

               Since the release of its report to Congress in April 2006, several
               decisions led the Army to conclude that its existing strategy was
               no longer viable. In particular, an internal DOD reprogramming
               action required the Army to offload a Heavy Brigade Combat Team
               equipment set stored on a prepositioned ship and redistribute it
               to meet existing equipment shortfalls and reduce costs. The Army
               had two equipment sets already aboard prepositioned ships and
               planned to upload a third set in 2013. The reprogramming action
               directed the Army to offload the third equipment set. However,
               because the third equipment set had not yet been created, the Army
               decided to offload one of the existing equipment sets instead to
               meet the reprogramming guidance. This decision effectively reduced
               the Army's program in the near term from two to one heavy brigade
               combat team afloat, with implications for the operational plans of
               the regional combatant commanders.

               Several factors combined to create a ripple effect that impacted
               the viability of the Army Prepositioned Stocks 2012 Strategy.
               First, the department told us the Army changed its strategy based
               on insights gained from the 2006 Quadrennial Defense Review. Also,
               Army officials told us that equipment shortfalls made it difficult
               for the Army to meet the requirements in the strategy at least
               partly because Army prepositioned stock equipment was continuing
               to be drawn to support ongoing operations. Also, the Army
               transformation to modularity exacerbated shortfalls in certain
               types of equipment and created excesses in others. In addition,
               the Army eliminated most of the remaining facilities and
               prepositioned stocks from Western Europe but was completing a new
               maintenance and storage facility in Italy which needed a mission.
               As a result, the Army's 2006 report was outdated soon after its
               publication and should not be used by Congress or DOD for funding
               decisions.

    			  The Army Faces Major Strategic and Management Challenges As It
    			  Revises and Implements Its Prepositioning Program

               The future success of the Army's prepositioning program depends
               not only on how well the Army aligns its efforts with those of the
               department as a whole, but also on how well long-standing
               management issues are addressed as the new strategic plan is
               implemented. The Army expects to finalize its implementation plan
               for the revised Prepositioned Stocks Strategy 2013 by December 31,
               2006, but DOD will not complete its departmentwide strategy before
               mid-April 2007. Further, problems persist with the Army's
               management of its secondary item and operational project stocks
               programs, including lingering questions about the overall
               requirements and the lack of reliable readiness measures for these
               programs. In addition, the lack of a comprehensive prepositioning
               storage and maintenance facilities plan contributes to increased
               maintenance costs and uncertain future facility requirements.
               Finally, the Army has not demonstrated adequate oversight to
               ensure the proper maintenance condition of prepositioned stocks.

               The Army is developing a new prepositioning strategy to address
               recent decisions that have affected the viability of its existing
               plan. According to Army officials, the new strategy is intended to
               promote greater flexibility in the use of prepositioned stocks
               while concurrently increasing the Army's access to unstable areas.
               While continuing to rely on stocks in South Korea, the proposed
               strategy includes significant changes to the program--among them,
               less reliance on heavy combat equipment afloat and expanded
               reliance on heavy equipment in Kuwait, Qatar, and Italy. The
               Army's draft revisions to its prepositioning strategy were
               approved by the Army Vice-Chief of Staff in late August 2006. The
               Army established an Integrated Process Team to develop a
               comprehensive implementation plan for the new strategy and to
               provide direction to working groups that would assess the areas of
               strategy, capabilities, equipping, facilities, and funding. The
               Army plans to have this task completed by late December 2006.
               However, since the Army's Integrated Process Teams were still
               performing their work, we could not evaluate progress at the time
               we completed our review.

               DOD has efforts underway that will address gaps identified in
               GAO's September 2005 report but have implications for the Army's
               efforts. First, to address gaps in departmentwide oversight, DOD
               convened a working group that includes representatives from the
               Office of the Secretary of Defense, Joint Staff, Defense Logistics
               Agency, the Army, Joint Forces Command, and the other services to
               develop joint doctrine for the prepositioning programs. This group
               was also working to update the departmental-level directive that
               describes responsibilities and provides broad guidance to the
               services during our review. While the efforts begun by this group
               represent progress, DOD had not yet developed joint doctrine for
               the program at the time we completed our work. Second, DOD also
               initiated a study in the spring of 2006 to address the need for a
               departmentwide prepositioning strategy to guide the department's
               future prepositioning efforts. This study was a follow-on to the
               2005 Mobility Capabilities Study that, while identifying the
               importance of prepositioning in meeting mobility objectives, along
               with interrelated airlift, sealift, and basing decisions,
               recognized the need for further analysis of prepositioning. Thus,
               the DOD-wide prepositioning study will determine how and what
               prepositioned equipment should be used and whether the
               prepositioned assets are in the best locations to support the
               department's priorities and posture plans. According to DOD
               officials, this DOD-wide prepositioning study was not scheduled to
               be finished until the spring of 2007 at the earliest. However, on
               October 17, 2006, Public Law 109-369 was enacted directing the
               Secretary of Defense to complete its DOD-wide prepositioning
               strategy by mid-April 2007.

               DOD and Army officials told us during the course of our review
               that they discuss such strategy issues during their joint working
               group meetings and felt that they have coordinated their
               prepositioning plans. However, if the two strategies are not
               synchronized, DOD could be limited in developing an optimal
               DOD-wide strategy because the Army strategy already exists.
               Alternatively, the Army could be at risk of filling requirements
               that will be superseded when the DOD-wide strategy is ultimately
               issued. In fact, DOD anticipates that when the DOD-wide strategy
               is issued the Army will have to modify its service-specific
               prepositioning strategy to align with the new requirements.
               Finally, since prepositioning is interconnected with airlift,
               sealift, and overseas basing, the Army's decisions will have an
               as-yet undetermined effect on lift requirements and basing.

    			  Despite Recent Efforts to Improve Requirements Setting for
    			  Secondary Item and Operational Project Programs, the Army Does
    			  Not Have Reliable Requirements or Readiness Information

               Despite recent efforts to improve requirements setting, the Army
               has not yet determined reliable secondary item and operational
               project requirements. In its efforts to reassess secondary item
               requirements, the Army ran its requirements-determination model,
               called the Army War Reserve Automated Process, in 2005. It had not
               previously run the model since 1999, even though Army guidance at
               that time called for requirements to be updated every 2 years.
               Because the model yielded questionable outputs, Army officials
               told us they were conducting a management review to scrub the
               requirements and help to determine investment priorities. Army
               officials said they expect requirements to be significantly
               adjusted as a result of their reviews. For example, the Army has
               already lowered the U.S. Army Europe meals-ready-to-eat stockage
               levels to match the smaller force structure there. This action
               resulted in over 1 million meals being made available to fill
               other high-priority requirements. In addition, the Army War
               Reserve Automated Process that is used for computing secondary
               item requirements will now be updated annually instead of
               biennially.

               Addressing these problems is critical for ensuring Army readiness
               in future conflicts. Experiences in Iraq showed that prepositioned
               secondary item stocks did not adequately support the troops in
               combat operations. Secondary items encompass a wide range of
               inventory, including critical readiness-enabling spare parts. In
               2005, we reported that inaccurate requirements and insufficient
               funding led to shortages in critical items during Operation Iraqi
               Freedom.^11 For example, demand for nonrechargeable lithium
               batteries and track shoes for armored vehicles were more than
               three times greater than the stated requirements for those items.
               We concluded that these shortfalls were directly traceable to
               problems in requirements computation.

               In addition to critical shortfalls, lessons learned also show
               considerable mismatches between what was available in
               prepositioned stocks and what units actually needed. In
               retrospect, the Army did a poor job in forecasting what it would
               need. As a result, it had to use scarce and expensive airlift to
               get needed stocks to the troops in the field, essentially
               defeating the purpose of prepositioning such items in the first
               place. Subsequent analyses have detailed the extent of the
               mismatches between stock levels, requirements, and actual usage.
               For example, most of the 16,000 different spare parts that were
               actually positioned in Kuwait were ultimately shipped back from
               the theater because they were not needed by the forces there,
               according to a RAND study commissioned by the Army.^12 Most spare
               parts had to be airlifted to the theater, according to RAND. In
               addition, RAND compared the Army's requirements for prepositioned
               spare parts to the actual demands during 2003 in Kuwait and found
               considerable mismatches. Only about half of the spare parts the
               Army thought would be required for prepositioned stocks were
               actually demanded in theater by Army units during 2003.

    ^11 [32]GAO-05-275 .

    ^12 The RAND Corporation, Sustainment of Army Forces in Operation Iraqi
    Freedom: Major Findings and Recommendations (Santa Monica, Calif.: 2005).

               According to Army officials, secondary items have historically not
               been fully funded at least partially because of concerns over the
               accuracy of the requirements. As shown in Operation Iraqi Freedom,
               inaccurate requirements resulted in limited demand for some items
               and excessive demand for others, greatly surpassing the on-hand
               inventory. The Army had to employ high-cost air transportation to
               bring needed items to the warfighter.

               As with secondary item requirements, long-standing issues exist
               within the operational project program--which includes important
               items like chemical defense equipment, pipeline systems, mortuary
               units, and bare base sets for housing soldiers in austere
               environments, among other items not typically part of unit
               equipment. These sets are typically kept to meet the specific
               needs of regional combatant commanders, and Army regulations
               require that they be revalidated every 5 years to ensure that the
               sets are still needed for an operational plan. Despite this
               requirement, the most recent revalidation for many of the projects
               was conducted in 1998. However, in response to our recommendation
               in 2005 that this long-standing problem be addressed, the Army
               initiated a revalidation of its Operational Project Stocks in
               April 2006.

               By October 2006, when we completed our work, the Army had queried
               Army commands worldwide to revalidate the needs for the various
               sets and had obtained validations for most of the sets. However,
               Army officials told us that they have already taken actions to
               eliminate projects that are no longer needed and are planning to
               conduct a management review of this program to further refine the
               requirements. To date, the Army has consolidated some projects and
               has cancelled other projects that were no longer needed. For
               example, three projects to support aerial delivery operations were
               cancelled because they were no longer required to support current
               operational plans. In addition, United States Army, Europe has
               cancelled two projects for bridging and aircraft matting because
               they no longer meet current operational requirements.

               One of the most significant consequences of having questionable
               requirements underpinning the programs is that it makes it
               difficult to assess their overall readiness, and the risk
               associated with shortfalls. Typically, the Army measures readiness
               of prepositioned equipment programs by assessing the inventory
               levels against requirements as well as the maintenance condition
               of on-hand equipment. However, the Army does not routinely measure
               or report readiness for the secondary item and operational project
               programs. According to Army and DOD officials, shortfalls in
               secondary items and some operational projects are identified in
               combatant command priority lists and through joint quarterly
               readiness reports to the Joint Staff, but not as part of the
               Army's readiness reporting system. This situation is largely
               unchanged since 1998, when we recommended that the Army fix
               requirements problems and develop readiness-reporting mechanisms
               for these programs.^13

               Despite their lower priority relative to combat equipment
               programs, secondary item and operational project programs can be
               critical during a war. They contain items such as spare parts that
               are essential to keep the combat equipment operational, as well as
               chemical defense equipment and other items likely to be needed
               during the early stages of a conflict. The budgetary stakes are
               high: according to the April 2006 report to Congress, the Army
               estimated that it had a shortfall of about $1.7 billion in
               secondary items alone. Without sound requirements, the Army cannot
               reliably assess the readiness of its programs. Once sound
               requirements are set, the Army will need reporting mechanisms to
               assess their readiness and the impact of any shortfalls. In the
               absence of such mechanisms, the Army cannot make sound risk-based
               decisions about what investments it should make in the programs in
               the future.

    			  Army Lacks a Comprehensive Prepositioning Storage and Maintenance
    			  Facilities Plan

               Although the Army reported maintenance and storage facility
               shortages to Congress, it lacks a comprehensive plan for
               maintenance and storage facilities for prepositioned stocks.
               According to Army officials, facility shortfalls are a concern in
               Kuwait and Korea, while facility excesses were an issue in Italy.
               Army policy recommends storing prepositioned equipment in
               controlled-humidity storage facilities, since outdoor storage
               results in increased maintenance costs. However, requirements for
               these facilities are currently uncertain. Until the Army develops
               a comprehensive plan that identifies how prepositioned equipment
               will be utilized and where it will be located for the long term,
               the existing facilities problems can not be addressed.

    			  Outdoor Storage of Equipment Results in Millions of Dollars of
    			  ncreased Maintenance Costs

               The Army's lack of adequate storage facilities for prepositioned
               equipment has led to equipment being stored outdoors, leaving it
               relatively unprotected from moisture, sand, and other elements and
               thus contributing to a number of maintenance problems, including
               corrosion.^14 Army Regulation 740-1 stipulates that prepositioned
               equipment should be stored in controlled-humidity storage
               facilities. If controlled-humidity storage is not available, then
               covered storage space is preferred. More frequent inspections are
               required for equipment stored outside.

    ^13 GAO, Military Prepositioning: Army and Air Force Programs Need To Be
    Reassessed, [33]GAO/NSIAD-99-6 (Washington, D.C.: Nov.16, 1998).

    ^14 Corrosion is defined under 10 U.S.C. S 2228 as the deterioration of a
    material or its properties caused by a reaction of that material with its
    chemical environment.

               Inadequate storage facilities in both South Korea and Kuwait have
               resulted in outdoor storage of prepositioned equipment. Figure 1
               shows the storage situation in Kuwait, with prepositioned
               equipment stored at outside locations.

               Figure 1: Existing Outdoor Storage in Kuwait

               Outdoor storage accelerates equipment deterioration and increases
               costs due to additional maintenance requirements. For example, if
               tanks are stored outside, preventive maintenance inspections must
               be performed every 30 days. If they are stored in
               controlled-humidity warehouses, inspections are only performed
               every 6 months. According to Army officials, maintenance
               inspections and repairs for equipment stored outdoors cost about
               four times that of equipment being stored in controlled-humidity
               warehouses. Army officials estimate that it costs an additional
               $24 million per year per heavy brigade combat team to maintain the
               equipment in outdoor storage.

    			  Future Facility Requirements for the Army Prepositioning Program
    			  Remain Uncertain

               Facility requirements for the Army's prepositioning program depend
               on equipment requirements, and as was discussed above, these have
               not yet been established. Consequently, facility requirements are
               uncertain. Prepositioned equipment can be used as rotational--that
               is, equipment provided to units arriving in theater for
               deployment; training--that is, equipment provided to units for
               training exercises but then returned to the storage location; or
               simply as stored prepositioned--equipment that is stored for
               undetermined future use. According to Army officials, there will
               be increased maintenance and maintenance facilities requirements
               if prepositioned equipment is to be used for training or to
               support a rotational presence in the region. Concurrently, there
               may be a decreased requirement for humidity-controlled storage
               space, depending on how the rotation is scheduled. Rotational unit
               equipment will have more repair requirements than stored units,
               due to damage and wear. If the prepositioned equipment is
               maintained solely for future use, more storage facilities and less
               maintenance capability will be needed. In Kuwait, the Army has not
               determined whether the prepositioned equipment will be used for
               units rotating in and out of theater, used as a combat brigade
               team training set, or stored.

               Storage facilities in Kuwait will likely be needed, but until Army
               officials decide how the equipment in Kuwait will be used, they
               will not be able to determine the type and amount of facilities
               needed. Storage facilities intended for prepositioned equipment at
               Camp Arifjan are currently being used as headquarters buildings
               for Army Central Command, and it is not clear when these buildings
               will revert to their storage function. While the Army is exploring
               numerous options for providing covered storage of the equipment in
               Kuwait, ranging in cost from $20 million to $37 million, none are
               currently funded.

               Additional maintenance and storage facilities are needed in South
               Korea to support the prepositioned equipment at Camp Carroll. The
               Army has already broken ground on a new maintenance facility that
               is expected to be operational in November 2007. The Army has plans
               to build an additional 200,000 square feet of storage space at a
               cost of $18.6 million. This project is currently unfunded, yet it
               has a target completion date of 2012. However, while the Army is
               addressing the prepositioning facility shortfalls at Camp Carroll,
               it is considering relocation of the set to another site near a
               port further south. Army officials believe it would provide for
               more flexible use of the prepositioned assets. If the Army decides
               to move the equipment set, the additional covered storage at Camp
               Carroll may be unnecessary.

               The Army's new strategy also includes a plan to store heavy
               equipment at a newly constructed Italian site, to make use of a
               facility that previously had no mission. When initially approved,
               the construction project was intended to support the storage of a
               prepositioned combat brigade team equipment set, but this plan was
               eliminated in the 2012 strategy. However, since the contract for
               this project had already been awarded and construction was
               underway, the Army decided to complete the construction. Army
               officials stated that it would be more costly to cancel the
               project than to finish it. The cost for the initial phases of the
               construction project is approximately $48 million. A $5 million
               ammunition maintenance and storage facility is also planned as
               part of this construction project.

               Figure 2 shows the new facility, including seven
               controlled-humidity warehouses, a maintenance facility, an
               administration building, and a brake test facility and wash rack.

               Figure 2: Overview of Military Construction Project at Camp
               Livorno, Italy

               The new Army strategy includes a prepositioned combat brigade team
               equipment set at Livorno with the intention of using the port to
               upload the prepositioned equipment onto ships as needed. The Army
               has also been discussing using the equipment in Livorno for
               rotational training exercises in Eastern Europe in locations like
               Bulgaria and Romania. However, specific plans for this had not
               been developed.

               Afloat stocks are reduced in the Army's new 2013 prepositioning
               strategy, but the Army plans to continue to utilize the
               Charleston, South Carolina, prepositioning facility to unload,
               repair, and reload prepositioned equipment from afloat
               prepositioning ships. The facility was originally used to maintain
               Polaris missiles and was converted by the Army to provide
               maintenance support of the prepositioned afloat fleet. According
               to Army officials, upgraded maintenance and storage facilities
               will be required to support the facility's prepositioning mission
               but the implications of the new strategy on facilities have not
               yet been determined.

               Table 1 shows the current status of maintenance and storage
               facilities at selected Army prepositioning locations.

               Table 1: Status of Facilities at Selected Army Prepositioned Stock
               Locations

    Location			           Status
    Europe              o Military closed three prepositioned sites in Europe
                           at Bettemborg, Luxembourg; Eygelshoven, Netherlands;
                           and Hythe, United Kingdom
                           o First two phases of a three-phase maintenance and
                           storage facility project are nearing completion in
                           Livorno, Italy at a cost of $48 million
    Charleston, S.C.    o The Army is proposing several projects for
                           additional storage and improved maintenance capability
                           for the facility
    South Korea         o Construction of a new maintenance facility is
                           currently underway at Camp Carroll with completion due
                           in November 2007
                           o Planning for additional 200,000 sq. ft. storage
                           capability
                           o Exploring potential relocation of set to Kwang Yang
    Kuwait              o Existing storage facility is currently being used to
                           house Army Central Command administrative offices,
                           which leaves prepositioned assets stored outside
                           o Army Materiel Command is considering permanent and
                           temporary maintenance and storage capability
                           alternatives to protect prepositioned equipment from
                           the harsh desert climate
    Qatar               o Seventeen of 26 existing storage facilities have
                           been diverted to Army priority missions; some diverted
                           warehouses may be returned to Army Prepositioning
                           Stocks use at some future date

               Source: GAO analysis, developed from Army data.

    			  Maintenance Oversight of Prepositioned Stocks Has Improved in
    			  South Korea, but Needs Improvement in Kuwait

               Management oversight of the maintenance of equipment in Korea has
               improved since we published our report in 2005. Previously,
               significant issues and problems were found with the mission
               capability of stocks in South Korea. We stated that despite
               reports of high mission capability, the majority of the stocks in
               South Korea were not mission capable. During our May 2006 visit to
               South Korea, we observed that the Army had hired additional
               personnel to bring the equipment up to full mission capability and
               ensure that the equipment was properly maintained. A new
               organizational structure was established that created clear lines
               of responsibility and standard operational procedures for each
               aspect of the cyclic maintenance program. A training program for
               production control was established for both U.S. and South Korean
               employees, and there was a continued emphasis on the need for
               oversight.

               While the problems we identified in 2005 in South Korea have been
               corrected, recent inspections of contractor-maintained equipment
               in Kuwait revealed a high percentage of equipment failure,
               indicating that maintenance oversight is a continuing problem.
               Analyzing data available at the site, we found that 28 percent of
               the prepositioned equipment in Kuwait submitted for government
               acceptance had failed quality assurance testing between June 2005
               and June 2006. However, the maintenance battalion had not
               routinely tracked this information or monitored this important
               performance measure.

               Additionally, much of the equipment recently certified by the
               contractor during preventative maintenance inspections failed
               random governmental checks. Beginning in May 2006, the quality
               assurance^15 team began performing random preventative maintenance
               checks on equipment items inspected and certified by the
               contractor within the previous 10 to 14 days. Nearly half of the
               49 pieces of equipment sampled during May and June 2006 by the
               quality assurance inspectors had nonmission-capable faults needing
               repair. We accompanied inspectors on three random inspections. The
               nonmission-capable faults we observed included inoperable lights,
               fluid leaks, lack of battery power, and an inoperable rear door on
               a Bradley Fighting Vehicle. Army officials told us this failure
               rate was not acceptable and that they had informed the contractor
               it needed to improve performance. Yet Army officials recently
               reported successful issuance in August 2006 of some of the
               prepositioned equipment for units heading to Iraq. This inspection
               failure rate raises questions about the true mission capability of
               the prepositioned equipment, and it demonstrates the need for
               rigorous management oversight of the maintenance contractor in
               Kuwait. Without improved oversight of maintenance, prepositioned
               equipment and supplies could be less than mission capable when
               needed.

    			  Conclusions

               While prepositioning is considered critical to DOD's ability to
               meet its mobility needs, the department does not yet have a clear
               strategy laid out that identifies the role that prepositioning
               will play in the 21st century. The Army took steps to revise its
               prepositioning strategy in the latter part of 2006; however, its
               efforts are not fully synchronized with the evolving DOD-wide
               strategy. The Army's decisions today have profound future
               implications for the entire department and potentially affect our
               ability to respond to conflict. The primary risk of having the
               Army develop its strategy in advance of a DOD-wide strategy is
               that the Army could develop plans without an understanding of how
               the Army and other services' programs will fit together or,
               alternatively, limit the options of the department because it must
               incorporate the Army's plans into the overall strategy. The
               importance that prepositioned stocks are envisioned to have in the
               future underscores the need for DOD-wide consensus on the
               direction and priority for the programs, and the necessity of
               strong leadership and direction from the top levels of DOD. The
               choices may well be difficult. Unlike the period following the end
               of the Cold War, the Army no longer has an excess of relatively
               modern combat and support equipment. Depending on the strategy
               that is eventually chosen, billions of investment dollars could be
               required to recapitalize prepositioning programs and build an
               infrastructure to support them. Alternatively, should the Army and
               DOD decide to focus less on prepositioned stocks, this decision
               will likely have a ripple effect on airlift and sealift needs. A
               DOD-wide strategy would become the foundation for an investment
               plan that balances costs and risks and would guide the department
               as it chooses where it will invest in an environment that is
               increasingly becoming resource constrained.

    ^15 Quality assurance inspectors perform a variety of tasks, including
    initial acceptance of repaired equipment from the maintenance contractor
    and monitoring of contractor-performed preventative maintenance checks.

               Setting and aligning broad strategies, however, will not be enough
               to ensure success in the Army's program over the longer term. Once
               the DOD-wide strategy is set and the Army's efforts are aligned
               with it, the Army must turn its attention to the fundamentals of
               program management. Dozens of reports from GAO and other
               organizations point to pervasive management problems in
               determining requirements and ensuring program readiness, as well
               as in providing adequate storage and maintenance for prepositioned
               equipment. To its credit, the Army recognizes this and has taken
               critical first steps toward redefining its prepositioning program
               and building a plan for its implementation. However, focused and
               sustained attention will be required to overcome these
               long-standing issues.

    			  Recommendations for Executive Action

               We recommend that the Secretary of Defense direct the Secretary of
               the Army to take steps to synchronize the Army's prepositioning
               strategy with the DOD-wide strategy to ensure that future
               investments made for the Army's prepositioning program align with
               the anticipated DOD-wide prepositioning strategy.

               Once the strategic direction is aligned with the DOD strategy, we
               recommend that the Secretary of the Army develop an implementation
               plan that

               o completes ongoing reevaluation of the secondary item and
               operational project stock requirements as well as establishes
               systematic readiness measurement and reporting of secondary items
               and operational project stock programs,
               o identifies the optimal mix of storage and maintenance facilities
               at each location to support the emerging strategy, and
               o prescribes oversight requirements for the maintenance of
               prepositioned equipment to ensure that equipment is ready for
               combat.

    			  Agency Comments and Our Evaluation

               In written comments on a draft of this report, DOD generally
               concurred with our recommendations but stated that it had already
               taken steps to address the recommendations and that further
               actions are not needed. We acknowledge that the Army and the
               department have taken some initial steps; however, we continue to
               believe that our recommendations have merit and that additional
               actions and sustained management attention will be needed to
               ensure the viability of the Army's prepositioning program as part
               of the overall departmentwide effort to meet mobility needs. DOD
               also commented that our report contained misleading information
               and provided technical comments to improve the accuracy and
               clarity of the report. We disagree that the facts in our report
               are misleading and have addressed each of the department's
               technical comments in appendix III.

               DOD partially concurred with our first recommendation that the
               Secretary of Defense take steps to synchronize the Army's
               prepositioning strategy with the emerging DOD-wide strategy, and
               stated that the Army had developed a service-specific strategy
               that is being incorporated into ongoing mobility studies and the
               emerging DOD-wide effort. The department stated that, since the
               Army is participating in ongoing studies, further direction is not
               required. Some of the technical comments DOD provided also
               addressed the strategy-setting issue, but seemed to contradict the
               overall response. For example, DOD stated that the timing of the
               two strategies could cause "disconnects" and that the Army will
               have to modify its strategy when the DOD-wide strategy is issued.
               Since DOD's comments lack internal consistency, it is not clear to
               us what the department intends to do to address the
               recommendation. As our report points out, successful management
               practices dictate that strategy setting should begin at the top,
               and that strong leadership will be needed from the department to
               ensure that the programs of the Army--as well as other military
               services--are aligned with the overall departmentwide strategy,
               not the reverse. Moreover, taking a service-centric approach to
               prepositioning may preclude opportunities for innovation, or lead
               to duplication across the department. Prepositioning should be
               viewed in a joint context, as part of broader mobility objectives.
               The ultimate departmentwide strategy should not just cobble
               together the plans of the individual services into a
               departmentwide strategy. In our view, as it develops the DOD-wide
               strategy, the department should take advantage of the opportunity
               to reexamine its approach to prepositioning as part of broader
               mobility considerations including its interrelationship with
               airlift and sealift.

               In the technical comments, the department also stated that the
               Army should not be criticized for its timing and lack of
               synchronization with a DOD strategy that had not yet been issued.
               The Army did expedite its strategy revision during the course of
               our review, completing it from start to finish in the latter half
               of 2006. The Army completed this revision while a broader strategy
               effort--specifically, a follow-on to the Mobility Capabilities
               Study focused on the future of prepositioning--was ongoing but had
               an unclear completion date. In a September 2005 report, we
               recommended that DOD develop a departmentwide strategy to set
               direction for and underpin the prepositioning programs of the
               services but this has still not been completed. Underscoring its
               interest in prepositioning--and consistent with our previous
               recommendation--the John Warner National Defense Authorization Act
               for Fiscal Year 2007 required the department to finalize a
               departmentwide prepositioning strategy by April 2007. Had the
               department implemented our recommendation in a more timely
               fashion, this synchronization concern would be moot and DOD may
               not have been called upon to establish a strategy for the
               department's prepositioning programs.

               The department concurred with our second recommendation that, once
               the Army's strategy is aligned with the DOD-wide strategy, the
               Secretary of the Army should develop an implementation plan to
               address the requirements, readiness reporting, facilities, and
               maintenance oversight issues that we identified in our report. The
               department stated that the Army had included an implementation
               plan in its revised prepositioning strategy that addressed these
               issues and that the implementation plan had been aligned with a
               joint staff instruction published in November 2006 that provides
               logistics planning guidance for prepositioning and a department
               directive dated December 2003 that provides war reserve materiel
               policy. As a result, the department stated that no additional
               direction is required. We disagree. The Army's implementation plan
               was to have been completed in December 2006, but was still
               unavailable as of the end of January 2007. As a result, GAO could
               not determine whether the elements of our recommendation have been
               addressed. However, we reviewed the recent logistics planning
               guidance and while the instruction provides general logistics
               planning guidance for prepositioned stocks, there are few
               specifics about requirements setting and readiness reporting for
               secondary items and operational project stocks, facilities, or
               maintenance oversight. We also reviewed the identified department
               guidance. While it does require the determination of war reserve
               materiel requirements, and annual reports of the existing levels
               of these items, we do not believe this is a systematic reporting
               of readiness. In fact, our 2005 report found that the department
               was not enforcing the readiness-reporting provision, and planned
               to rescind it. Neither Instruction addresses the optimum mix of
               storage and maintenance facilities or prescribes oversight
               requirements for the maintenance of prepositioned equipment to
               ensure that it is combat ready. Moreover, since these issues have
               been long-standing, recognized both in prior GAO reports and
               assessments made by the Army's own audit organizations, we
               continue to believe that additional direction is needed.

               We will send 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, this report will be available at
               no charge on the GAO Web site at http://www.gao.gov . Contact
               points for our Offices of Congressional Relations and Public
               Affairs may be found on the last page of this report.

               If you or your staff has any questions, please contact me at (202)
               512-8365. Key contributors to this report are listed in appendix
               IV.

               William M. Solis, Director
    			  Defense Capabilities and Management

    			  Appendix I: Scope and Methodology

               To assess whether the Army's report comprehensively addressed the
               required reporting areas in Public Law 109-163, we reviewed the
               Army's prepositioned stocks program. We obtained the Army's report
               and reviewed and compared it to the legislative mandate as well as
               other documents including Department of Defense (DOD) regulations,
               Army regulations that govern storage and maintenance of
               prepositioned stocks, and the Army Prepositioned Stocks Strategy
               2012. We also reviewed Inspector General and Army Audit Agency
               reports on prepositioning issues as well as any relevant GAO
               reports. We interviewed officials in the Department of Defense
               Joint Staff, Department of the Army, Army Materiel Command, and
               the Army Sustainment Command and its subordinate units at each
               prepositioning location. We also collected and analyzed internal
               Army reports on inventory and readiness to verify the reported
               inventory levels and readiness rates of prepositioned stocks.

               To assess the major challenges facing the Army as it revises and
               implements its prepositioning program, we reviewed the Army
               Prepositioned Stocks Strategy 2012 and DOD regulations and
               documents pertaining to a joint prepositioning strategy, along
               with relevant past GAO, Inspector General, and Army Audit Agency
               reports. We interviewed officials from the Department of the Army,
               the Office of the Secretary of Defense for Policy, the Department
               of Defense Joint Staff, the Army Materiel Command, and the Army
               Sustainment Command and its subordinate units at prepositioning
               locations in Europe, South Korea, South Carolina, and Kuwait. We
               conducted site visits to Army prepositioned stock facilities at
               each location to observe firsthand the current status of their
               storage and maintenance facilities and also reviewed existing
               maintenance and storage procedures and oversight processes. We
               also examined the Army's planned revisions to its existing Army
               Prepositioned Stocks Strategy 2012 and the efforts on behalf of
               DOD to develop an overarching prepositioning strategy. We examined
               the level of coordination between the Army and DOD with regard to
               the new prepositioning strategies currently under development. We
               could not fully assess these strategies, as they are still in the
               process of being developed. We also documented current inventory
               levels, funding for the program, and equipment readiness rates by
               collecting and analyzing internal Army reports on inventory,
               funding, and readiness. We reviewed past reports prepared by GAO,
               the Army Audit Agency, the Army Materiel Command Inspector
               General, and the Army Logistics Support and Evaluation Team that
               identified problems with the prepositioning program.

               We conducted our review from February 2006 through October 2006 in
               accordance with generally accepted government auditing standards.
               We reviewed available data for inconsistencies and also verified
               with the Army information technology contractor in Kuwait that
               they review and validate the input data we used in the report. We
               determined that the data we used were sufficiently reliable for
               the purpose of this report.

               We interviewed officials, and obtained documentation when
               applicable, at the following locations:

               o U.S. Army Headquarters, Washington, D.C.
               o U.S. Army Material Command, Ft. Belvoir, Virginia.
               o U.S. Army Forces Command, Ft. McPherson, Georgia.
               o U.S. Army Central Command, Ft. McPherson, Georgia.
               o U.S. Army Sustainment Command, Rock Island, Illinois.
               o U.S. Army Europe, Campbell Barracks, Germany.
               o 8th U.S. Army, Yongsan Garrison, South Korea.
               o U.S. Army Field Support Brigade, Seckenheim, Germany.
               o Material Support Center - Korea, Camp Carroll, South Korea.
               o U.S. Army Field Support Battalion - Livorno, Camp Livorno,
               Italy.
               o U.S. Army Field Support Battalion - Northeast Asia, Camp
               Carroll, Korea.
               o U.S. Army Field Support Battalion - Southwest Asia, Camp
               Arifjan, Kuwait.
               o U.S. Army Field Support Battalion- Afloat - Charleston, South
               Carolina.

               Unified Commands

               o U.S. Forces Europe, Patch Barracks, Germany.
               o U.S. Forces Korea, Yongsan Garrison, South Korea.
               o Joint Chiefs of Staff, J-4, Washington, D.C.

    			  Appendix II: Past Products Identifying Challenges Facing the
    			  Army and DOD Regarding Prepositioning Programs

               The Army's prepositioning program has faced a number of
               long-standing challenges including inadequate oversight and
               management; equipment and facility excesses and shortfalls; and
               invalid, inaccurate, poorly defined, and otherwise questionable
               requirements. In addition to problems with the prepositioning
               program, the Army has also had difficulty associated with the
               successful implementation of strategic plans and programs. GAO,
               the Army Audit Agency, Army's and the Department of Defense's
               (DOD) Inspector Generals along with others have called attention
               to these problems in products issued over the years.

               Table 2 provides summaries of the challenges to the Army and DOD's
               prepositioning programs along with program implementation concerns
               identified in past GAO reports and testimonies issued between
               January 1996 and September 2006. Table 3 provides summaries of
               similar issues identified in select products released by other
               organizations during the same time period.

    			  Table 2: GAO Products

    Title                          Key challenges identified
    Force Structure: Army Needs to In September 2006, we reported that the
    Provide DOD and Congress More  Army had not completed key details of the
    Visibility Regarding Modular   equipping strategy for its modular force
    Force Capabilities and         and, as a result, it is unclear what level
    Implementation Plans,          of equipment units will have, how this
    [34]GAO-06-745 (September      strategy may affect the Army's equipment
    2006)                          funding plans, and how well units with low
                                      priority for equipment will be able to
                                      respond to unforeseen crises. We also
                                      reported that the Army lacks a
                                      comprehensive and transparent approach to
                                      measure progress against its modularity
                                      objectives, assess the need for further
                                      changes to modular designs, and monitor
                                      implementation plans. We noted that without
                                      performance metrics and a comprehensive
                                      testing plan, decision makers will not have
                                      full visibility into how the modular force
                                      is currently organized, staffed, and
                                      equipped and, as a result, will not have
                                      sufficient information to assess the
                                      capabilities, cost, and risks of the Army's
                                      modular force implementation plans.
    DOD's High-Risk Areas:         In July 2006, we testified that DOD has
    Challenges Remain to Achieving continued to make progress implementing the
    and Demonstrating Progress in  10 initiatives in its supply chain
    Supply Chain Management,       management improvement plan, but it will
    [35]GAO-06-983T (July 2006)    take several years to fully implement these
                                      initiatives. We noted that although DOD has
                                      incorporated several broad performance
                                      measures in its supply chain management
                                      improvement plan, it continues to lack
                                      outcome-focused performance measures for
                                      many of the initiatives, making it
                                      difficult to track and demonstrate progress
                                      toward improving the three focus areas of
                                      requirements forecasting, asset visibility,
                                      and materiel distribution. We additionally
                                      reported that although DOD's plan includes
                                      four high-level performance measures that
                                      are being tracked across the department,
                                      these measures do not necessarily reflect
                                      the performance of the initiatives and do
                                      not relate explicitly to the three focus
                                      areas. Further, DOD's plan does not include
                                      cost metrics that might show efficiencies
                                      gained through supply chain improvement
                                      efforts.
    Force Structure: Capabilities  In April 2006, we testified that although
    and Cost of Army Modular Force the Army is making progress creating
    Remain Uncertain,              modular units, it faces significant
    [36]GAO-06-548T (April 2006)   challenges in managing costs and meeting
                                      equipment and personnel requirements
                                      associated with modular restructuring in
                                      the active component and National Guard. We
                                      noted that the Army does not have a
                                      comprehensive and transparent approach to
                                      measure progress against stated modularity
                                      objectives and assess the need for further
                                      changes to modular designs. We additionally
                                      testified that the Army has not established
                                      outcome-related metrics linked to many of
                                      its modularity objectives and although it
                                      is analyzing lessons learned from Iraq and
                                      training events, the Army does not have a
                                      long-term, comprehensive plan for further
                                      analysis and testing of the designs and
                                      fielded capabilities. Finally, we testified
                                      that without performance metrics and a
                                      comprehensive testing plan, neither the
                                      Secretary of Defense nor congressional
                                      leaders will have full visibility into the
                                      capabilities of the modular force as it is
                                      currently organized, staffed, and equipped.
    Defense Logistics: Preliminary In March 2006, we testified that both the
    Observations on Equipment      Army and Marine Corps will face a number of
    Reset Challenges and Issues    ongoing and long-term challenges that will
    for the Army and Marine Corps, affect the timing and cost of equipment
    [37]GAO-06-604T (March 2006)   reset, such as Army and Marine Corps
                                      transformation initiatives, reset of
                                      prepositioned equipment, efforts to replace
                                      equipment left overseas from the active,
                                      National Guard, and Reserve units, as well
                                      as the potential transfer of U.S. military
                                      equipment and the potential for continuing
                                      logistical support to Iraqi Security
                                      Forces. We also testified that the Marine
                                      Corps and Army will have to better align
                                      their funding requests with the related
                                      program strategies to sustain, modernize,
                                      or replace existing legacy equipment
                                      systems. We testified that both services
                                      will have to make difficult choices and
                                      trade-offs when it comes to their many
                                      competing equipment programs. Finally, we
                                      noted that while the services are working
                                      to refine overall requirements, the total
                                      requirements and costs are unclear and
                                      raise a number of questions as to how the
                                      services will afford them.
    DOD's High-Risk Areas:         In October 2005, we testified that DOD's
    High-Level Commitment and      plan to improve supply chain management

    Oversight Needed for DOD       provides a good start and framework for
    Supply Chain Plan to Succeed,  addressing long-term systemic weaknesses
    [38]GAO-06-113T (October 2005) and in focusing the multiyear effort to
                                      improve supply support to the warfighter.
                                      We noted that successful resolution of
                                      DOD's supply chain management problems will
                                      require continued efforts to complete and
                                      successfully implement the plan. Based on
                                      GAO's criteria for removing programs from
                                      the high-risk designation, we reported that
                                      it is important for DOD to sustain top
                                      leadership commitment and long-term
                                      institutional support for the plan; obtain
                                      necessary resource commitments from the
                                      military services, the Defense Logistics
                                      Agency, and other organizations; implement
                                      proposed improvement initiatives across the
                                      department to address root causes; identify
                                      performance metrics and valid data to use
                                      in monitoring the initiatives; and
                                      demonstrate progress toward meeting
                                      performance targets.
    Defense Logistics: Better      In September 2005, we reported that DOD
    Management and Oversight of    faced near-term operational risks should
    Prepositioning Programs Needed another large-scale conflict emerge because
    to Reduce Risk and Improve     existing prepositioned stocks had been
    Future Programs,               heavily drawn to support operations in
    [39]GAO-05-427 (September      Iraq. We noted that some residual
    2005)                          capability exists but many of the programs
                                      face significant inventory shortfalls and,
                                      in some cases, maintenance problems. We
                                      additionally reported that the department
                                      and the military services have provided
                                      insufficient oversight over DOD
                                      prepositioning programs resulting in
                                      long-standing problems with requirements
                                      determination and inventory management.
    Defense Inventory: Actions     In March 2005, we reported on DOD's
    Needed to Improve the          supply-chain management during Operation
    Availability of Critical Items Iraqi Freedom. We developed detailed case
    during Future Military         studies of nine supply items that were
    Operations, [40]GAO-05-275     reported to be in short supply and could
    (March 2005)                   have had operational impacts, and found
                                      that U.S. troops experienced shortages of
                                      seven of the nine items that led, in some
                                      cases, to a decline in the operational
                                      capability of equipment and increased risk
                                      to troops. We identified five systemic
                                      deficiencies that contributed to shortages
                                      of the selected items, including (1)
                                      inaccurate and inadequately funded Army war
                                      reserve requirements, (2) inaccurate supply
                                      forecasts, (3) insufficient and delayed
                                      funding, (4) delayed acquisition, and (5)
                                      ineffective distribution.
    High-Risk Series: An Update,   In January 2005, we reported that DOD's
    [41]GAO-05-207 (January 2005)  supply-chain management had experienced
                                      significant weaknesses in its ability to
                                      provide efficient and effective supply
                                      support to war fighters. While DOD reports
                                      showed the department owning about $67
                                      billion of inventory, shortages of certain
                                      critical spare parts were adversely
                                      affecting equipment readiness and
                                      contributing to maintenance delays. DOD
                                      also lacked visibility and control over the
                                      supplies and spare parts it owned and did
                                      not have the ability to provide timely or
                                      accurate information on the location,
                                      movement, status, or identity of its
                                      supplies.
    Military Prepositioning:       In March 2004, we testified that during
    Observations on Army and       Operation Iraqi Freedom, the Army's
    Marine Corps Programs During   prepositioning program had some equipment
    Iraqi Freedom and Beyond,      that was outdated or did not match unit
    [42]GAO-04-562T (March 2004)   needs. The program also faced shortfalls,
                                      such as trucks, spare parts, and other
                                      items. We noted that shortages in Army
                                      prepositioned and war reserve spare parts
                                      had been a long-standing systemic problem.
                                      We likewise reported that the theater
                                      supply-and-distribution system became
                                      overwhelmed and was worsened by the
                                      inability to track assets available in
                                      theater, which meant that warfighters did
                                      not know what was available.
    Defense Logistics: Preliminary In December 2003, we reported that during
    Observations on the            Operation Iraqi Freedom poor asset
    Effectiveness of Logistics     visibility and insufficient and ineffective
    Activities During Operation    theater distribution capabilities
    Iraqi Freedom, [43]GAO-04-305R contributed to substantial logistics
    (December 2003)                support problems. DOD and military service
                                      officials raised a number of issues that
                                      may have contributed to the logistics
                                      problems, including (1) shortages of some
                                      spares or repair parts needed by deployed
                                      forces, (2) a reported mismatch between
                                      Army prepositioned equipment and unit
                                      needs, (3) DOD contractors used for
                                      logistics support during Operation Iraqi
                                      Freedom were not always effective, and (4)
                                      physical security at ports and other
                                      distribution points in the theater was not
                                      always adequate to protect assets.
    Military Readiness: New        In March 2003, we reported that DOD used
    Reporting System Is Intended   readiness measures that varied 10
    to Address Long-Standing       percentage points or more to determine
    Problems, but Better Planning  readiness ratings and often did not report
    Is Needed, [44]GAO-03-456      the precise measurements outside DOD. We
    (March 2003)                   additionally reported that DOD had complied
                                      with most, but not all, of the legislative
                                      readiness-reporting requirements and, as a
                                      result, Congress was not receiving all the
                                      information mandated by law. DOD issued a
                                      directive in June 2002 to establish a new
                                      comprehensive readiness-reporting system.
                                      However, as of January 2003, DOD had not
                                      developed an implementation plan containing
                                      measurable performance goals,
                                      identification of resources, performance
                                      indicators, and an evaluation plan to
                                      assess progress in developing the new
                                      reporting system.
    Major Management Challenges    In January 2003, we reported that
    and Program Risks: Department  inefficient inventory management practices
    of Defense, [45]GAO-03-98      represented one of the most serious
    (January 2003)                 weaknesses in DOD's logistics operations.
                                      While DOD's inventory value had been
                                      declining for the previous 10 years, GAO's
                                      past and current work in the area indicated
                                      that DOD (1) continued to store
                                      unnecessarily large amounts of material,
                                      with about half of its secondary inventory
                                      exceeding then- war reserve or current
                                      operating requirements; (2) purchased
                                      material for which there was no valid
                                      requirement; (3) experienced equipment
                                      readiness problems because of a lack of key
                                      spare parts; and (4) maintained inadequate
                                      visibility over material being shipped to
                                      and from military activities.
    Defense Inventory: Improved    In July 2002, we reported that the Army's
    Industrial Base Assessments    approach to industrial-base capability
    for Army War Reserve Spares    assessments lacked key attributes that
    Could Save Money,              included the collection of current industry
    [46]GAO-02-650 (July 2002)     data, the analysis of that data, and the
                                      creation of management strategies for
                                      improving wartime spare parts availability.
                                      We noted that out-of-date data could result
                                      in reduced readiness and inflated or
                                      understated war reserve spare parts funding
                                      requests within budget submissions to
                                      Congress, and the Army's ability to
                                      identify long lead times and create
                                      management strategies to reduce lead times
                                      and thus the amount of inventory needed.
    Defense Inventory: Army War    In May 2001, we reported that
    Reserve Spare Parts            notwithstanding the apparent shortfall in
    Requirements Are Uncertain,    funding for war reserve spare parts, our
    [47]GAO-01-425 (May 2001)      review showed uncertainties about the
                                      accuracy of the Army's requirements and
                                      funding needs in that area. Specifically,
                                      we found that (1) the best available data
                                      regarding the rate at which spare parts
                                      would be consumed during wartime had
                                      generally not been used in determining war
                                      reserve requirements for spare parts, (2) a
                                      potential mismatch existed between the
                                      Army's methodology for determining spare
                                      parts requirements and the Army's planned
                                      battlefield maintenance practices, (3) the
                                      capacity of the industrial base to support
                                      the parts requirements of the two major
                                      theaters of war scenario was not well
                                      defined or based on industry data, and (4)
                                      emerging issues, such as force
                                      restructuring actions, could significantly
                                      affect future war reserve requirements.
    Military Prepositioning: Army  In November 1998, we reported that the Army
    and Air Force Programs Need To and Air Force had poorly defined, outdated,
    Be Reassessed,                 or otherwise questionable requirements in
    [48]GAO/NSIAD-99-6 (November   the major programs that GAO reviewed. The
    1998)                          Army and the Air Force had reported
                                      significant shortages and poor maintenance
                                      conditions in their prepositioning
                                      programs. In some cases, however, reliable
                                      data to assess inventory fill and
                                      maintenance condition were unavailable.
                                      Thus, the precise readiness of the
                                      prepositioned stocks--and the impact of any
                                      shortfalls--was difficult to determine
                                      because of the questionable requirements
                                      that underpinned the programs and the poor
                                      information that the services used to
                                      manage the programs.
    Afloat Prepositioning: Not All In July 1997, we reported that of the
    Equipment Meets the Army's     Army's unit sets considered when reporting
    Readiness Goal,                the readiness of the brigade set of war
    [49]GAO/NSIAD-97-169 (July     reserve equipment; about 25 percent did not
    1997)                          meet the Army's readiness goal for
                                      full-mission capability. According to Army
                                      maintenance records, some equipment aboard
                                      prepositioning ships had been reported as
                                      nonmission capable since September 1995.
                                      These records also erroneously identified
                                      some nonmission-capable equipment as
                                      repairable aboard ship, although Army
                                      officials said that many repairs could not
                                      be made until the equipment was downloaded.
                                      One factor that contributed to lower
                                      readiness rates was that some equipment was
                                      not fully mission capable when it was
                                      originally loaded on prepositioning ships.
                                      Other factors include the deterioration of
                                      the equipment while in storage aboard ships
                                      and the limited ability to conduct
                                      maintenance on the equipment while in
                                      storage.
    Army War Reserves: DOD Could   In July 1997, we reported that DOD could
    Save Millions by Aligning      have saved about $54 million per year in
    Resources With the Reduced     personnel costs once the Army removed
    European Mission,              unneeded war reserve equipment from central
    [50]GAO/NSIAD-97-158 (July     Europe and aligned its resources with the
    1997)                          reduced mission. Army data showed that of
                                      128,000 items in central Europe identified
                                      as available for redistribution outside of
                                      Europe, the Army had firm plans for about
                                      54,000 items, had proposed--but had not
                                      funded or implemented--the plans for about
                                      27,000 items, and had no plans for about
                                      46,000 items because it found no known
                                      requirement for them in the war reserve
                                      program.
    Defense Inventory Management:  In March 1997, we testified that inventory
    Problems, Progress, and        management problems had plagued DOD for
    Additional Actions Needed,     decades. We had recently reported that
    [51]GAO/T-NSIAD-97-109 (March  about half of DOD's secondary inventory was
    1997)                          not needed to support war reserve or
                                      current operating requirements. Most of the
                                      problems that contributed to the
                                      accumulation of this unneeded inventory
                                      still existed, such as outdated and
                                      inefficient inventory management practices
                                      that frequently did not meet customer
                                      demands, inadequate inventory oversight,
                                      weak financial accountability, and
                                      overstated requirements. We noted that
                                      while we continued to see pockets of
                                      improvement, DOD had made little overall
                                      progress in correcting systemic problems
                                      that had traditionally resulted in large
                                      unneeded inventories.

    Source: GAO.

    Table 3: Other Products

    Title                            Key challenges identified
    Management of Army Prepositioned In August 2006, the Army Audit Agency
    Stocks. Headquarters, Department reported that U.S. Army Material Command
    of the Army, U.S. Army Audit     management practices for overseeing the
    Agency, A2006-0200-ALL (August   Army prepositioned stocks program and
    2006)                            ensuring it remained responsive to
                                        warfighters needs appeared to be on
                                        automatic pilot with little management
                                        intervention. They reported that this
                                        inattention has resulted in supply
                                        problems including problems associated
                                        with requirements determination and
                                        inventory management.
    Army Prepositioned Stocks in     In August 2006, the Army Audit Agency
    Europe. Headquarters, Department reported that the requirements identified
    of the Army, U.S. Army Audit     in the Army's APS Strategy 2012 would not
    Agency, A2006-0197-ALE (August   effectively support responsibilities in
    2006)                            the European theater or Army
                                        transformation goals. The Army Audit
                                        Agency indicated that while the APS
                                        strategy included requirements for six
                                        operational projects, only two were valid
                                        - special operations forces and aerial
                                        delivery. According to the Army Audit
                                        Agency, the remaining operational
                                        projects were either invalid or
                                        questionable for the U.S. European
                                        Command Area of Responsibility and
                                        proponents of these projects did not do
                                        required reviews and revalidations of the
                                        requirements.
    Military Construction Projects   In June 2006, the Army Audit Agency
    Supporting Army Prepositioned    reported that the Army was continuing
    Stocks in Europe. Headquarters,  with its construction projects at
    Department of the Army, U.S.     Livorno, Italy, despite elimination of
    Army Audit Agency,               the original requirements for the
    A2006-0149-ALE (June 2006)       projects and uncertainty about the
                                        facility's future mission. They
                                        additionally reported that the
                                        continuation of construction without a
                                        permanent requirement did not justify
                                        expenditure of Military Construction,
                                        Army funds appropriated for the project
                                        and violated the spirit in which Congress
                                        appropriated funds for the project.
    Operation Iraqi Freedom (OIF)    In June 2004, the Center for Naval
    Maritime Prepositioning Force    Analyses reported that although Marine
    (MPF) Reconstitution,            Corps Maritime Prepositioning Force
    Regeneration, and Reembarkation  operations in Iraq could be characterized
    (R3)Operations: Summary          as a success, the execution of
    Findings, Center for Naval       reconstitution, regeneration, and
    Analyses, CAB D0009974.A2/Final  reembarkation was neither simple nor
    (June 2004)                      easy. Challenges and issues included (1)
                                        a lack of detailed published policies and
                                        guidance, and servicewide knowledge and
                                        experience, in planning and executing
                                        operations; (2) simultaneous conduct of
                                        combat and operations; and (3) a lack of
                                        effective systems, organizations, and
                                        procedures for tracking and accounting
                                        for prepositioned equipment after it was
                                        downloaded.
    Operational Project Stocks -     In February 2004, the Army Audit Agency
    Phase II, Headquarters,          reported that some operational
    Department of the Army, U. S.    projects--one of four categories of Army
    Army Audit Agency,               prepositioned stocks--had (1) invalid
    A-2004-0108-AML (February 2004)  intended purposes; (2) inaccurate,
                                        overstated, outdated, or questionable
                                        requirements; (3) insufficient quantities
                                        of equipment on hand; or (4) a lack of
                                        requirements for essential equipment.
                                        Consequently, about $472 million of the
                                        roughly $1.5 billion in requirements
                                        reviewed were invalid and $280 million
                                        were questionable.
    U.S. Army Materiel Command       In September 2003, the U.S. Army Materiel
    (USAMC) Operation Iraqi Freedom  Command sponsored an Operation Iraqi
    (OIF) Lessons Learned            Freedom lessons learned conference during
    Conference, 10-11 September      which 27 major issues were identified in
    2003, Redstone Arsenal, Alabama  such areas as personnel, supply,
                                        maintenance, and distribution. For
                                        example (1) supply-related lessons
                                        learned included the need to relook at
                                        requirements determinations, asset
                                        management and visibility, prepositioned
                                        stocks, and ammunition warfighter
                                        support; (2) maintenance-related lessons
                                        learned included the need to improve
                                        prepositioning maintenance, readiness and
                                        other reporting, accountability, and
                                        forward repair activity; and (3)
                                        distribution-related lessons learned
                                        included the need to modify force
                                        structure and doctrine to support the
                                        distribution system, appoint a single DOD
                                        distribution manager, and develop and
                                        implement a business system.
    Systematic Inspection of the     In August 2001, the Army Materiel Command
    Material Condition of Army War   Inspector General reported the following
    Reserve Stocks, U.S. Army        problems with Army war reserve
    Materiel Command Inspector       sustainment stocks related to the Army
    General (August 2001)            Prepositioned Stock program: (1) a lack
                                        of centralized strategic operational
                                        direction; (2) insufficient funding for
                                        program requirements; (3) a lack of data
                                        integrity in automated systems; (4)
                                        adverse mission impact caused by
                                        readiness reporting procedures and
                                        overall operational practices; (5)
                                        mismatches between recorded condition
                                        codes of materiel and true conditions;
                                        (6) no established procedures for test,
                                        measurement, and diagnostic equipment
                                        support; (7) an inability of the command
                                        to effectively support the Army's wartime
                                        mortuary affairs mission; (8) materiel
                                        excess to requirements stored at
                                        prepositioned sites; (9) ineffective
                                        government oversight of a contractor
                                        allowing decreased readiness and
                                        increased costs; and (10) bulk fuel,
                                        potable water, and other assets to
                                        support forces during deployment were not
                                        part of the package.
    Army Prepositioned Stock         In March 1998, the Army Audit Agency
    Program, Combat Equipment Group  reported that while the Army Combat
    - Europe, U.S. Army Audit        Equipment Group properly accounted for
    Agency, AA 98-138 (March 1998)   its war reserve stocks stored in Europe,
                                        improved accounting procedures were
                                        needed for its war reserve stocks loaned
                                        in support of Operation Joint Endeavor in
                                        Bosnia. The audit agency additionally
                                        reported that repair parts had been
                                        identified during the audit that were not
                                        needed to support the deployable unit
                                        sets authorized for the war reserve
                                        program. Moreover, while war reserve
                                        equipment was generally maintained and
                                        stored properly, some of the combat
                                        equipment companies retained too many
                                        line items, maintained excess stockage
                                        levels, and didn't establish an effective
                                        method to monitor maintenance operations.
    Sustainment Requirements for the In February 1998, the Army Audit Agency
    Army Prepositioned Stock         reported that a substantial number of
    Program, U.S. Army Audit Agency, undesignated war reserve assets were
    AA 98-99 (February 1998)         stored in Europe that could have been
                                        used to satisfy new sustainment stock
                                        requirements.
    Total Asset                      In November 1997, the Army Audit Agency
    Visibility-Operational Projects, reported problems in the Total Asset
    U.S. Army Audit Agency, AA 98-31 Visibility capability for Army
    (November 1997)                  operational projects, including (1)
                                        incomplete or unreliable on-hand asset
                                        balances, (2) a lack of visibility over
                                        loaned assets, (3) inadequate
                                        identification of key management controls
                                        in Army policy regulations, (4)
                                        weaknesses in data integrity, and (5)
                                        failure of Army managers at both the
                                        wholesale and retail levels to
                                        redistribute assets to improve readiness
                                        and reduce requirements.
    Equipment Pre-positioned Afloat, In December 1996, the DOD Inspector
    Department of Defense Inspector  General reported that the Army had
    General, 97-054 (December 1996)  rapidly expanded its afloat
                                        prepositioning program without first
                                        publishing criteria, policy, plans, and
                                        doctrine resulting in a possible
                                        inability to ensure effective equipment
                                        management in support of the combatant
                                        commanders.

    Source: GAO.

    			  Appendix III: Comments from the Department of Defense

    Note: GAO comments supplementing those in the report text appear at the
    end of this appendix.

    See comment 2.

    See comment 1.

    See comment 4.

    See comment 3.

    See comment 7.

    See comment 5.

    See comment 6.

    See comment 10.

    See comment 9.

    See comment 8.

    See comment 11.

    See comment 14.

    See comment 13.

    See comment 12.

    GAO's Responses to DOD's Technical Comments:

               1. DOD comments indicate that the reason the Army shifted its
               prepositioning strategy in 2006 was not due to budget
               reprogramming decisions; instead it was due to the 2006
               Quadrennial Defense Review. We interviewed Army officials during
               the summer of 2006 who told us that the budget reprogramming
               decision and equipment shortfalls throughout the Army were the
               main impetus of the strategy review. We have added the Army's
               assertion that the quadrennial review influenced the decision to
               the text.
               2. DOD indicates that the DOD policy under development "will
               result in the Army creating/modifying its strategy in accordance
               with the guidance in the DOD policy" when issued. We have added
               the department's assertion to the text. We agree that having an
               Army implementation plan in place before the DOD policy is issued
               will result in the need to modify the Army's strategy. However
               this is an apparent inconsistency with the main text of the
               department's comments stipulating that the Army's completed
               strategy will be incorporated into the DOD-wide strategy. As a
               result, we continue to believe that additional department-level
               direction is needed to ensure that future investments made by the
               Army are aligned with DOD policy.
               3. We believe that strategy is a better description as it provides
               linkage to the recommendation in our 2005 report calling for a
               DOD-wide prepositioning strategy.
               4. The department stated that the Army should not be criticized
               for creating an implementation strategy before the DOD policy is
               issued. Our intent was not to criticize but to demonstrate the
               potential risks associated with individual service strategies
               being implemented before the department's strategy is issued. In a
               September 2005 report GAO recommended that DOD develop a
               departmentwide strategy to set direction for and underpin the
               prepositioning programs of the services but this has still not
               been completed. The Army can ill afford to invest scarce resources
               to meet requirements that will not be aligned with the DOD policy
               when issued.
               5. The department disagreed with several aspects of our
               description of the operational project and secondary item
               programs. We have included additional information to the report
               that, in response to a past GAO recommendation, the Army has
               conducted revalidations of most operational project stocks.
               Further, the Army asserted that it tracks the funding of the
               prepositioned secondary items and operational project stocks as
               part of the Army's Strategic Management System and that this
               constitutes readiness reporting. We disagree. The requirements
               underpinning these programs are questionable, and funding
               information is inadequate for determining readiness.
               6. We have changed the text to reflect the department's definition
               of war reserve sustainment stocks.
               7. Since the Army strategy evolved during our review, we continue
               to believe our caption better reflects the substance.
               8. See comment 1.
               9. We have changed the text to delete "reset".
               10. We have changed the text to insert "DOD".
               11. We have made changes to the text to reflect the role of
               Combatant Commanders in operational planning.
               12. The department's suggested language indicated that the shift
               in strategy was the result of the 2006 Quadrennial Review. We have
               reflected this throughout the report. The department also
               suggested deleting language in the draft report concerning the
               lack of mission in Italy in the previous Army strategy but offered
               no reason why this information should be deleted. When initially
               approved, the $55 million construction project in Italy was
               intended to support the storage of a prepositioned combat brigade
               team equipment set there, but this requirement had been eliminated
               in the 2012 strategy leaving the facility with no mission. The
               Army decided to complete the construction as it was more costly to
               cancel than complete, and the Army's 2013 strategy indicates
               placing a combat brigade team equipment set at that location even
               though existing operational and contingency plans for the area do
               not require this type of equipment. We have retained this
               information in the report because we believe this information
               illustrates the need for better facilities planning by the Army.
               13. We have made changes to the text to include the Joint Forces
               Command in DOD's working group.
               14. We added information to reflect the facilities in Qatar.

    Appendix IV: GAO Contact and Staff Acknowledgments

    GAO Contact

    William M. Solis, (202) 512-8365

    Acknowledgments

    In addition to the contact named above, John Pendleton, Assistant
    Director, Jeff Kans, Travis Thomson, Jennifer Jebo, Erika Prochaska, and
    Cheryl Weissman also made key contributions to this report.

    (350921)

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    Highlights of [59]GAO-07-144 , a report to congressional committees

    February 2007

    DEFENSE LOGISTICS

    Improved Oversight and Increased Coordination Needed to Ensure Viability
    of the Army's Prepositioning Strategy

    Prepositioned military equipment and supplies on ships and overseas on
    land have become an integral part of the U.S. defense strategy. However,
    the Army's program has faced long-standing management challenges,
    including equipment excesses and shortfalls, invalid or poorly defined
    requirements, and maintenance problems. In Public Law 109-163, Congress
    required the Army to conduct an assessment of its prepositioning programs
    and required GAO to assess (1) whether the Army's report addressed the
    areas required by Congress, and (2) the major challenges the Army
    continues to face in its prepositioning program. GAO analyzed the Army's
    report and other information it obtained from the Joint Staff, the Army,
    and its subordinate commands to identify the issues affecting the Army's
    prepositioning program. GAO also visited prepositioned equipment sites in
    South Carolina, Europe, South Korea, and Kuwait.

    [60]What GAO Recommends

    GAO is making recommendations to synchronize the Army's prepositioning
    strategy with overall department efforts and address issues including
    requirements determination, readiness reporting, need for a comprehensive
    facilities plan, and maintenance oversight. The Department of Defense
    (DOD) generally concurred with our recommendations but felt that further
    actions are unneeded. GAO disagrees and continues to believe that its
    recommended actions are warranted.

    The Army's April 2006 report on the status of its prepositioning program
    addressed the areas required by Congress; for example, it included
    descriptions of operational capabilities, as well as inventory shortfalls
    expressed in terms of procurement costs. However, the Army significantly
    shifted its prepositioning strategy in the latter part of 2006, since that
    report was issued. According to the Army, this shift was based on insights
    gained from the 2006 Quadrennial Defense Review, but Army officials told
    us that budget reprogramming decisions and worsening Army-wide equipment
    shortfalls also influenced the expedited strategy revision. The Army's
    revised strategy proposes less reliance on heavy combat equipment afloat
    and the expansion of heavy equipment in Kuwait and Italy. As a result, the
    Army's April 2006 report to Congress is outdated, and neither Congress nor
    DOD should base funding decisions on it.

    The Army faces several major strategic and management challenges as it
    revises and implements its prepositioning program. From a strategic
    perspective, the Army cannot gauge how well its emerging strategy will
    align with DOD plans currently under development. The Army plans to begin
    implementing its revised strategy by the end of 2006. DOD has a
    departmentwide prepositioning study underway intended to set strategy and
    joint doctrine, but this will not be completed for several months and it
    anticipates that the Army will have to modify its prepositioning strategy
    when the DOD-wide strategy is issued. As a result, the Army is at risk of
    resourcing requirements that may be superseded by the DOD strategy.
    Moreover, because prepositioning is linked to airlift, sealift, and
    basing, the Army's decisions will have an as-yet undetermined effect on
    these areas. In addition to these strategic concerns, the Army faces three
    key management challenges. First, the Army has yet to determine sound
    secondary item and operational project stock requirements, and to
    systematically measure and report readiness. While the Army has been
    taking steps to address long-standing requirements-determination problems
    in certain parts of its program, the effort was not finished when GAO
    completed its work. Without accurate requirements and systematic readiness
    reporting, Army managers are not able to determine the extent to which the
    existing inventory reflects what the Army needs. Second, the Army lacks a
    comprehensive plan for maintenance and storage facilities for
    prepositioned stocks, resulting in uncertain future facility requirements.
    In the interim, prepositioned stocks are being stored outside, resulting
    in higher maintenance costs. Finally, inadequate maintenance oversight of
    the Army's prepositioning program has raised concerns about the true
    condition of the equipment at some locations. Until these strategic and
    management challenges are addressed, the Army will face uncertain risks
    should new conflicts occur.

    References

    Visible links
      27. http://www.gao.gov/cgi-bin/getrpt?GAO-05-427
      28. http://www.gao.gov/cgi-bin/getrpt?GAO-06-604T
      29. http://www.gao.gov/cgi-bin/getrpt?GAO-05-427
      31. http://www.gao.gov/cgi-bin/getrpt?GAO/NSIAD-99-6
      32. http://www.gao.gov/cgi-bin/getrpt?GAO-05-275
      33. http://www.gao.gov/cgi-bin/getrpt?GAO/NSIAD-99-6
      34. http://www.gao.gov/cgi-bin/getrpt?GAO-06-745
      35. http://www.gao.gov/cgi-bin/getrpt?GAO-06-983T
      36. http://www.gao.gov/cgi-bin/getrpt?GAO-06-548T
      37. http://www.gao.gov/cgi-bin/getrpt?GAO-06-604T
      38. http://www.gao.gov/cgi-bin/getrpt?GAO-06-113T
      39. http://www.gao.gov/cgi-bin/getrpt?GAO-05-427
      40. http://www.gao.gov/cgi-bin/getrpt?GAO-05-275
      41. http://www.gao.gov/cgi-bin/getrpt?GAO-05-207
      42. http://www.gao.gov/cgi-bin/getrpt?GAO-04-562T
      43. http://www.gao.gov/cgi-bin/getrpt?GAO-04-305R
      44. http://www.gao.gov/cgi-bin/getrpt?GAO-03-456
      45. http://www.gao.gov/cgi-bin/getrpt?GAO-03-98
      46. http://www.gao.gov/cgi-bin/getrpt?GAO-02-650
      47. http://www.gao.gov/cgi-bin/getrpt?GAO-01-425
      48. http://www.gao.gov/cgi-bin/getrpt?GAO/NSIAD-99-6
      49. http://www.gao.gov/cgi-bin/getrpt?GAO/NSIAD-97-169
      50. http://www.gao.gov/cgi-bin/getrpt?GAO/NSIAD-97-158
      51. http://www.gao.gov/cgi-bin/getrpt?GAO/T-NSIAD-97-109
      59. http://www.gao.gov/cgi-bin/getrpt?GAO-07-144
    *** End of document. ***