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

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protection in the United States. It may be reproduced and distributed in
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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 Armyï¿½s April 2006 Report to Congress Addressed the Areas
			  Required, But the Armyï¿½s 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
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