Defense Logistics: Army Has Not Fully Planned or Budgeted for the
Reconstitution of Its Afloat Prepositioned Stocks (08-FEB-08,	 
GAO-08-257R).							 
                                                                 
At various stages throughout the current operations in Iraq and  
Afghanistan, the Army has withdrawn equipment from its stored, or
prepositioned, stock sets around the world, as well as from its  
afloat stocks, thus depleting a large portion of its		 
prepositioned stocks. The Army prepositions equipment at diverse 
strategic locations in order to field combat-ready forces in days
rather than the weeks it would take if equipment had to be moved 
from the United States to the location of the conflict. The Army 
Prepositioned Stocks (APS) program supports the National Military
Strategy and is an important part of the Department of Defense's 
(DOD) overall strategic mobility framework. The APS program	 
depends on prepositioned unit sets of equipment and sustainment  
stocks to enable troops to deploy rapidly and train with	 
prepositioned equipment before beginning combat operations. As we
testified in January 2007 and March 2006, however, sustained	 
continuing operations have taken a toll on the condition and	 
readiness of military equipment, and the Army faces a number of  
ongoing and long-term challenges that will affect both the timing
and cost of equipment repair and replacement, particularly to its
prepositioned stocks. Over the past several years, GAO and other 
audit agencies have reported on numerous long-standing problems  
facing DOD's and the Army's prepositioning programs, including a 
lack of centralized operational direction; unreliable reporting  
on the maintenance condition of equipment; equipment excesses at 
some prepositioned locations; and systemic problems with	 
requirements determination and inventory management. In September
2005, we recommended that DOD develop a coordinated		 
departmentwide plan and joint doctrine for the department's	 
prepositioning programs. In February 2007, we reported that while
the Army expected to finalize its implementation plan for	 
prepositioning stocks by December 31, 2006, DOD would not	 
complete its departmentwide strategy before mid-April 2007. We	 
recommended 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 would	 
align with the anticipated DOD-wide prepositioning strategy. In  
addition, the John Warner National Defense Authorization Act for 
Fiscal Year 2007 required the department to establish a 	 
departmentwide prepositioning strategic policy by April 2007.	 
-------------------------Indexing Terms------------------------- 
REPORTNUM:   GAO-08-257R					        
    ACCNO:   A80610						        
  TITLE:     Defense Logistics: Army Has Not Fully Planned or Budgeted
for the Reconstitution of Its Afloat Prepositioned Stocks	 
     DATE:   02/08/2008 
  SUBJECT:   Combat readiness					 
	     Defense cost control				 
	     Defense economic analysis				 
	     Defense operations 				 
	     Defense procurement				 
	     Equipment inventories				 
	     Equipment management				 
	     Equipment repairs					 
	     Inventory control					 
	     Military budgets					 
	     Military operations				 
	     National defense operations			 
	     Program management 				 
	     Strategic national stockpile			 
	     Strategic planning 				 
	     Afghanistan					 
	     Army Prepositioned Stocks Program (APS)		 
	     Iraq						 

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GAO-08-257R

   

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February 8, 2008

The Honorable Ike N. Skelton
Chairman
Committee on Armed Services
House of Representatives

The Honorable Solomon P. Ortiz
Chairman
Readiness Subcommittee
Committee on Armed Services
House of Representatives

Subject: Defense Logistics: Army Has Not Fully Planned or Budgeted for the
Reconstitution of Its Afloat Prepositioned Stocks

At various stages throughout the current operations in Iraq and
Afghanistan, the Army has withdrawn equipment from its stored, or
prepositioned, stock sets around the world, as well as from its afloat
stocks, thus depleting a large portion of its prepositioned stocks.^1 The
Army prepositions equipment at diverse strategic locations in order to
field combat-ready forces in days rather than the weeks it would take if
equipment had to be moved from the United States to the location of the
conflict. The Army Prepositioned Stocks (APS) program supports the
National Military Strategy and is an important part of the Department of
Defense's (DOD) overall strategic mobility framework. The APS program
depends on prepositioned unit sets of equipment and sustainment stocks to
enable troops to deploy rapidly and train with prepositioned equipment
before beginning combat operations. As we testified in January 2007 and
March 2006, however, sustained continuing operations have taken a toll on
the condition and readiness of military equipment, and the Army faces a
number of ongoing and long-term challenges that will affect both the
timing and cost of equipment repair and replacement, particularly to its
prepositioned stocks.^2

Over the past several years, GAO and other audit agencies have reported on
numerous long-standing problems facing DOD's and the Army's prepositioning
programs, including a lack of centralized operational direction;
unreliable reporting on the maintenance condition of equipment; equipment
excesses at some prepositioned locations; and systemic problems with
requirements determination and inventory management. In September 2005, we
recommended that DOD develop a coordinated departmentwide plan and joint
doctrine for the department's prepositioning programs.^3 In February 2007,
we reported that while the Army expected to finalize its implementation
plan for prepositioning stocks^4 by December 31, 2006, DOD would not
complete its departmentwide strategy before mid-April 2007.^5 We
recommended 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 would align with the anticipated DOD-wide
prepositioning strategy. In addition, the John Warner National Defense
Authorization Act for Fiscal Year 2007^6 required the department to
establish a departmentwide prepositioning strategic policy by April 2007.

^1 The Army prepositions stocks primarily at land sites in Europe,
Northeast Asia, Southwest Asia, and aboard ships afloat near Guam and
Diego Garcia. During the initial stages of Operation Iraqi Freedom, the
Army primarily used prepositioned stocks afloat (APS-3) and from Southwest
Asia (APS-5).

^2 GAO, Defense Logistics: Preliminary Observations on the Army's
Implementation of Its Equipment Reset Strategies, GAO-07-439T (Washington,
D.C.: Jan. 31, 2007), and Defense Logistics: Preliminary Observations on
Equipment Reset Challenges and Issues for the Army and Marine Corps,
GAO-06-604T (Washington, D.C.: Mar. 30, 2006).

The 2007 Authorization Act^7 also directs the Secretary of Defense to take
necessary steps to ensure that financial resources are provided to
reconstitute equipment and materiel in prepositioned stocks in accordance
with the requirements under the APS Strategy 2012 or subsequent strategy.
Additionally, the act directs the Secretary to include in the budget
justification materials a clear and detailed description of the amounts
requested for reconstitution of equipment and materiel in prepositioned
stocks. The National Defense Authorization Act for Fiscal Year 2008^8
directs DOD to submit an annual report on the status of materiel in the
prepositioned stocks, including the department's timeline and funding
requirements for reconstituting shortfalls in prepositioned stocks. The
act also directs DOD to report on any operations plans affected by any
shortfall in the prepositioned stocks and any action taken to mitigate any
risk that a shortfall may create.

The APS program encompasses three categories of stocks stored at land
sites and aboard prepositioning ships: combat brigade sets,^9 war reserve
sustainment stocks,^10 and operational project stocks.^11 APS equipment
sets are referred to according to numerical designations of 1 through 5,
corresponding to their locations. The Army has primarily depended on two
APS sets for operations in Iraq and Afghanistan--APS-3, which is equipment
prepositioned on ships, or "afloat"; and APS-5, which is the equipment
prepositioned in Southwest Asia. APS-5 has been depleted and reconstituted
several times over during the course of these operations. In December
2006, the Army decided to remove equipment and supplies from its APS-3
prepositioned sets stored on ships in order to accelerate the creation of
two additional brigade combat teams^12 by April 2008.^13 Army officials
determined that using equipment from other APS sets, such as APS-4 and
APS-5, to satisfy these equipment requirements was not a viable option
because of the risks involved in Northeast Asia and ongoing operations in
Southwest Asia. Some members of Congress have expressed concerns, however,
about the potential effect of the Army's decision to deplete the equipment
stocks from these ships and the risk that DOD may be unprepared for a
conflict elsewhere in the world. Prepositioned stocks are critical
enablers to DOD's military strategy, and they help ensure that the
military has materiel and equipment available for rapid deployment should
future conflicts erupt.

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

^4 The revised Army Prepositioned Stock (APS) Strategy 2013 superseded Army
Prepositioned Stock (APS) Strategy 2012.

^5 GAO, Defense Logistics: Improved Oversight and Increased Coordination
Needed to Ensure Viability of the Army's Prepositioning Strategy,
GAO-07-144 (Washington, D.C.: Feb. 15, 2007).

^6 Pub. L. No. 109-364, S351 (2006). See also 10 U.S.C. S2229 and the
accompanying note.

^7 Pub. L. No. 109-364, S323 (2006).

^8 The National Defense Authorization Act for Fiscal Year 2008, Pub. Law
No. 110-181, S 352 (2008), was passed as we prepared to issue this report.

^9 Combat brigade sets are designed to support 3,000 to 5,000 soldiers and
include heavy weaponry such as tanks, support equipment such as trucks,
and spare parts to support the early stages of a conflict.

^10 War reserve sustainment stocks include items to sustain the battle
until stocks can be resupplied and war reserve secondary items such as
rations, clothing, medical supplies, and repair parts.

^11 Operational project stocks include authorized materiel above unit
authorizations designed to support Army operations and contingencies and
equipment and supplies for Special Forces operations and mortuary
operations, among others.

At the request of the Chairman, House Committee on Armed Services, and the
Chairman, Subcommittee on Readiness, House Committee on Armed Services, we
have reviewed the above issues. For this report, our objectives were to
identify (1) the Army's strategy for reconstituting the prepositioned
equipment sets worldwide, and how this strategy fits into broader DOD-wide
strategies; and (2) the extent to which the Army's APS reconstitution
strategy is reflected in current defense budget requests and cost
estimates for restoring the prepositioned equipment sets to a posture that
fully supports DOD's strategy for future employment. On August 14, 2007,
we briefed your offices on our preliminary observations. Subsequent to
this briefing we obtained additional information from the Army and DOD
regarding the Army's prepositioning strategy and the status of the
DOD-wide strategy. This report updates and summarizes the information
discussed in that briefing. You also asked us to identify (1) what factors
the Army and DOD considered in deciding to remove the Army's prepositioned
equipment sets afloat to accelerate the creation of two additional brigade
combat teams; and (2) DOD's and the Army's process for analyzing and
mitigating risks in the event that another conflict occurs elsewhere.
These two additional objectives will be addressed in a separate classified
report.

Our audit work focused on the Army's strategy for reconstituting the
prepositioned equipment sets worldwide and how this strategy fits into
broader DOD-wide strategies; and the extent to which this strategy is
reflected in current defense budget estimates and cost estimates for
restoring prepositioned equipment. To identify the Army's strategy and
determine how this strategy fits into broader DOD-wide strategies, we
interviewed officials from key DOD and Army organizations, including the
Office of the Under Secretary of Defense, Logistics and Materiel Readiness
Program Support; Office of the Under Secretary of Defense, Acquisition,
Technology, and Logistics; the Army Materiel Command; the Army Office of
Program, Analysis, and Evaluation; Office of Army Deputy Chief of Staff,
Logistics; and the Office of Army Deputy Chief of Staff, Force
Development. To determine how the Army's strategy is reflected in current
defense budget estimates and cost estimates for restoring prepositioned
equipment, we reviewed cost estimates and fiscal year 2007 and fiscal year
2008 budget requests provided by the Army Budget Office, and we discussed
how reconstitution strategies are reflected in future budget requests with
officials from the Army Office of Program, Analysis, and Evaluation;
Office of Army Deputy Chief of Staff, Logistics; and Office of Army Deputy
Chief of Staff, Force Development. We conducted this performance audit
from March 2007 through February 2008 in accordance with generally
accepted government auditing standards. Those standards require that we
plan and perform the audit to obtain sufficient, appropriate evidence to
provide a reasonable basis for our findings and conclusions based on our
audit objectives. We believe that the evidence obtained provides a
reasonable basis for our findings and conclusions based on our audit
objectives.

^12 Brigade combat teams are combat maneuver brigades that will have a
common organizational design and are intended to increase the rotational
pool of ready units. Modular combat brigades have one of three
designs--heavy brigade, infantry brigade, or Stryker brigade.

^13T he April 2008 deployment date is based on the Army's overall rotation
schedule for moving units in and out of Iraq.

Findings

Army officials stated that its worldwide APS equipment sets, including
APS-3, would be reconstituted in synchronization with the Army's overall
equipping priorities when properly funded and in accordance with the
official Army worldwide APS reconstitution strategy known as Army
Prepositioned Strategy 2015 (APS Strategy 2015).^14 According to DOD
officials, the Army's equipping priorities will be based on evolving
conditions and operations such as the availability of equipment and
duration of operations in Iraq and Afghanistan, for example. As of
December 2007, the Army had not established its overall equipping
priorities. Additionally, the Army's APS reconstitution strategy is not
correlated with a DOD-wide APS strategy, because, according to DOD
officials, a DOD-wide prepositioning strategy does not exist. DOD
officials explained that the services are responsible for equipping
strategies and that the Joint Staff, consistent with current policy,
conducts assessments of the services' prepositioned programs to determine
their relationship within the DOD-wide strategic context. DOD officials do
not believe additional synchronization of strategies is required.
According to DOD, the War Reserve Materiel Policy^15 provides ample policy
guidance on war reserve materiel requirements and war reserve materiel
positioning while the allocation process is outlined in the Joint
Strategic Capability Plan.^16 DOD officials believe publication of the War
Reserve Materiel Policy and Joint Strategic Capability Plan satisfies the
congressionally mandated requirement contained in the John Warner National
Defense Authorization Act for Fiscal Year 2007.^17 Nonetheless, as we
recommended in our September 2005^18 and February 2007 reports,^19 a
DOD-wide strategy would set direction and a shared foundation for the
services' prepositioning programs. Synchronizing a DOD-wide strategy with
the Army's prepositioning strategy would ensure that future investments
made for the Army's prepositioning program would align with the
anticipated DOD-wide strategy. Without a DOD-wide prepositioning strategy,
DOD risks inconsistencies between the Army's and the other services'
prepositioning strategies, which may result in duplication of efforts and
resources. We continue to believe a DOD-wide strategy is needed in
addition to broad strategic guidance.

^14 In November 2007, the Army leadership approved APS Strategy 2015 which
superseded APS Strategy 2013. APS Strategy 2015 is similar to APS Strategy
2013 but also includes a Light Infantry Battalion and some Motorized
Augmentation Sets.

^15 DoDD 3110.6, War Reserve Materiel Policy (Nov. 9, 2000).

^16 The Joint Strategic Capability Plan apportions resources to the
combatant commanders. It covers a 2-year period and provides strategic
guidance to the combatant commanders, Joint Chiefs of Staff members, and
heads of defense agencies and departments. This is a classified document,
which we were unable to review.

^17 Pub. L. No. 109-364, S351 (2006). See also 10 U.S.C. S2229 and the
accompanying note.

^18 GAO-05-427.

^19 GAO-07-144.

We could not determine the extent to which the Army's APS reconstitution
strategy is reflected in current defense budget requests and cost
estimates for restoring the prepositioned equipment sets to a posture that
fully supports DOD's strategy for future employment because Army officials
could not provide a breakdown of the $3.3 billion cost estimate to
reconstitute APS-3 requested in the fiscal year 2007 supplemental budget.
Army officials also stated that full implementation of APS Strategy
2013^20 would total somewhere between $10.6 billion and $12.8 billion
throughout the 2008 Program Objective Memorandum (POM), which includes
requests for 5 years beyond the current fiscal year 2008 budget request.
The fiscal year 2008 POM estimates include about $3.6 billion for
procurement; $4.2 billion for operations and support; and $2.8 billion for
war reserve secondary items. Army officials stated that the fiscal year
2008 POM does not include requests for APS reconstitution costs, but that
the fiscal year 2010 POM will likely include a request for APS
reconstitution. According to Army officials, the fiscal year 2007
supplemental APS budget funded the removal of equipment from APS-3.
However, the Army's fiscal year 2008 budget requests for the care and
maintenance of this equipment were not adjusted to reflect the fact that
the equipment was no longer included in the prepositioned set.
Furthermore, future budget requests for reconstitution of the APS
equipment sets are difficult to distinguish because they may also include
funding for other equipment-related budget requests, including Army
modularity,^21 modernization,^22 and equipment reset,^23 or requests to
fill equipment shortages. According to Army officials, the Army
programming and budget process does not treat APS funding as a discrete
entity. Funds are often moved into and out of APS operation and
maintenance accounts depending on Army funding priorities. Because
operation and maintenance funds are fungible, the Army can move funds to
respond to changes in readiness and operational environments. Army
officials stated that separating APS requirements from other requirements
in budget requests is complicated, and they do not plan to track APS
execution separately. In addition, under the Army Force Generation
(ARFORGEN) model,^24 once the equipment from APS-3 has been removed from
the ships, the equipment becomes part of the Army's reset and training
pool.^25 Equipment within this pool will be reset and, accordingly, funded
with reset funding. Without clearly identifying APS reconstitution
requirements, however, the Army cannot ensure that it can provide
sufficient funding, and Congress cannot be assured it has the visibility
it needs for its decision-making process.

^20 Updated budget requests for APS Strategy 2015 were not available
because the budget requests were still under review when the new strategy
was approved.

^21 Modularity costs are defined as the increased costs of equipment due to
changing authorizations associated with standardization of units to the
modular configuration.

^22 Modernization encompasses replacing older systems with more capable
systems.

^23 Reset is the cost to replace, recapitalize, and repair equipment in
order to restore units to a level of combat capability required for future
missions.

^24 The ARFORGEN model is designed to generate trained and ready forces to
meet global demands.

^25 Under ARFORGEN, units proceed through three pools of unit readiness:
(1) reset and train; (2) ready; and (3) available.

We are not making any recommendations at this time as DOD has not yet
implemented the recommendation from our September 2005 report^26 to
develop a coordinated departmentwide plan and joint doctrine for the
department's prepositioning programs. While DOD partially concurred with
our prior recommendation to develop a coordinated DOD-wide plan, it had
not done so as of December 21, 2007. We continue to believe our
recommendation has merit and that DOD should develop a departmentwide
prepositioning plan.

Agency Comments

While DOD did not provide any overall reactions to a draft of this report,
they did provide written technical comments. We have incorporated those
comments throughout the report as appropriate.

                                   - - - - -

We are sending copies of this report to the appropriate congressional
committees, 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
[13]http://www.gao.gov .

If you or your staff has questions, please contact me at (202) 512-8365 or
[email protected]. Contact points for our Offices of Congressional Relations
and Public Affairs may be found on the last page of this report. GAO staff
who made major contributions to this report are listed in enclosure I.

William M. Solis, Director
Defense Capabilities and Management

^26 GAO-05-427.

Enclosure I: GAO Contact and Staff Acknowledgments

GAO Contact

William M. Solis, (202)512-8365 or [14][email protected]

Acknowledgments

In addition to the contact named above, David A. Schmitt,
Assistant Director; Donna M. Rogers; Christopher Turner; and Cheryl
Weissman made key contributions to this report.

(351010)

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