Defense Inventory: Improved Management Framework Needed to Guide Air
Force Best Practice Initiatives (Letter Report, 11/18/1999,
GAO/NSIAD-00-2).

Pursuant to a legislative requirement, GAO reviewed the Air Force's best
practices implementation schedule for the acquisition and distribution
of secondary inventory items, focusing on: (1) the extent to which the
schedule responds to the provisions of the Strom Thurmond National
Defense Authorization Act for Fiscal Year 1999; and (2) specific
elements of a management framework needed for effective implementation
and oversight of the Air Force's best practice initiatives.

GAO noted that: (1) the Air Force's schedule is generally responsive to
the act; (2) it describes 17 initiatives that address the acquisition
and distribution of secondary items that the Air Force manages, and with
one exception, provides for implementation of these initiatives to be
completed within 5 years; (3) the initiatives are aimed at reducing the
Air Force's infrastructure and improving the maintenance, information
management, and acquisition processes; (4) though generally responsive
to the act's requirements, the Air Force's schedule provides a
management framework that lacks an overall strategy and specific
elements needed to assess implementation progress, measure success, and
identify needed changes; (5) while the schedule's initiatives are linked
to higher level Air Force logistics goals and objectives, there is no
strategy that ensures the efforts are coordinated, nor are specific
performance goals and baselines established to measure the overall
results of the initiatives; (6) in prior work, GAO noted that the lack
of a detailed management framework contributed to the Department of
Defense's (DOD) difficulty in implementing new initiatives; and (7) the
Government Performance and Results Act offers a model for developing an
effective management framework through the use of strategic plans and
establishment of performance measures to assess the results of the
initiatives and improve the likelihood of successful implementation.

--------------------------- Indexing Terms -----------------------------

 REPORTNUM:  NSIAD-00-2
     TITLE:  Defense Inventory: Improved Management Framework Needed to
	     Guide Air Force Best Practice Initiatives
      DATE:  11/18/1999
   SUBJECT:  Logistics
	     Air Force procurement
	     Inventory control systems
	     Private sector practices
	     Equipment repairs
	     Strategic planning
	     Military inventories
	     Performance measures
	     Air Force supplies
IDENTIFIER:  Air Force Strategic Logistics Plan

******************************************************************
** This file contains an ASCII representation of the text of a  **

** GAO report.  Delineations within the text indicating chapter **
** titles, headings, and bullets are preserved.  Major          **
** divisions and subdivisions of the text, such as Chapters,    **
** Sections, and Appendixes, are identified by double and       **
** single lines.  The numbers on the right end of these lines   **
** indicate the position of each of the subsections in the      **
** document outline.  These numbers do NOT correspond with the  **
** page numbers of the printed product.                         **
**                                                              **
** No attempt has been made to display graphic images, although **
** figure captions are reproduced.  Tables are included, but    **
** may not resemble those in the printed version.               **
**                                                              **
** Please see the PDF (Portable Document Format) file, when     **
** available, for a complete electronic file of the printed     **
** document's contents.                                         **
**                                                              **
** A printed copy of this report may be obtained from the GAO   **
** Document Distribution Center.  For further details, please   **
** send an e-mail message to:                                   **
**                                                              **
**                                            **
**                                                              **
** with the message 'info' in the body.                         **
******************************************************************

Report to Congressional Committees

November 1999

Defense Inventory

Improved Management Framework Needed to Guide Air Force Best Practice
Initiatives
*****************

*****************

GAO/NSIAD-00-2

Letter                                                                     3

Appendixes

Appendix I:Summary of Air Force Initiatives

                                                                         14

Appendix II:Comments From the Department of Defense

                                                                         20

Appendix III:GAO Contacts and Staff Acknowledgments

                                                                         22

Related GAO Products

                                                                         24

Table 1:  Air Force Initiatives and Projected Completion Dates7

CREP    Contract Repair Enhancement Program

DOD     Department of Defense

DREP    Depot Repair Enhancement Program

In 1990, we began a special effort to review and report on the federal
program areas that we identified as high risk because of vulnerabilities
to waste, fraud, abuse, and mismanagement. This effort, which was
supported by the Senate Committee on Government Affairs and the House
Committee on Government Reform, brought a
Results Act: DOD's Annual Performance Plan for Fiscal Year 1999 (GAO/NSIAD-
98-188R, June 5, 1998), DOD Financial Management: More Reliable
Information Key to Assuring Accountability and Managing Defense Operations
More Efficiently 
(GAO/T-AIMD/NSIAD-99-145, Apr. 14, 1999), and Department of Defense:
Status of Financial Management Weaknesses and Actions Needed to Correct
Continuing Challenges
Major Management Challenges and Program Risks: Department of Defense 
                                                      National Security and
                                             International Affairs Division

B-281460

November 18, 1999

Congressional Committees

Section 347 of the Strom Thurmond National Defense Authorization Act for
Fiscal Year 1999 requires the secretary of each military department to
submit to the Congress a schedule for implementing best commercial
inventory practices for the acquisition and distribution of secondary
inventory items./Footnote1/ Best commercial practices are defined as
practices that enable the Department to reduce inventory levels while
improving the responsiveness of the supply system to user needs. Section
347 further requires that the schedule provide for implementation of such
best practices to be completed within 5 years of its enactment, or by
October 17, 2003. The act also requires us to evaluate the extent to which
the secretary of each military department has complied with the act's
requirements. 

In this report, we discuss our evaluation of the Air Force's best
practices implementation schedule for the acquisition and distribution of
secondary inventory items, which the Secretary of the Air Force submitted
to the Congress on July 19, 1999./Footnote2/ Specifically, we (1)
determined the extent to which the schedule responds to the provisions of
the act and (2) identified specific elements of a management framework
needed for effective implementation and oversight of the Air Force's best
practice initiatives. 

Results in Brief

The Air Force's schedule is generally responsive to the act. It describes
17 initiatives that address the acquisition and distribution of secondary
items that the Air Force manages, and with one exception, provides for
implementation of these initiatives to be completed within 5
years./Footnote3/ The initiatives are aimed at reducing the Air Force's
infrastructure and improving the maintenance, information management, and
acquisition processes. 

Though generally responsive to the act's requirements, the Air Force's
schedule provides a management framework that lacks an overall strategy
and specific elements needed to assess implementation progress, measure
success, and identify needed changes. While the schedule's initiatives are
linked to higher level Air Force logistics goals and objectives, there is
no strategy that ensures the efforts are coordinated, nor are specific
performance goals and baselines established to measure the overall results
of the initiatives. In prior work,/Footnote4/ we noted that the lack of a
detailed management framework contributed to DOD's difficulty in
implementing new initiatives. The Government Performance and Results Act
offers a model for developing an effective management framework through
the use of strategic plans and establishment of performance measures to
assess the results of the initiatives and improve the likelihood of
successful implementation. 

So that progress and results information is available to the Congress and
DOD managers, we are recommending that the Secretary of the Air Force
develop a management framework for implementing these initiatives that
would include a comprehensive strategy and performance plans. 

Background

To provide reparable parts to support its operations, the Air Force uses
an extensive logistics system that is based on procedures and concepts
that have evolved over time. Reparable parts are expensive items, such as
hydraulic pumps, navigational computers, wing sections, and landing gear,
that can be fixed and used again. The Air Force's logistics system, often
referred to as a logistics pipeline or supply chain, consists of a number
of interrelated activities that provide parts where and when they are
needed./Footnote5/ These activities include the purchase, storage, repair,
and distribution of parts, which together require billions of dollars of
investments in personnel, equipment, facilities, and inventory. In 1998,
DOD reported that the Air Force's secondary inventory was valued at $25.9
billion, or
42 percent of DOD's total secondary inventory./Footnote6/

Since 1990, we have identified DOD's management of secondary inventories
as a high-risk area because levels of inventory were too high and
management systems and procedures were ineffective./Footnote7/ In
addition, our financial statement audits have identified continuing
significant problems with the integrity of DOD's inventory data. For
example, we reported that inaccurate inventory data resulted from
weaknesses in DOD's procedures relied on to maintain visibility over, and
conduct physical counts of, on-hand inventories. Until these problems are
effectively resolved, DOD's ability to reliably measure and assess
performance will continue to be impaired./Footnote8/ While DOD has made
some improvements, these general conditions still exist, and this area
remains on our high-risk list./Footnote9/ We have reported that adopting
best business practices in inventory management and improving the
reliability of financial management information are key steps toward
solving these problems.

The Congress has recently taken specific actions to encourage DOD to adopt
best commercial practices to improve its inventory management. The
National Defense Authorization Act for Fiscal Year 1998 required the
Director of the Defense Logistics Agency to develop and submit to the
Congress a schedule for implementing best commercial practices for the
acquisition and distribution of nine categories of consumable-type
supplies. The Strom Thurmond National Defense Authorization Act for Fiscal
Year 1999 placed a similar requirement on the secretary of each military
department, with implementation to be completed by October 17, 2003. 

DOD is working to adopt best practices in its operations. In November
1997, the Secretary of Defense issued the Defense Reform Initiative
report, which identified a number of reengineering initiatives aimed at
adopting modern business practices to achieve world-class standards of
performance. In addition, the DOD performance plan for fiscal year 2000
noted that the inventory supply system is larger than required to support
today's smaller force structure and outlined goals to reduce inventory
levels and streamline infrastructure. In March 1999, the Under Secretary
of Defense (Acquisition Reform) stated that DOD needed "a revolution in
business affairs . . . that embodies the best of modern business
practices, the ability to access the full range and scope of technologies
to meet the speed and agility demanded by the new battlespace, and an
absolute commitment to finding the best, most efficient means of
delivering goods and services to our warfighters.(c) 

Air Force's Schedule Generally Responds to the Act's Requirements

The Air Force's schedule is generally responsive to the requirements of
the act. It contains 17 initiatives that address the acquisition and
distribution of secondary inventory items the Air Force manages and
provides for implementation of these initiatives to be completed within 5
years, with one exception./Footnote10/ The initiatives are aimed at
improving the maintenance, information management, and acquisition
processes and reducing infrastructure. For example, the Contract Repair
Enhancement Program initiative is designed to reduce not only the time it
takes to provide a customer with a needed item (called logistics response
time) but also the number of days it takes to repair items. Another
initiative is intended to track items removed from aircraft through the
repair pipeline until they are ready for reissue, as well as track items
ordered until they are received by the customer. 

For most of the initiatives, the schedule provided a description; specific
goals and objectives; linkage to higher level Air Force goals and
objectives; an estimate of the portion of inventory to be affected by the
initiative; and general outcome measures, such as increased readiness. For
a few initiatives, the schedule provided the accountable organization and
interim milestones to measure progress. The schedule also contained a
description of the inventory management functions the initiatives would
affect and projected dates for completion. Table 1 lists the initiatives
and the projected dates for implementation to be completed. (See app. I
for a description of each initiative.)

Table****Helvetica:x11****1:    Air Force Initiatives and Projected
                                Completion Dates

------------------------------------------------------------------------
| Initiative   : Initiative                          : Projected       |
| category     :                                     : completion date |
|----------------------------------------------------------------------|
| Maintenance  : Depot Repair Enhancement Program    : Mar. 1998a      |
|              :                                     :                 |
|              : Contract Repair Enhancement Program : Sept. 2001      |
|              :                                     :                 |
|              : Aircraft Repair Enhancement Program : Dec. 2000       |
|----------------------------------------------------------------------|
| Information  : Integrated Maintenance Data System  : Sept. 2003      |
| Management   :                                     :                 |
|              : Integrated Logistics System-Supply  : Sept. 2001      |
|              :                                     :                 |
|              : Pipeline Tracking Analysis and      : 2004-2006       |
|              : Metrics System                      :                 |
|              :                                     : July 2001       |
|              : Execution and Prioritization of     :                 |
|              : Repair Support System               : Sept. 1999      |
|              :                                     :                 |
|              : Merger of D041 and D062 Systems     : Jan. 2000       |
|              :                                     :                 |
|              : Requirements Management System      :                 |
|----------------------------------------------------------------------|
| Outsourcing  : Virtual Prime Vendor                : July 2000       |
| or           :                                     :                 |
| Otherwise    : Reengineering Supply Support Process: June 2002       |
| Reducing     :                                     :                 |
| Infrastructu : Express Transportation              : Dec. 1999       |
| re           :                                     :                 |
|              : Depot Maintenance Consolidation     : Sept. 2000      |
|              :                                     :                 |
|              : Regional Supply Squadron            : July 2002       |
|              :                                     :                 |
|              : Supply and Transportation Unit      : Sept. 2001      |
|              : Reengineering                       :                 |
|----------------------------------------------------------------------|
| Acquisition  : Corporate Contracts                 : June 1999       |
|----------------------------------------------------------------------|
| Other        : Logistics Transformation and        : Mar. 2000       |
|              : Functional Integration              :                 |
------------------------------------------------------------------------

aAlthough formally completed in March 1998, the Air Force continues to
examine potential improvements.

Management Framework Is Key to Implementing Initiatives

The Air Force's schedule for implementing its initiatives provides a
management framework that lacks an overall strategy and specific elements
needed to assess implementation progress, measure success, and identify
needed changes. The Government Performance and Results Act can provide a
model for developing an effective management framework to guide the
implementation of the initiatives and to provide the Congress and DOD
managers with information on progress and results.

Schedule Provides a Limited Management Framework 
-------------------------------------------------

In our past work, we reported that the lack of a management framework
containing an overall strategy and outcome-oriented goals and performance
measures contributed to DOD's difficulty in implementing new initiatives.
For example, we reported that DOD did not have an adequate management
framework to clearly determine the progress being made in achieving the
Total Asset Visibility initiative goals and that the initiative's
strategic and implementation plans were inadequate./Footnote11/ As a
result, DOD managers did not have a clear picture of the initiative's
implementation status or know how various initiatives within each service
contributed to achieving overall DOD goals and objectives. In addition, we
reported that there was confusion over who would use the system and how it
would be used. 

The schedule represents a collection of best practice initiatives the Air
Force plans to complete within the next 5 years to improve the acquisition
and distribution of secondary supply items managed by the Air Force. While
the schedule included goals and objectives for each initiative, most were
stated in very general terms. For example, the Express Transportation
initiative is designed to replace the current way items are delivered with
faster commercial or in-house air delivery, which could reduce inventories
and increase unit readiness ratings. However, the schedule included no
specific performance measures or baselines for these goals. Without this
information, it is difficult to determine the impact these initiatives may
have on overall Air Force operations. Also, objective information on
implementation progress and achievement of desired outcomes may not be
available to the Congress and defense managers. 

In some cases, the schedule did provide some elements of a management
framework. Each initiative was linked to Air Force logistics improvement
goals, which the Air Force has aligned with the DOD Logistics Strategic
Plan. The schedule also provided a general estimate of what portions of
the existing inventory may be affected by each initiative. Also, five
initiatives contained interim actions and milestones that could be used to
measure progress toward full implementation, and four initiatives had
specific results and outcome measures that could be used to assess whether
the initiatives were achieving the desired results. 

Results Act Management Framework
--------------------------------

The Results Act framework generally consists of establishing strategic
plans, performance plans, and mechanisms for measuring program progress
and results. Such a framework for the Air Force's initiatives would
include (1) establishing broad general initiative goals and objectives, 
(2) linking the goals to overall DOD goals and objectives, (3)
establishing quantifiable performance measures and baselines to assess
whether the initiatives are achieving desired results, (4) defining levels
of accountability and responsibility for implementing the initiatives and
identifying the resources that will be required to achieve goals, (5)
establishing milestones necessary to measure progress toward full
implementation, and
(6) defining an evaluation plan for periodically comparing actual results
to established goals and objectives. This information would allow the
Congress and other decisionmakers to measure initiative implementation
progress and to determine whether the initiatives are achieving their
desired results. 

In addition to these potential benefits, considering the initiatives as
interrelated efforts maximizes their systemwide improvement potential. Our
prior work on best inventory management practices has shown that efforts
to reengineer a logistics system are more successful when various
logistics activities are viewed as a series of interrelated processes
rather than isolated functional areas./Footnote12/ For example, when one
airline began changing the way it purchased parts from suppliers, it
considered how the changes would affect mechanics in repair workshops.
Additionally, airline officials described how a combination of supply
chain improvements could lead to continuous improvements. They also
described how culture changes, improved data accuracy, and more efficient
processes lead to reductions in inventories and complexity of operations.
These reductions can lead to further efficiencies and process improvements. 

One Initiative Can Assist in Developing Needed Management Framework 
--------------------------------------------------------------------

The Logistics Transformation and Functional Integration initiative, which
began in March 1999, is a 1-year study designed to identify the steps
needed to reengineer the Air Force logistics system and identify
opportunities for value-added changes. According to the schedule, this
initiative will use integrated supply chain management techniques to
identify ". . . the means to accurately predict requirements, acquire the
right amount of inventory, rapidly move serviceable and reparable items,
and select the optimum path for each item as it moves through the supply
chain.(c) If successful, this initiative might produce many of the
management framework components discussed earlier, such as an overarching
improvement strategy and integrated implementation plans. It is also
expected to identify outcome measures that focus on customer support and
optimize operating costs. 

Conclusions

The Air Force's schedule generally meets the requirements of the act by
providing information on 17 initiatives that, with one exception, are
expected to have implementation completed within 5 years. Achieving the
Air Force's goal of improved management of secondary items will depend on
the successful implementation of these initiatives. Implementation of the
initiatives is generally linked to and guided by the Air Force Logistics
Support Plan. However, the strategy set forth in that document is general
in nature, and implementation and assessment of the Air Force's
initiatives would benefit from more specific guidance. The Results Act
provides a model for developing a more effective management framework that
could provide this information and allow for more meaningful evaluations
of progress and results.

Recommendations

To provide a mechanism to improve the potential for successful
implementation of Air Force initiatives and measure results, we recommend
that the Secretary of the Air Force develop a management framework for
implementing best practice initiatives based on the principles embodied in
the Results Act. Specifically, the management framework should include 

o a strategy that is directly linked to top-level DOD goals and
  objectives and that recognizes the interrelationship of the initiatives
  and the overall impact the initiatives will have on the Air Force's
  logistics pipeline, such as reduced pipeline time, improved customer
  service, and reductions in total inventory and

o a performance plan that includes clearly defined goals and objectives,
  defined levels of accountability, quantifiable performance measures and
  baselines, interim schedule milestones, and plans to periodically
  assess the overall impact the initiatives have achieved in reducing
  inventory levels while improving the responsiveness of the supply
  system to user needs. 

Agency Comments and Our Evaluation

In commenting on a draft of this report, DOD concurred with our
recommendation and stated that the Air Force is revising its Logistics
Support Plan to more clearly articulate the relationships, goals,
objectives, and metrics of logistics initiatives. It will also provide
regularly scheduled review and analysis to the Air Force Deputy Chief of
Staff (Installations and Logistics). DOD further stated that approval of
the expanded Air Force Logistics Support Plan structure by the Air Force
Deputy Chief of Staff (Installations and Logistics) is anticipated during
the second quarter of fiscal year 2000. DOD's comments are included in
their entirety as 
appendix II. 

DOD did express concern that the draft report implied that the current
management framework for implementing the initiatives included in the
schedule was inadequate. DOD stated that the initiatives are linked to Air
Force improvement goals, which, in turn, are aligned with the DOD
Logistics Strategic Plan. Further, DOD cited results that have been
achieved and asserted that such results would not have been possible
without adequate management oversight. Our report states that the schedule
links each initiative to Air Force improvement goals, and those goals are
aligned with higher level DOD goals and objectives. However, the goals and
objectives for most initiatives were stated in broad terms and related
performance measures were not included in the schedule to assess progress
and results. Without this information, it will be difficult to determine
whether the initiatives are improving overall Air Force operations. 

Scope and Methodology

Our analysis of the Air Force's schedule was based on the information
contained in the schedule, discussions with Air Force officials, and our
prior work comparing DOD and private sector logistics practices. 

We also identified areas in which the schedule could be improved to guide
initiative implementation and improve management of secondary inventory
items. Specifically, we examined the schedule in terms of outcome-oriented
Results Act principles to determine whether the schedule provided an
overall strategy for adopting best practices and contained key elements to
guide implementation. We did not assess the merits of the Air Force's
initiatives or the initiatives' likelihood for success.

We interviewed officials and obtained information about ongoing and
planned initiatives at Air Force Headquarters in Washington, D.C.; the Air
Force Materiel Command at Wright-Patterson Air Force Base in Ohio; Warner
Robins Air Logistics Center at Robins Air Force Base in Georgia; and the
Air Combat Command at Langley Air Force Base in Virginia. In addition, we
used information from our related reports that have been issued since 1993
and are listed in GAO related products at the end of the report.

We conducted our review from November 1998 to August 1999 in accordance
with generally accepted government auditing standards.

We are sending copies of this report to the appropriate congressional
committees; the Honorable William S. Cohen, Secretary of Defense; the
Honorable F. Whitten Peters, Secretary of the Air Force; Lieutenant
General Henry T. Glisson, Director, Defense Logistics Agency; and Jacob
Lew, Director, Office of Management and Budget. We will also make copies
available to others upon request.

Please contact me at (202) 512-8412 if you or your staff have any
questions concerning this report. Key contributors to this assignment are
listed in appendix III.

*****************

*****************

David R. Warren, Director
Defense Management Issues

List of Congressional Committees

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

The Honorable Ted Stevens
Chairman
The Honorable Daniel K. Inouye
Ranking Minority Member
Subcommittee on Defense
Committee on Appropriations
United States Senate

The Honorable Floyd Spence
Chairman
The Honorable Ike Skelton
Ranking Minority Member
Committee on Armed Services
House of Representatives

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

--------------------------------------
/Footnote1/-^Secondary inventory includes spare parts, clothing, and
  medical supplies to support Department of Defense (DOD) forces worldwide.
/Footnote2/-^We are providing separate reports on the Army, Air Force, and
  Navy best practice implementation schedule. 
/Footnote3/-^The Pipeline Tracking Analysis and Metrics initiative is
  planned to be completed between 2004 and 2006.
/Footnote4/-^Defense Inventory: DOD Could Improve Total Asset Visibility
  Initiative With Results Act Framework (GAO/NSIAD-99-40, Apr. 12, 1999).
/Footnote5/-^The Air Force also relies on this pipeline for consumable
  parts that are not intended for repair, such as screws, fuses, clothing,
  and food. Some of these are used extensively to fix reparable parts and
  aircraft. The Defense Logistics Agency provides most of the consumable
  parts that Air Force repair activities use and handles a large portion
  of the warehousing and distribution of reparable parts.
/Footnote6/-^Inventory value reported in the Department of Defense Supply
  System Inventory Report, Sept. 30, 1998. The Air Force Working Capitol
  Fund financial statements report this inventory value at $19.8 billion.
/Footnote7/-^much-needed focus to problems that were costing the
  government billions of dollars. 
/Footnote8/-^(GAO/T-AIMD/NSIAD-99-171, May 4, 1999).
/Footnote9/-^(GAO/OCG-99-4, January 1999).
/Footnote10/-^The final phase of the Pipeline Tracking Analysis and
  Metrics System is dependent on receiving 2 to 3 years of data from other
  information management initiatives. Therefore, implementation is
  expected to be completed between 2004 and 2006. 
/Footnote11/-^Total Asset Visibility is a DOD-wide initiative to provide
  users with timely and accurate information on the location, status, and
  identity of units, personnel, equipment, and supplies. For additional
  information, see Defense Inventory: DOD Could Improve Total Asset
  Visibility Initiative With Results Act Framework (GAO/NSIAD-99-40, Apr.
  12, 1999). 
/Footnote12/-^Inventory Management: DOD Can Build on Progress by Using
  Best Practices for Reparable Parts (GAO/NSIAD-98-97, Feb. 27, 1998).

SUMMARY OF AIR FORCE INITIATIVES
================================

The Air Force's best practices implementation schedule lists 17
initiatives. The initiatives are aimed at improving the Air Force's
maintenance, information management, and acquisition processes;
transferring logistics activities to the private sector; or otherwise
reducing infrastructure. The schedule describes each initiative and
identifies goals and objectives, plans, areas of improvement, the portion
of inventory affected, and projected dates for implementation to be
completed. 

Maintenance

Three initiatives in the Air Force's schedule are designed to improve Air
Force and contractor depot maintenance processes. Each initiative is
focused on a different aspect of depot-level maintenance: Air Force
organic component repair, aircraft maintenance, and contractor repair
operations. We recently issued a report discussing the status of these
three initiatives./Footnote1/ 

Depot Repair Enhancement Program
--------------------------------

The Air Force considers the Depot Repair Enhancement Program (DREP)
initiative its standard repair process for organic depot repair of
aircraft component parts. The key principles of the program are a
standardized repair process, focus on the movement of an asset through the
repair process, daily repair based on greatest Air Force need, supply
support on the shop floor, standardized functions with defined roles and
responsibilities, alignment of responsibility and authority of key
players, standardized data systems, and customer performance measures. The
program is intended to reduce the time it takes a customer to receive an
order, as well as increase unit readiness. This initiative began in June
1996 and in March 1998 was considered completed, although improvements are
ongoing.

Contract Repair Enhancement Program
-----------------------------------

The Contract Repair Enhancement Program (CREP) initiative is for depot
repair of aircraft component parts by contractors. Its purpose is to
improve processes and thus improve customer support while reducing repair
times and inventory costs. The Air Force has established specific CREP
goals for fiscal years 1999 and 2000, such as to reduce the time it takes
for a requisitioning activity to receive an order. The program was started
in February 1996, and implementation is to be completed by September 2001. 

Aircraft Repair Enhancement Program
-----------------------------------

The Aircraft Repair Enhancement Program initiative is designed to be the
Air Force's program to improve depot maintenance of aircraft by such steps
as streamlining the process for aircraft repair, improving requirement
visibility and planning, and standardizing a programmed depot maintenance
scheduling system. The program's goals are to reduce the time an aircraft
is in depot repair, the number of aircraft at the depot, and material to
support aircraft, while delivering aircraft on schedule. This initiative
was started in October 1998, and implementation is to be completed by
December 2000. 

Information Management

Six initiatives in the Air Force's schedule involve improvements to data
systems and forecasting capability. Two of these initiatives are for new
data systems, one initiative is designed to support the repair-on-demand
philosophy in the DREP and CREP initiatives, and three initiatives are to
combine systems. For example, over 30 data systems, which provide data for
2 systems, were analyzed to determine where changes were needed and which
interfaces could be eliminated. 

Integrated Maintenance Data System
----------------------------------

The Integrated Maintenance Data System initiative is designed to be the
Air Force's system for collecting and processing maintenance data for
production support of assets such as aircraft, engines, and support
equipment. It is intended to combine historical and legacy data contained
in other databases to enhance maintenance production, thus improving the
flow, accuracy, and availability of essential logistics information. This
initiative is designed to reduce the time it takes for a customer to
receive an order. This initiative was started in May 1995, and
implementation is to be completed by September 2003.

Integrated Logistics
System-Supply
-------------

The Integrated Logistics System-Supply initiative is a new system for 
base-level supply operations that is to replace the Standard Base Supply
System. The new system is designed to use commercial off-the-shelf
products to provide a wider range of processing options to ensure an
integrated logistics system. This initiative started in February 1997, and
implementation is to be completed by September 2001. 

Pipeline Tracking Analysis and Metrics System
---------------------------------------------

The Pipeline Tracking Analysis and Metrics System initiative is designed
to be a new single integrated information management and decision support
system. The system is to provide more timely information on the
performance of the various segments of the logistics pipeline (supply,
distribution, transportation, and maintenance), produce decision support
metrics, and track individual assets throughout the pipeline (from removal
to return of an asset to serviceable condition and issuance of the asset).
It is intended to reduce the time it takes for a customer to receive an
order and to be completed in three phases. Implementation of the first
phase is to be completed by June 2000; the second phase by June 2001; and
the third phase, which depends on other data systems to provide 2 to 3
years of data, between 2004 and 2006. According to an Air Force official,
this third phase is an ongoing improvement phase to use and validate data
generated from new systems coming on-line.

Execution and Prioritization of Repair Support System
-----------------------------------------------------

The Execution and Prioritization of Repair Support System initiative is
designed as an automated system to prioritize repair and distribution of
reparable aircraft parts based on weapon system availability. It is to
identify and prioritize customer needs, determine the ability of existing
resources to support the repair, and provide the data and mechanism that
are needed to move an item into repair. This initiative is intended to
maximize aircraft availability and reduce the time it takes for a customer
to receive an order. It is designed to support the repair-on-demand
philosophy of DREP and CREP. This initiative started in June 1996, and
implementation is to be completed by July 2001.

Merger of D041 and D062 Systems
-------------------------------

Upon completion of the merger of the D041 reparable item computation
system and the D062 financial system, all secondary item requirements
(reparable and consumable) and budgeting processes should be integrated
into a single process. This merger is designed to provide more accurate
planning for reparable items by accurately forecasting requirements for
the consumable items that are used to repair the reparable parts. This
initiative is intended to improve requirement forecasting and unit
readiness ratings and reduce the time it takes for a requisitioning
activity to receive an order. This initiative started in November 1996,
and implementation is to be completed by September 1999.

Requirements Management System
------------------------------

The Requirements Management System initiative is designed to combine the
systems for secondary item requirements computation and for item
stratification into a single system. For example, items that make up a
weapon system could be stratified by cost, level of repair, or time to
repair. It is designed to provide more timely updates on items, as well as
item and summary level projected expenditures for depot level repair and
buy decisions. It is also to automate as many manual tasks as possible
while enhancing requirement accuracy. This initiative is intended to
replace the D041 system and provide a more responsive requirements
determination process that better serves customer needs by implementing a
modern, near real-time, user friendly system. It started in July 1997 and
is projected to be complete by January 2000.

Outsourcing or Otherwise Reducing Infrastructure

Six initiatives involve moving work to the private sector or otherwise
reducing inventory holdings and/or infrastructure. Three initiatives call
for private industry support to government. The other three are intended
to reduce existing government infrastructure. For example, the Depot
Maintenance Consolidation initiative is the transfer of two Air Force
depots' workload to the remaining three depots. 

Virtual Prime Vendor
--------------------

The Virtual Prime Vendor initiative is designed to allow the use of a
single contractor to supply parts to repair shops and depot maintenance
facilities for Air Force aircraft. It is to allow the contractor to use
preexisting distribution networks and state-of-the-art information
technology systems. This initiative is intended to increase the
effectiveness of the supply system and reduce the time it takes to fill
customers' orders. This initiative started in October 1998 and is still
under development, but a contract is to be awarded by July 2000.

Reengineering Supply Support Process
------------------------------------

The Reengineering Supply Support Process initiative is designed to support
the management of spare parts by certifying contractors rather than the
government to manage parts for certain Air Force weapon systems. Weapon
systems being considered are the C-17, C-130J, F-22, and AWACS. This
initiative is intended to reduce order and ship time and the time it takes
for a requisitioning activity to receive an order and increase unit
readiness ratings. This initiative started in July 1998, and
implementation is to be completed by June 2002.

Express Transportation
----------------------

Express Transportation is an initiative designed to use commercial and
in-house air transportation to deliver parts faster to Air Force customers
in the continental United States and overseas. This initiative is designed
to increase unit readiness ratings and reduce the time it takes for a
requisitioning activity to receive an order. The U.S. and overseas systems
are on separate implementation timetables. The continental United States
delivery system was implemented on October 1998, with improvements
ongoing. The overseas contract was awarded in July 1998, with a
performance start of October 1998. A test of the overseas concept is
scheduled for the first quarter of fiscal year 2000. 

Depot Maintenance Consolidation
-------------------------------

The Depot Maintenance Consolidation initiative is transferring the
workload from two air logistics centers, which are being closed, to the
three remaining centers and the Army. This initiative is intended to
generate a 10-percent savings by identifying new processes, lowering
general and administrative costs, improving efficiency, and increasing
output. Ultimate goals are to reduce operating costs, depot repair cycle
time, and the time it takes for a requisitioning activity to receive an
order. The initiative started in October 1997, and implementation is to be
completed by September 2000. 

Regional Supply Squadron
------------------------

The Regional Supply Squadron initiative is designed to consolidate
requisitioning, funding, computer support, equipment management, and
record maintenance into four regional squadrons. These squadrons are to
provide peacetime, contingency, and major regional conflict support for
units within or deployed to each area. The regions are under the Air
Combat Command, the Air Material Command, the Pacific Air Force, and the
U.S. Air Force Europe. The goals of regionalization are to eliminate
redundancy, save manpower, streamline processes, improve core tasks,
leverage technology, and improve customer support. This initiative started
in August 1997, and implementation is to be completed by July 2002.

Supply and Transportation Unit Reengineering
--------------------------------------------

The Supply and Transportation Unit Reengineering initiative is designed to
eliminate duplicate efforts in base level cargo shipping, delivery,
pickup, and receiving, thus reducing time, manpower, and vehicles. The
initiative is being done in two phases. Phase one is examining pickup,
delivery, cargo in-check, and receiving processes. Phase two is verifying
the merits of express carrier direct delivery to flightline organizations
and the value of integrating outbound shipping processes. This initiative
started in July 1998 at the Air Combat Command, with testing in other
major commands ongoing. The projected completion date for this initiative
is under evaluation; however, if adopted Air Force-wide, it is intended to
be implemented within the time period set by section 347.

Acquisition

Corporate Contracts
-------------------

The Corporate Contracts initiative is designed to consolidate government
requirements for spares or repair work from a single contractor into one
long-term contract with preestablished pricing. A corporate contract would
replace multiple contracts, combining requirements for several Department
of Defense customers. This would allow multiple customers to order from a
single contract. This initiative is intended to reduce cost and
acquisition time for the three remaining air logistics centers. This
initiative started in November 1998, and implementation is to be completed
by June 1999. 

Other

Logistics Transformation and Functional Integration
---------------------------------------------------

The Logistics Transformation and Functional Integration initiative is a
study designed to identify improvements needed in logistics processes and
develop an overall strategy for implementing these improvements. The
current processes and improvements needed are to be evaluated by a team of
contractor and Air Force members. The team is to use integrated logistics
chain management techniques to develop processes that accurately predict
requirements, acquire the right amount of inventory, rapidly move
serviceable and reparable items, and select the optimum path for each item
as it moves through the logistics chain. This initiative is intended to
optimize performance and cost while delivering support to customers at the
right time, cost, and condition. The study started in March 1999 and is to
be completed in March 2000.

--------------------------------------
/Footnote1/-^Air Force Depot Maintenance: Management Changes Would Improve
  Implementation of Reform Initiatives (GAO/NSIAD-99-63, June 25,1999). 

COMMENTS FROM THE DEPARTMENT OF DEFENSE
=======================================

*****************

*****************

*****************

*****************

GAO CONTACTS AND STAFF ACKNOWLEDGMENTS
======================================

GAO Contacts 

Charles Patton, (202) 512-4412
Robert Repasky, (202) 512-9868

Acknowledgments 

In addition to those named above, Leslie Gregor, Willie Cheely, and
William Woods made key contributions to this report.

RELATED GAO PRODUCTS
====================

Financial Management: Better Controls Essential to Improve the Reliability
of DOD's Depot Inventory Records (GAO/AIMD-99-132, June 28, 1999).

Department of Defense: Status of Financial Management Weaknesses and
Actions Needed to Correct Continuing Challenges
(GAO/T-AIMD/NSIAD-99-171, May 4, 1999).

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

Defense Inventory: DOD Could Improve Total Asset Visibility Initiative
With Results Act Framework (GAO/NSIAD-99-40, Apr. 12, 1999).

Major Management Challenges and Program Risks: Department of Defense 
(GAO/OCG-99-4, Jan. 1999).

Inventory Management: More Information Needed to Assess DLA's 
Best Practice Initiatives (GAO/NSIAD-98-218, Sept. 2, 1998).

Results Act: DOD's Annual Performance Plan for Fiscal Year 1999 (GAO/NSIAD-
98-188R, June 5, 1998).

Inventory Management: DOD Can Build on Progress by Using Best
Practices for Reparable Parts (GAO/NSIAD-98-97, Feb. 27, 1998).

Defense Inventory Management: Expanding Use of Best Practices for
Hardware Items Can Reduce Logistics Costs (GAO/NSIAD-98-47, 
Jan. 20, 1998).

Inventory Management: Greater Use of Best Practices Could Reduce
DOD's Logistics Costs (GAO/T-NSIAD-97-214, July 24, 1997).

Inventory Management: The Army Could Reduce Logistics Costs for
Aviation Parts by Adopting Best Practices (GAO/NSIAD-97-82, 
Apr. 15, 1997).

Defense Inventory Management: Problems, Progress, and Additional
Actions Needed (GAO/T-NSIAD-97-109, Mar. 20, 1997).

Inventory Management: Adopting Best Practices Could Enhance Navy
Efforts to Achieve Efficiencies and Savings (GAO/NSIAD-96-156, 
July 12, 1996).

Best Management Practices: Reengineering the Air Force's Logistics
System Can Yield Substantial Savings (GAO/NSIAD-96-5, Feb. 21, 1996).

Inventory Management: DOD Can Build on Progress in Using Best
Practices to Achieve Substantial Savings (GAO/NSIAD-95-142, 
Aug. 4, 1995).

(709383)

Table 1:  Air Force Initiatives and Projected Completion Dates7

*** End of document. ***