Defense Supply: Acquisition Leadtime Requirements Can Be Significantly
Reduced (Letter Report, 12/20/94, GAO/NSIAD-95-2).

Acquisition leadtime is used in inventory management to determine the
quantity of items needed to meet demand while stocks are being
replenished.  Overstated leadtimes can swell inventories unnecessarily.
During the 1980s, the Defense Department's (DOD) acquisition leadtime
requirements grew by $13 billion.  DOD has made only limited progress in
reducing acquisition leadtime because its leadtime reduction initiatives
have been unevenly implemented by the military services and by the
Defense Logistics Agency.  GAO also found opportunities to reduce
leadtime that were overlooked by DOD.  GAO believes that DOD can cut
acquisition leadtime days by at least 25 percent during a four-year
period at a savings of about $1 billion.  This reduction can be achieved
by reemphasizing prompt implementation of DOD's 1990 initiatives,
periodically validating and updating old leadtime data for long leadtime
items, and considering leadtime reductions in deciding whether to
continue buying spare parts from the prime contractor or from the
manufacturer.

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

 REPORTNUM:  NSIAD-95-2
     TITLE:  Defense Supply: Acquisition Leadtime Requirements Can Be 
             Significantly Reduced
      DATE:  12/20/94
   SUBJECT:  Defense procurement
             Inventory control
             Inventory control systems
             Logistics
             Combat readiness
             Military materiel
             Property and supply management
             Federal supply systems
             Defense cost control
             Spare parts
IDENTIFIER:  DOD Inventory Reduction Plan
             UH-60 Helicopter
             Black Hawk Helicopter
             B-2 Aircraft
             F-15 Aircraft
             
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Cover
================================================================ COVER


Report to the Secretary of Defense

December 1994

DEFENSE SUPPLY - ACQUISITION
LEADTIME REQUIREMENTS CAN BE
SIGNIFICANTLY REDUCED

GAO/NSIAD-95-2

Defense Supply


Abbreviations
=============================================================== ABBREV

  DOD - Department of Defense
  DLA - Defense Logistics Agency

Letter
=============================================================== LETTER


B-259446

December 20, 1994

The Honorable William J.  Perry
The Secretary of Defense

Dear Mr.  Secretary: 

Acquisition leadtime (formerly called procurement leadtime) is used
in inventory management systems to determine the quantity of items
needed to meet demand during the time required to order and receive
replenishment stocks.  Acquisition leadtime is divided into
administrative leadtime (the time required to award a contract) and
production leadtime (the time for the contractor to deliver an item). 
Overstated leadtimes can cause unnecessary inventory investment. 
Conversely, understated leadtimes can cause material shortages and
reduced readiness. 

During the 1980s, the Department of Defense's (DOD) acquisition
leadtime requirements grew by $13 billion.  In 1990, DOD recognized
that leadtimes were excessive and directed the military services and
the Defense Logistics Agency (DLA) to take a number of initiatives
designed to reduce leadtimes by 25 percent.  This report addresses
(1) the effectiveness of DOD's leadtime reduction initiatives and (2)
additional opportunities to reduce leadtimes. 


   RESULTS IN BRIEF
------------------------------------------------------------ Letter :1

DOD has made only limited progress in reducing acquisition leadtime
because its leadtime reduction initiatives have been unevenly
implemented by the military services and DLA.  For example, the Navy
acted aggressively to effectively implement most of DOD's initiatives
and reduced its leadtime by 27 percent over the past 4 years. 
Conversely, the Air Force did little to implement the initiatives and
experienced a 1-percent increase in its leadtime. 

We also identified opportunities to reduce leadtime that were
overlooked by the DOD initiatives.  We believe that DOD can reduce
acquisition leadtime days by at least 25 percent over a 4-year period
at a savings of about $1 billion.  This reduction can be accomplished
by renewing the emphasis on prompt implementation of DOD's 1990
initiatives, periodically validating and updating old leadtime data
for long leadtime items, and considering leadtime reductions as a
factor in deciding whether to continue purchasing spare parts from
the prime contractor or to purchase them from the actual
manufacturer. 


   DOD HAS MADE LIMITED PROGRESS
   IN REDUCING ACQUISITION
   LEADTIMES
------------------------------------------------------------ Letter :2

The value of DOD inventory requirements needed to support acquisition
leadtime grew from about $8 billion in 1979 to about $21 billion in
1989.  Recognizing that excessively long acquisition leadtime was a
major contributor to the large growth in defense inventories in the
1980s, in May 1990 DOD directed the military services and DLA to take
a number of initiatives to reduce acquisition leadtime as a part of a
10-point Inventory Reduction Plan.  The recommended initiatives
included (1) establishing procurement leadtime reduction goals, (2)
shortening production leadtimes by gradually reducing the required
delivery dates in contract solicitations, and (3) expanding multiyear
contracting and indefinite quantity requirements contracts.  Similar
policy guidance for reducing acquisition leadtime, except for
establishing reduction goals, was included in DOD Material Management
Regulation 4140.1-R, dated January 1993. 

The leadtime reduction initiatives were based on a December 1986 DOD
memorandum that included the recommendations of a study\1 performed
for DOD by the Logistics Management Institute.  The DOD memorandum
and the Institute study showed that a 25-percent reduction in
leadtime was achievable by adopting methods proven successful in the
private sector.  In stressing the significance of the initiatives,
DOD commented that each day the DOD-wide average leadtime is reduced
future purchases can be reduced by $10 million. 

Since 1990, DOD has had only limited success in achieving the
25-percent reduction indicated by the study.  As shown in table 1,
DOD's average leadtime decreased by about 9 percent. 



                           Table 1
           
           Changes in Average Leadtime Days between
                        1990 and 1994


                                    1990   1994   Days
---------------------------------  -----  -----  -----  ----
Navy                                 715    522    193  27.0
Army                                 711    690     21   3.0
Air Force                            614    620    (6)  (1.0
                                                           )
DLA                                  309    293     16   5.0
DOD average                          587    531     56   9.0
------------------------------------------------------------
On the basis of DOD's estimate that $10 million can be saved for each
day the average leadtime is reduced, the 56-day leadtime reduction
resulted in procurement savings of $560 million.  A further leadtime
reduction of 91 days will be needed to achieve the 25-percent
reduction indicated by the study.  Such a reduction would result in
additional procurement savings of $910 million. 

None of the DOD components have fully implemented DOD's 1990 leadtime
reduction initiatives or its 1993 policy guidance for reducing
leadtime, but some have made greater efforts than others.  As shown
in table 1, the Navy had the greatest success and the Air Force had
the least success in reducing acquisition leadtime. 


--------------------
\1 Procurement Leadtime:  The Forgotten Factor (Logistics Management
Institute, Sept.  1986). 


      NAVY
---------------------------------------------------------- Letter :2.1

From 1990 to 1994, the Navy reduced the overall average acquisition
leadtime by 193 days, or about 27 percent.  This was accomplished by
a number of actions.  In accordance with DOD initiatives, the Navy
first established a leadtime reduction goal of 25 percent.  The Navy
then had the inventory control points reduce the leadtimes shown in
their databases by 25 percent for each item managed.  Finally, the
Navy took aggressive action over the next 4 years to shorten required
delivery dates in contract solicitations and negotiations. 


      ARMY
---------------------------------------------------------- Letter :2.2

From 1990 to 1994, the Army's average acquisition leadtime decreased
by 21 days, or about 3 percent.  Unlike the Navy, the Army did not
establish a leadtime reduction goal, nor did it take action to obtain
leadtime reductions through contract solicitations and negotiations. 
Instead, the Army emphasized another of DOD's initiatives to reduce
leadtime by using more flexible procurement methods such as multiyear
procurements and indefinite quantity type contracts. 

According to Army officials, quantities for follow-on years can be
easily added to multiyear and indefinite quantity type contracts,
which will reduce administrative leadtime to a matter of days instead
of months.  Also, delays in starting up production are minimized.  As
an example of the impact of these types of contracts, in 1993 the
Army reported that a 3-year vehicle roadwheel purchase by the
Tank-Automotive Command reduced acquisition leadtime by 13 months (7
months' administrative and 6 months' production) resulting in a
savings of about $19 million.  Similarly, by using an indefinite
quantity type contract to purchase sprockets, this command reduced
acquisition leadtime by 15 months and saved about $5 million. 


      AIR FORCE
---------------------------------------------------------- Letter :2.3

From 1990 to 1994, the Air Force's average acquisition leadtime
increased by 6 days, or about 1 percent.  The Air Force did not
implement DOD's 1990 leadtime reduction initiatives because it felt
that no action was needed to reduce leadtime based on a comparison
with the leadtimes of the Navy. 

The Air Force delayed implementation of the initiatives pending an
evaluation of the Navy's reported success in achieving a 25-percent
decrease in production leadtime without degrading mission support. 
In its evaluation, the Air Force compared aviation data due to the
similarity of parts.  On the basis of this evaluation, which was
completed in December 1993, the Air Force concluded that its
production leadtimes for both repairable and consumable aviation
parts were lower than the Navy's leadtimes, even after the 25-percent
reduction.  The Air Force, therefore, concluded that no action was
needed to reduce production leadtime. 

We analyzed and compared leadtime data for the Air Force and the Navy
as shown on their latest available inventory stratification reports
of March 31, 1993, and September 30, 1993, respectively.  We found
that the Air Force's production leadtime was lower for consumable
parts, but considerably higher for repairable parts.  The Air Force's
average production leadtime for repairable parts of 596 days was 176
days, or about 42 percent, higher than the Navy's leadtime of 420
days.  Also, the Air Force's overall average acquisition leadtime of
818 days for repairable parts was 299 days, or 58 percent, higher
than the Navy's acquisition leadtime of 519 days. 


      DLA
---------------------------------------------------------- Letter :2.4

From 1990 to 1994, DLA's average acquisition leadtime decreased by 16
days, or about 5 percent.  DLA did not establish a leadtime reduction
goal or attempt to reduce leadtime through contract solicitations and
negotiations, as recommended by DOD's leadtime reduction initiatives. 
Instead, DLA concentrated on various initiatives to automate the
procurement source selection process and on increased use of
long-term contracting techniques, such as indefinite quantity type
contracts. 

As the result of a study by its supply centers that identified the
potential for shorter leadtimes for high dollar, high demand, long
leadtime items, in February 1994 DLA drafted proposed policy guidance
for implementing acquisition leadtime reduction initiatives.  The
proposed policy would require the supply centers to reduce leadtime
by 30 percent over a 2-year period from a base of fiscal year 1992 (a
reduction of 86 days).  To accomplish this reduction, the supply
centers would request shorter delivery times in contract
solicitations, consider shorter production leadtimes as a factor in
competitive bid evaluations, and periodically validate and update
production leadtimes through market surveys.  As of October 1994, DLA
had not implemented the proposed policy, pending its decision to
incorporate the policy as a part of a broader business plan it was
developing. 


   RENEWED EMPHASIS AND IMPROVED
   OVERSIGHT NEEDED TO REDUCE
   LEADTIME
------------------------------------------------------------ Letter :3

With the exception of the Navy, the military services and DLA placed
no timely emphasis on the effective implementation of DOD's 1990
leadtime reduction initiatives or its 1993 leadtime reduction policy. 
Also, DOD was not aware of the general lack of progress made over the
past 4 years in reducing leadtime because of an absence of adequate
oversight information. 

The Navy's success in reducing leadtime by 27 percent in comparison
to the limited progress made by the other DOD components shows that
DOD can benefit by placing renewed emphasis on effective
implementation of the leadtime reduction initiatives.  One way would
be to focus on the Navy's success in establishing a 25-percent
reduction goal and achieving that goal by taking aggressive action to
reduce production leadtime in contract solicitations and
negotiations. 

DOD was not aware of the general lack of progress in implementing the
initiatives because the annual progress reports required of the
military services and DLA did not provide sufficient oversight
information to make a meaningful assessment.  The reports did not
show historical trends in leadtime days before and after the 1990
initiatives.  Also, the reports did not provide any meaningful
statistics showing the extent of implementation.  For example, Army
and DLA reports stated that an expansion of multiyear procurements
was a primary means of reducing leadtime, but the reports did not
provide statistics showing the extent of the expansion. 


   OPPORTUNITIES TO REDUCE
   LEADTIMES OVERLOOKED BY DOD'S
   INITIATIVES
------------------------------------------------------------ Letter :4

We identified additional opportunities for significant reductions in
acquisition leadtime that were overlooked by the DOD initiatives. 
These opportunities are having inventory management activities (1)
periodically validate recorded leadtime data, (2) work closely with
major contractors to update old leadtime data for items with long
production leadtimes (e.g., over 18 months), and (3) consider
potential reductions in leadtime as a factor in deciding whether to
purchase spare parts through the prime contractor or directly from
the actual manufacturer. 


      NEED TO PERIODICALLY
      VALIDATE AND UPDATE
      LEADTIMES
---------------------------------------------------------- Letter :4.1

We reviewed the accuracy of acquisition leadtimes at the Air Force's
Oklahoma City and San Antonio Air Logistics Centers and the Army's
Aviation and Troop Command and found that the Army's leadtimes were
more accurate.  The Army command had a higher accuracy rate than the
centers because it had recently worked closely with eight major
contractors to update production leadtimes for all items with
leadtimes of 18 months or longer.  As a result, leadtime changes were
made for 1,129 items, or 75 percent of the items reviewed.  Leadtime
decreases accounted for 1,061, or 94 percent of the changes.  The
command estimated net annual procurement savings of $88 million from
using updated leadtimes to compute buy requirements. 

Although the Army command reduced leadtimes, our review still
identified inaccuracies.  We tested 26 items and found that the
leadtimes for 5 items, or 19 percent, were inaccurate.  For example,
in July 1994 the Aviation and Troop Command used an administrative
leadtime of 9 months in the requirement computation for a rotor blade
tip used on the UH-60 Black Hawk helicopter (NSN 1560-01-331-3845). 
However, procurement history records showed that the administrative
leadtime required to process the last two purchases was only 2
months.  The item manager told us that the 9-month administrative
leadtime was based on the time it took to award a multiyear contract
and that the 2 months' administrative leadtime represented the time
it took to place orders against the contract.  The 2-month
administrative leadtime should have been used in making purchasing
decisions because it represents the actual ordering time to acquire
additional parts once a multiyear contract is awarded.  Command
officials agreed that an adjustment should be made in the
requirements system for the reduced leadtime. 

The two Air Force air logistics centers had a higher percentage of
leadtime inaccuracies than the Army command.  We reviewed the
accuracy of acquisition leadtimes for 106 items and found that
leadtimes for 53 items, or 50 percent, were inaccurate, resulting in
overstated requirements of $7.3 million.  These inaccuracies resulted
from the failure to periodically validate and update leadtime data in
the requirement computation database.  The following examples
illustrate the leadtime inaccuracies found. 

In November 1993, the Oklahoma City Air Logistics Center was using a
production leadtime of 44 months in the requirement computation for a
circuit card used on the B-2 bomber (NSN 5998-01-262-8124FW). 
Procurement history records showed that the 44 months was based on
information provided by the contractor in July 1991.  We asked center
officials to contact the contractor to verify the accuracy of the
leadtime.  According to the officials, the contractor stated that the
44-month leadtime was outdated and quoted a current leadtime of 25
months.  The 19-month reduction in production leadtime caused the
value of requirements for this item to be reduced by $69,962. 

The circuit card is one of six B-2 bomber sample items with old and
long leadtimes that the contractor updated.  As a result, the
Oklahoma City Air Logistics Center reduced leadtimes by an average of
14 months for five items, thus deferring future purchases. 

In another case, the San Antonio Air Logistics Center was using an
acquisition leadtime of 100 months in the requirement computation for
a signal generator used on the F-15 aircraft (NSN
6625-01-051-6832DQ).  In response to our inquiries, the item manager
said a keypunch error had occurred in March 1993 during file
maintenance and corrected the acquisition leadtime to 38 months. 
Correcting the leadtime reduced the value of requirements and budget
estimates for this item by $408,857. 


      PURCHASING SPARE PARTS
      DIRECTLY FROM ACTUAL
      MANUFACTURER CAN REDUCE
      LEADTIMES
---------------------------------------------------------- Letter :4.2

DOD promotes the purchase of spare parts from actual manufacturers
rather than from prime contractors as a way to increase competition. 
This process is called spare parts breakout and is recognized as an
effective means of achieving price reductions.  Spare parts breakout
has the added benefit of reducing acquisition leadtime by eliminating
the processing time that a prime contractor adds for passing an order
to the actual manufacturer. 

As part of the inventory reduction plan initiatives, the Army
undertook a major program to breakout spare parts from the prime
contractor for direct purchase from the actual manufacturer. 
Although the intent of this program was to bring about procurement
economies through elimination of middleman profits, the program also
contributed to a reduction in procurement leadtime.  In the 1993
progress report on inventory reductions, the Army reported that the
inventory commands had screened about 12,000 items for breakout in
fiscal year 1992 and identified approximately 6,000 items for
breakout from the prime contractor.  At the Aviation and Troop
Command, for example, the purchase of spare parts for the Blackhawk
helicopter had been almost completely broken out.  The program
manager told us that in his experience production leadtime always
goes down, often times by half, when a spare part is broken out for
direct purchase from the actual manufacturer. 

Additional opportunities to buy directly from manufacturers continue
to exist.  For example, in response to our inquiries on six sample
items managed by the Air Force's Oklahoma City Air Logistics Center,
the prime contractor for the B-2 bomber advised the center that it
was not the actual manufacturer for five of the six items.  The
contractor stated that it added 5 months' leadtime to process the Air
Force's order to the actual manufacturer.  Center officials agreed
that the leadtime to acquire these items could be reduced simply by
buying from the actual manufacturer instead of from the prime
contractor and informed us that the next purchases would be made
directly from the manufacturer. 


   RECOMMENDATIONS
------------------------------------------------------------ Letter :5

We recommend that the Secretary of Defense direct the Secretaries of
the Army and the Air Force and the Director of DLA to place renewed
emphasis on implementing the DOD leadtime reduction initiatives and
to improve oversight information reported to DOD so that the progress
being achieved can be measured.  In doing so, we recommend that the
other military services and DLA follow the Navy's lead in setting a
leadtime reduction goal and achieving this goal through contract
solicitations and negotiations. 

We also recommend that the Secretary of Defense direct the
Secretaries of the Army, the Navy, and the Air Force and the Director
of DLA to have their inventory management activities

periodically validate recorded leadtime data to detect and correct
errors,

work closely with major contractors in updating old leadtime data for
items with long production leadtimes (e.g., over 18 months), and

consider potential leadtime reductions as a factor in evaluating the
feasibility of buying directly from manufacturers instead of from
prime contractors. 


   AGENCY COMMENTS AND OUR
   EVALUATION
------------------------------------------------------------ Letter :6

DOD agreed that further action to reduce acquisition leadtimes is
required (see app.  I).  However, DOD views full implementation of
the policy guidance on methods of reducing leadtimes included in DOD
Material Management Regulation 4140.1-R, dated January 1993, as the
most effective means to accomplish this reduction.  DOD stated that
the military services and DLA would be reminded of the need to fully
implement that guidance. 

In a November 23, 1994, memorandum to the military services and DLA,
DOD stated that renewed emphasis on acquisition leadtime reduction
was appropriate.  The memorandum stated that while the greatest
emphasis should be placed on full implementation of the guidance in
the DOD regulation, such as gradually reducing required delivery
dates in solicitations, consideration should be given to the
usefulness of leadtime reduction goals and the importance of
periodically validating recorded leadtime data.  The memorandum also
stated that full implementation of the spare parts breakout program
could help reduce leadtime and that contractor furnished data could
be a useful source of information in validating leadtime data.  DOD
asked to be advised of the actions taken to reduce leadtimes by
February 15, 1995. 

With regard to our reference to additional savings of $910 million
from further leadtime reductions leading to a DOD-wide average
reduction of 25 percent, DOD commented that the Secretary of Defense
issued a memorandum dated September 14, 1994, that challenges DOD
components to reduce business-process cycle times by at least 50
percent by the year 2000.  DOD stated further that application of
this challenge to acquisition leadtime will include an estimate of
possible savings. 

While DOD's actions are constructive, we do not believe that relying
on the military services and DLA to fully implement the January 1993
policy guidance is the most effective means of achieving a 25-percent
reduction in acquisition leadtime.  The guidance already has been in
effect for almost 2 years, and our report points out that only the
Navy has been successful in reducing leadtime by 25 percent since
1990.  At that time, DOD directed the military services and DLA to
take a number of initiatives to reduce acquisition leadtime that are
similar to those in the January 1993 guidance.  Also, the guidance
does not contain a leadtime reduction goal. 

Furthermore, we believe that improved oversight is needed if leadtime
reductions are to be achieved.  DOD's comments do not address this
part of our recommendation and the January 1993 guidance does not
require the military services and DLA to provide DOD with oversight
information on their progress in reducing leadtimes.  Also, DOD no
longer requires annual reports from the military services and DLA
showing their progress in implementing the 1990 inventory reduction
plan. 

Alternative means are available for providing DOD with oversight
information.  One way would be to require that the military services
and DLA include leadtime data in their annual Defense Business
Operations Fund budget submissions to DOD.  These submissions could
show the progress being made in achieving a 25-percent reduction in
acquisition leadtime, using fiscal year 1990 as the base year for
measuring progress. 


   SCOPE AND METHODOLOGY
------------------------------------------------------------ Letter :7

To evaluate the effectiveness of DOD's leadtime reduction
initiatives, we held discussions and collected information at
headquarters of DOD, Army, Navy, Air Force, and DLA, Washington,
D.C.; the Oklahoma City Air Logistics Center, Tinker Air Force Base,
Oklahoma; the San Antonio Air Logistics Center, Kelly Air Force Base,
Texas; and the Army Aviation and Troop Command, St.  Louis, Missouri. 
We reviewed DOD guidance and initiatives for managing acquisition
leadtimes and the implementing policies, procedures, and practices of
the military services and DLA. 

To determine if additional leadtime reduction opportunities exist, we
obtained computer tapes from the Air Force and the Army that
identified acquisition leadtimes for all spare parts managed by the
two Air Force air logistics centers and the Army command as of March
31, 1993.  From data extracted from the tapes, we selected 106 Air
Force items and 26 Army items for review.  These items represented a
mix of items either planned to be bought in fiscal year 1995 or
having long leadtimes of more than 50 months.  We compared leadtime
estimates used in requirement computations to leadtimes actually
experienced and other leadtime information in item manager files.  We
selected Air Force and Army locations for detailed review because of
their large acquisition leadtime requirements. 

We used the same computer programs, reports, records, and statistics
DOD, the military services, and DLA use to manage inventories, make
decisions, and determine requirements.  We did not independently
determine the reliability of all of these sources.  However, as
stated above, we did assess the accuracy of the leadtime information
by comparing data contained in the requirements system with data
contained in item manager files. 

We performed our review between October 1993 and August 1994 in
accordance with generally accepted government auditing standards. 


---------------------------------------------------------- Letter :7.1

As you know, the head of a federal agency is required by 31 U.S.C. 
720 to submit a written statement on actions taken on our
recommendations to the House Committee on Government Operations and
the Senate Committee on Governmental Affairs not later than 60 days
after the date of this report.  A written statement must also be
submitted to the House and Senate Committees on Appropriations with
the agency's first request for appropriations made more than 60 days
after the date of the report. 

We are sending copies of this report to the Chairmen and Ranking
Minority Members, Senate and House Committees on Appropriations and
on Armed Services, Senate Committee on Governmental Affairs, and
House Committee on Government Operations; the Secretaries of the
Army, the Navy, and the Air Force; the Director, DLA; and the
Director, Office of Management and Budget. 

Please contact me at (202) 512-5140 if you have any questions.  The
major contributors to this report are listed in appendix II. 

Sincerely yours,

Mark E.  Gebicke
Director, Military Operations
 and Capabilities Issues




(See figure in printed edition.)Appendix I
COMMENTS FROM THE DEPARTMENT OF
DEFENSE
============================================================== Letter 



(See figure in printed edition.)

Now on pp.  1-3. 

See comment 1. 



(See figure in printed edition.)

See comment 2. 



(See figure in printed edition.)

Now on pp.  3-5. 

See comment 2. 

See comment 3. 



(See figure in printed edition.)

Now on pp.  1 and 5. 

See comment 2. 

See comment 4. 



(See figure in printed edition.)



(See figure in printed edition.)

Now on pp.  1
and 5-8. 



(See figure in printed edition.)

Now on p.  8. 

Now on p.  8. 

Now on p.  8. 

Now on p.  8. 



(See figure in printed edition.)

See comment 5. 


The following are GAO's comments on the Department of Defense's (DOD)
letter dated November 22, 1994. 


   GAO COMMENTS
------------------------------------------------------------ Letter :8

1.  We revised page 2 in accordance with DOD's suggestions. 

2.  We revised page 2 as suggested by DOD. 

3.  We revised page 4 to address DOD's concern. 

4.  We added references to DOD's policy guidance on reducing
leadtime, as set forth in DOD Regulation 4140.1-R, dated January
1993, on page 2. 

5.  We changed "inventory managers" to "inventory management
activities" on pages 5 and 8, as suggested by DOD. 


MAJOR CONTRIBUTORS TO THIS REPORT
========================================================== Appendix II


   NATIONAL SECURITY AND
   INTERNATIONAL AFFAIRS DIVISION,
   WASHINGTON, D.C. 
-------------------------------------------------------- Appendix II:1

James Murphy, Assistant Director
Thomas Wells, Assignment Manager
Melvin Wagman, Evaluator


   DALLAS REGIONAL OFFICE
-------------------------------------------------------- Appendix II:2

Roger Tomlinson, Evaluator-in-Charge
Bonnie Carter, Evaluator
Rebecca Pierce, Evaluator

