Defense Inventory: Action Needed To Avoid Inappropriate Sales of Surplus
Parts (Letter Report, 08/03/98, GAO/NSIAD-98-182).

Pursuant to a congressional request, GAO reviewed the Department of
Defense's (DOD) disposal process for surplus parts with both military
technology and flight safety risks, focusing on DOD's efforts to: (1)
identify and destroy parts with military technology; and (2) implement a
flight safety program to prevent aircraft parts with potential flight
safety risks from being sold through the disposal process.

GAO noted that: (1) while DOD recognizes the dangers associated with
selling surplus parts with military technology to the public and has
taken certain actions to address the problem, DOD's disposal offices
have inadvertently sold surplus parts with military technology intact;
(2) these sales occurred for three reasons; (3) the military services
assigned the wrong demilitarization codes to the parts; (4) because
guidance was inadequate, codes assigned to parts with military
technology incorrectly indicated that the parts did not contain the
technology; (5) DOD has been considering ways to address this situation
but has not yet reached a final decision; (6) an initiative intended to
correct inaccurately assigned demilitarization codes did not ensure that
data systems were updated with the corrected codes; (7) as a result,
disposal offices continued to sell parts with military technology intact
after the codes for the parts were determined to be inaccurately
assigned; (8) personnel responsible for correcting the inaccurately
assigned codes did not always update their data systems with the
corrected codes; (9) the methods that the disposal offices used to
demilitarize some parts did not adequately destroy the military
technology contained in the parts; (10) guidance to disposal offices on
how to destroy the military technology inherent in some items was not
adequate; (11) DOD and its components have not aggressively pursued
implementation of initiatives to prevent the sale of potentially
dangerous flight safety critical aircraft parts through the disposal
system; (12) DOD and the components have not set timelines for
implementing the flight safety program; (13) also, none of the
components have fully implemented all of the program initiatives, but
some have made greater progress than others; (14) for example, at the
time GAO's fieldwork was completed, the Army had identified over 4,500
aircraft parts with flight safety implications, whereas the Navy had not
identified any aircraft parts with these implications; and (15) DOD
plans to increase its interaction and involvement in the program, but
the military services and the Defense Logistics Agency continue to have
problems accomplishing flight safety program initiatives.

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

 REPORTNUM:  NSIAD-98-182
     TITLE:  Defense Inventory: Action Needed To Avoid Inappropriate 
             Sales of Surplus Parts
      DATE:  08/03/98
   SUBJECT:  Aircraft components
             Inventory control systems
             Transportation safety
             Military inventories
             Surplus federal property
             Property disposal
             Military materiel
IDENTIFIER:  DOD Flight Safety Critical Aircraft Parts program
             
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Cover
================================================================ COVER


Report to the Chairman, Committee on National Security, House of
Representatives

August 1998

DEFENSE INVENTORY - ACTION NEEDED
TO AVOID INAPPROPRIATE SALES OF
SURPLUS PARTS

GAO/NSIAD-98-182

Defense Inventory

(709297)


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

  DOD - Department of Defense
  DRMO - Defense Reutilization and Marketing Office

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


B-280096

August 3, 1998

The Honorable Floyd D.  Spence
Chairman, Committee on National Security
House of Representatives

Dear Mr.  Chairman: 

As requested, we reviewed the Department of Defense's (DOD) disposal
process for surplus parts with both military technology and flight
safety risks.  Specifically, this report addresses DOD's efforts to
(1) identify and destroy parts with military technology and (2)
implement a flight safety program to prevent aircraft parts with
potential flight safety risks from being sold through the disposal
process.  This report is a follow-on to our 1997 report that
addressed DOD's destruction of usable aircraft parts that did not
have military technology and flight safety implications.\1 The scope
and methodology of our work are described in appendix I. 


--------------------
\1 Defense Inventory:  Management of Surplus Usable Aircraft Parts
Can Be Improved (GAO/NSIAD-98-7, Oct.  2, 1997). 


   BACKGROUND
------------------------------------------------------------ Letter :1

The Federal Property and Administrative Services Act of 1949, as
amended (40 U.S.C.  471-486), places responsibility for the
disposition of government real and personal property with the General
Services Administration.  That agency delegated disposal of DOD
personal property to the Secretary of Defense, who in turn delegated
it to the Defense Logistics Agency.  The Defense Reutilization and
Marketing Service, a component of the Defense Logistics Agency,
carries out the disposal function.  The complexity of DOD's disposal
process is characterized by the massive volume of excess property
that is handled.  In fiscal year 1997, DOD disposed of millions of
items with a reported acquisition value (the amount originally paid
for the items) of almost $22 billion. 


      DOD'S DISPOSAL PROCESS
---------------------------------------------------------- Letter :1.1

DOD, through the Office of the Deputy Under Secretary of Defense
(Logistics), provides overall guidance for determining if parts
should be disposed of.  The military services and the Defense
Logistics Agency have responsibility for determining if specific
parts under their management are excess to their needs.  Parts that
are excess enter the disposal process and are sent to one of 154
worldwide Defense Reutilization and Marketing Offices (DRMO), or
disposal yards.  DRMO personnel inspect the parts upon receipt for
condition; acquisition value; and special handling requirements, such
as those for military-sensitive items.  DRMOs have disposition
priorities, consistent with legislative requirements, to make the
excess parts available for reutilization within DOD or transfer to
other federal agencies.  Parts that remain are designated as surplus
and can be donated to eligible entities, such as state and local
governments among many others.  After these priorities have been
served, parts that remain may be sold to the general public as usable
items or scrap.  Figure 1 shows the process for disposing of parts. 

   Figure 1:  Process for
   Disposing of Military Parts

   (See figure in printed
   edition.)


      DISPOSAL OF PARTS WITH
      MILITARY TECHNOLOGY
---------------------------------------------------------- Letter :1.2

The military services assign a code the first time they buy spare
parts for new aircraft, ships, land vehicles, and other military
weapons and equipment to indicate whether the parts contain
technology conferring a military capability.  The military services
are also responsible for reviewing and validating the assigned codes
once every 5 years.  Because of concerns about safeguarding military
technology, DOD issued specific policies and procedures relating to
the disposal of these parts.  For parts that have military technology
involving weapons, national security, or military advantages inherent
in them, DOD requires the parts to be demilitarized so that the
technology remains within DOD.  Demilitarization makes the parts
unfit for their originally intended purpose, either by partial or
total destruction, before or as a condition of sale to the public. 
The term includes mutilation, cutting, crushing, scrapping, melting,
burning, or alteration that destroys the military technology in the
parts. 


      FLIGHT SAFETY AIRCRAFT PARTS
      PROGRAM
---------------------------------------------------------- Letter :1.3

DOD also has a program to identify and prevent parts with potential
flight safety risks from being sold through the disposal process.  In
our 1994 report,\2 we cited concerns from the Federal Aviation
Administration and the Department of Transportation's Inspector
General that DOD aircraft parts, sold as scrap, illegally reentered
civil aviation as usable.  As a result, in July 1995 DOD initiated a
departmentwide Flight Safety Critical Aircraft Parts program to
identify and destroy surplus parts that could cause an aircraft to
crash if the parts fail during a flight.  The goal of the program is
to prevent potentially dangerous parts from being sold by the DRMOs. 


--------------------
\2 Commercial Practices:  Opportunities Exist to Enhance DOD's Sales
of Surplus Aircraft Parts (GAO/NSIAD-94-189, Sept.  23, 1994). 


   RESULTS IN BRIEF
------------------------------------------------------------ Letter :2

While DOD recognizes the dangers associated with selling surplus
parts with military technology to the public and has taken certain
actions to address the problem, DOD's disposal offices have
inadvertently sold surplus parts with military technology intact. 
These sales occurred for three reasons.  First, the military services
assigned the wrong demilitarization codes to the parts.  Because
guidance was inadequate, codes assigned to parts with military
technology incorrectly indicated that the parts did not contain the
technology.  DOD has been considering ways to address this situation
but has not yet reached a final decision.  Second, an initiative
intended to correct inaccurately assigned demilitarization codes did
not ensure that data systems were updated with the corrected codes. 
As a result, disposal offices continued to sell parts with military
technology intact after the codes for the parts were determined to be
inaccurately assigned.  Personnel responsible for correcting the
inaccurately assigned codes did not always update their data systems
with the corrected codes.  Third, the methods that the disposal
offices used to demilitarize some parts did not adequately destroy
the military technology contained in the parts.  Guidance to disposal
offices on how to destroy the military technology inherent in some
items was not adequate. 

DOD and its components have not aggressively pursued implementation
of initiatives to prevent the sale of potentially dangerous flight
safety critical aircraft parts through the disposal system.  DOD and
the components have not set timelines for implementing the flight
safety program.  Also, none of the components have fully implemented
all of the program initiatives, but some have made greater progress
than others.  For example, at the time our fieldwork was completed,
the Army had identified over 4,500 aircraft parts with flight safety
implications, whereas the Navy had not identified any aircraft parts
with these implications.  DOD plans to increase its interaction and
involvement in the program, but the military services and the Defense
Logistics Agency continue to have problems accomplishing flight
safety program initiatives. 


   DOD INADVERTENTLY SOLD SURPLUS
   PARTS WITH MILITARY TECHNOLOGY
   INTACT
------------------------------------------------------------ Letter :3

Because DOD has been lax in following its existing disposal policies
and procedures, it inadvertently sold or offered for sale parts with
military technology intact.  This situation occurred because (1) the
military services assigned the wrong demilitarization codes to parts
with military technology that needed to be protected, (2) an
initiative intended to correct inaccurately assigned demilitarization
codes did not ensure that data systems were updated with the
corrected codes, and (3) the methods DOD used to demilitarize some
parts did not adequately destroy the military technology contained in
the parts.  DOD has some actions underway to address these problems,
but none have been fully implemented. 


      DEMILITARIZATION CODES ARE
      NOT ACCURATELY ASSIGNED
---------------------------------------------------------- Letter :3.1

Demilitarization codes are supposed to help the DRMOs determine which
parts have military technology that should be destroyed before the
parts are sold to the public as scrap or without the technology. 
However, DOD investigations and our analysis of 264 judgmentally
selected items available for sale at 5 DRMOs showed that the military
services often assigned the wrong demilitarization codes to parts
with military technology that needed to be protected.  When parts are
miscoded, there is a high probability that those without military
technology will be unnecessarily destroyed and those with military
technology will be inadvertently sold.  Such actions waste time and
resources; increase costs; and, in the latter case, inadvertently
make weapons and military technology available to the public. 

DOD has had problems with the accuracy of assigned demilitarization
codes for many years and has initiated several projects to address
these problems.  For example, DOD (1) established liaisons in 1991
with federal investigative agencies to help find miscoded parts with
military technology that are in the hands of the public, (2) assigned
its own investigators, also in 1991, to monitor DRMO activities and
identify miscoded parts, and (3) validated demilitarization codes
from 1993 to 1995 for various weapon systems. 

Despite these initiatives, DOD documents show numerous instances of
military parts and equipment with military technology intact that
continue to be made available to the public.  For example, in 1995
and 1997, DOD investigators identified hundreds of items that
contained military technology sold by disposal offices.  Many of
these items were classified at the secret or confidential levels. 
The items included grenade launchers, bomb ejector arming units,
radar circuit card assemblies, a guided missile launcher, key
components of intercontinental ballistic missiles, weapon system
technical data, electronic warfare equipment, sophisticated weapon
fire control equipment, entire missiles and missile launchers,
automatic weapons, guided and cluster bombs, coders, decoders,
encoders, rocket launchers, secure communications equipment, and
military night vision devices. 

The Defense Reutilization and Marketing Service also provided us with
a listing of 1,684 different items it identified as miscoded.  The
items contained military technology but were incorrectly coded as
having no military technology implications.  We obtained disposal
office sales history information for 881 of these items.  There were
7,702 transactions involving the sale of these 881 items to the
public between 1995 and 1997.  These items included parts for
weapons, guided missiles, and sensitive circuit card assemblies. 

Our analysis of 264 judgmentally selected items at 5 DRMOs showed
that the wrong demilitarization codes were continuing to be assigned
to some parts.  The 264 items were recorded as either sold or
available for sale to the public.  We selected these items because
they were parts for weapons and weapon systems but were shown in the
disposal offices' records as having no military technology that
needed to be protected.  We reviewed item characteristics and
discussed the coding accuracy with disposal office personnel. 
Disposal office officials told us that, in their judgment, the
demilitarization codes shown in the disposal offices records as
having no military technology implications were likely inaccurate for
145 of the sample items. 

For selected items that appeared to be inaccurately coded, we
contacted the item managers and equipment specialists and discussed
the accuracy of the assigned demilitarization codes.  The item
managers and equipment specialists generally confirmed that the
demilitarization codes for these items were inaccurate.  For example,
one of the items that was available for sale to the public at the
DRMO in Kaiserslautern, Germany, was a waveguide assembly used in
communications equipment.  The item was coded as having no military
technology implications.  The equipment specialist confirmed that the
assigned demilitarization code was incorrect because the part
contained technology involving special military satellite
communications.  The specialist corrected the demilitarization code. 

According to officials at the five disposal offices visited, miscoded
items account for 25 percent of their property management workload. 
They explained that, because of constant employee turnover, receiving
personnel must be continually trained to screen for incorrect codes. 
Also, potentially miscoded items have to be reported to the Defense
Reutilization and Marketing Service, and items with military
technology requiring demilitarization must be stored apart from other
items.  Miscoding can have a significant impact on the disposal
office workload.  For example, the Kaiserslautern DRMO had a backlog
of 29 semi-truck trailers full of material waiting to be processed
for disposal.  Officials stated that time spent on miscoded items
significantly affected their ability to process the backlog and that
more trailer loads of material were being received daily. 

DRMOs also inadvertently offered to sell some parts with military
technology intact because DRMO personnel made errors in consolidating
parts having military technology implications with parts not having
these implications.  This occurred when several single items were
accumulated together and offered for sale as a batch lot.  Although
the batch lot was recorded as having no military technology
implications, some individual parts in the lot contained protected
military technology.  For example, a batch lot of 42 weapons parts
available for sale to the public at the Kaiserslautern DRMO contained
7 parts with military technology that should have been destroyed (see
fig.  2).  DRMO personnel subsequently removed the military
technology items from the batch lot.  DRMO supervisors stated that
action would be taken to educate personnel on the required content of
batch lots and that supervisory checks of batch lot contents would be
made periodically to ensure that no parts with military technology
are included in future batch lots. 

   Figure 2:  Batch Lot Containing
   Military Technology Items

   (See figure in printed
   edition.)

In our October 1997 report, we recommended that DOD improve the
accuracy of assigned demilitarization codes by providing its
personnel with guidance on selecting appropriate demilitarization
codes that includes the specific details necessary to make
appropriate decisions.  DOD agreed with our recommendation and stated
that it would work with the military services and the Defense
Logistics Agency to determine the feasibility of departmentwide use
of a worksheet that provides personnel with the specific details
necessary to make prudent decisions on selecting the appropriate
demilitarization codes.  However, as of May 1998, DOD had not started
using a worksheet departmentwide. 


      DATA SYSTEMS ARE NOT UPDATED
      WITH CORRECT CODES
---------------------------------------------------------- Letter :3.2

Because DOD has had long-standing problems with the accuracy of
assigned demilitarization codes, in 1993 the Defense Reutilization
and Marketing Service developed a program for disposal offices to
identify and prevent items with military technology from being sold. 
However, the disposal offices continued to sell parts with military
technology intact because personnel often did not update their data
systems with corrected codes. 

Under the program, disposal office personnel check the assigned
demilitarization code.  If the personnel believe an item has been
miscoded, the item is "challenged." They send a written report
concerning the potential coding error to the Defense Reutilization
and Marketing Service's challenge program office where the item is
then recorded in the program's database as an open case.  Challenge
program personnel conduct research and discuss the assigned code with
item managers and equipment specialists from the military services. 
After the correct code is determined, the item is recorded in the
program's database as a closed case.  Challenge program personnel are
then supposed to manually enter the correct code to the data system
used by disposal offices to manage surplus parts, and the equipment
specialists are supposed to enter the correct code to the data system
used by the military services to catalog the characteristics of the
parts. 

The disposal offices continued to sell parts with military technology
intact because the challenge program was not effectively implemented. 
Both program personnel and equipment specialists did not update their
data systems with the corrected codes after challenge program cases
were closed.  For example, disposal office personnel challenged the
code for an automatic machine gun firing mechanism, which indicated
that the part was appropriate for sale to the public.  Research by
challenge program personnel revealed that the part should be
destroyed because it is the mechanism that enables the machine gun to
fire automatically.  However, Defense Reutilization and Marketing
Service sales records show that 10 of the automatic machine gun
mechanisms were later sold at a public auction because challenge
program personnel and military service equipment specialists did not
update their data systems with the correct code. 

To determine if this problem continued to exist, we asked the Defense
Reutilization and Marketing Service to identify the number of
instances in which either challenge program personnel or equipment
specialists did not update their data systems with the corrected
codes.  Defense Reutilization and Marketing Service analyses showed
that challenge program personnel did not enter corrected codes to the
disposal data system for 2,920 of 35,981 (8 percent) closed cases. 
In November 1997, the Service corrected this problem by implementing
a computer program that automatically updates the disposal data
system when a case is closed in the challenge program.  This
automation eliminates the need for manual updates to the disposal
data system.  However, DOD has not corrected a larger problem
involving cataloging data system updates that have to be made by the
military services equipment specialists.  The specialists had not
updated the required changes for 26,278 of the 35,981 (73 percent)
closed cases that the challenge program identified with incorrect
codes.  In June 1998, DOD officials stated that the equipment
specialists had attempted to update the cataloging data system but
the system did not accept the changes.  They are researching the
cause of the problem. 

We also asked the Defense Reutilization and Marketing Service to
determine the number of instances in which the same item had
different demilitarization codes in the two data systems.  In
December 1997, the Service compared the demilitarization codes in the
cataloging data system used by the military services with the codes
for the same items in the data system used by the disposal offices. 
The comparison identified 86,217 instances in which the same item had
different demilitarization codes.  We did not make an analysis to
determine which codes were correct.  However, the Defense
Reutilization and Marketing Service official responsible for the
challenge program believed the disposal office data system codes were
more accurate than the codes in the cataloging data system because
the latter system had not been updated with challenge program
changes.  The official said that only the military services can
update the cataloging system with the correct demilitarization codes. 


      PARTS WITH MILITARY
      TECHNOLOGY ARE NOT
      ADEQUATELY DESTROYED
---------------------------------------------------------- Letter :3.3

DOD 4160.21-M-1, Defense Demilitarization Manual, provides
instructions on how surplus parts with military technology should be
destroyed.  However, DRMOs do not always adequately destroy parts
with military technology associated with weapons and weapon systems. 
In some cases, parts containing recoverable military technology have
been sold to the public and foreign countries.  Purchasers of
demilitarized parts have put them back together or reverse engineered
the technology and remanufactured the parts so they function as they
did originally. 

According to DOD officials, the lack of adequate guidance to DRMOs on
how to destroy the military technology inherent in some items has
been a long-standing problem.  For example, when DOD conducted a
study in 1995 to determine if parts were being sold with military
technology, it identified about 500 military weapons and
weapon-related parts requiring demilitarization that were being
resold by private companies.  This listing included sensitive items
such as F-18 guided missile launchers, technical data for Apache and
Cobra helicopters, and F-15 inertial navigation systems.  In some
instances, the companies obtained the parts from disposal offices
that did not adequately destroy the military technology before they
sold the parts. 

Guidance to DRMOs on how to destroy the military technology inherent
in some items continues to be inadequate.  Officials at the five
DRMOs told us that they still did not have adequate demilitarization
instructions and, as a result, the demilitarization process is simply
a trial and error process.  For example, at the DRMO at Fort Hood,
Texas, we noted a part used as an ammunition feeder for an automatic
gun was coded for total destruction, but no specific guidance exists
on how to destroy the part (see fig.  3).  DRMO officials stated that
their demilitarization process previously involved cutting the shaft
of the feeder into two pieces.  However, the officials discovered
that, when the part is demilitarized in this manner, it can be welded
back together and used as it was originally intended.  The DRMO
personnel then began cutting off all of the feeders' appendages,
which rendered the part unusable. 

   Figure 3:  Ammunition Feeder
   for an Automatic 30-Millimeter
   Gun

   (See figure in printed
   edition.)


      DOD PLANS TO TAKE CORRECTIVE
      ACTION
---------------------------------------------------------- Letter :3.4

At each of the DRMOs we visited, officials stated that losing
military technology through the disposal process is a serious problem
that they work on daily to prevent.  DRMO officials said, however,
that until the accuracy of assigned demilitarization codes and the
destruction guidance are improved, disposal offices will continue to
inadvertently sell some items with military technology that could be
used by the public.  To overcome these problems, DOD is considering a
proposal to assign the responsibility for attaining accuracy in
demilitarization coding to a single office in the Defense
Reutilization and Marketing Service and is planning to provide the
DRMOs with computerized images on how to destroy military technology
in military parts. 

Historically, the military services have been responsible for
assigning demilitarization codes to parts for new weapon systems and
for ensuring that the assigned demilitarization codes are accurate
throughout the life of the weapon system.  According to DOD, over
3,000 personnel in dozens of locations are responsible for assigning
demilitarization codes to approximately 12,000 new items entering the
DOD supply system each month.  These personnel are also responsible
for validating code accuracy for items already in the system.  In a
1997 report,\3 DOD's Inspector General recommended that DOD
consolidate the responsibility to assign, challenge, and maintain
demilitarization codes into a single office within the Defense
Reutilization and Marketing Service.  In its final comments to the
Inspector General's report, DOD stated that it planned to proceed
with the consolidation.  However, DOD has tasked the Defense Science
Board to study the entire DOD demilitarization program and plans to
use the results of this study, expected later in 1998, in deciding
whether to implement the consolidation. 

DOD also is developing a system to provide DRMOs with computerized
images on how to destroy military technology in military parts. 
Defense Logistics Agency officials said that the imaging system will
include instructions, illustrations, and destruction techniques on
over 100,000 different parts.  The officials said that the system
will not need to include images for all parts that contain military
technology because a destruction technique for a specific part in a
weapon system can be used for all similar parts in other weapon
systems.  According to Defense Logistics Agency officials, the
imaging system could be available to the DRMOs by late 1998 via the
Internet.  The officials also stated that the success of this system
will depend on whether the military services provide the required
instructions, illustrations, and techniques on how to demilitarize
parts and whether this information is kept up to date. 

The Defense Reutilization and Marketing Service also has started two
pilot projects to centralize the demilitarization process at fewer
DRMO locations.  The Service expects the centralized sites to destroy
military technology completely and consistently in accordance with
imaging system instructions. 


--------------------
\3 Coding Munitions List Items, DOD Inspector General, Audit Report
No.  97-130, April 16, 1997. 


   FULL IMPLEMENTATION OF FLIGHT
   SAFETY PROGRAM HAS NOT OCCURRED
------------------------------------------------------------ Letter :4

In July 1995, DOD began departmentwide implementation of a Flight
Safety Critical Aircraft Parts program that included six major
initiatives to address concerns about aircraft parts with safety
risks being sold to the public.  However, DOD is making slow and
uneven progress in implementing these initiatives.  DOD has not set
timelines for implementing the program.  Further, none of the DOD
components have fully implemented all of the initiatives.  As a
result, DOD's disposal offices continue to sell potentially dangerous
flight safety critical aircraft parts to the public. 


      POTENTIAL DANGERS PROVIDED
      IMPETUS FOR THE PROGRAM
---------------------------------------------------------- Letter :4.1

Recognizing the potential danger in having military aircraft parts
with flight safety risks sold through the disposal process and then
being reused on commercial and defense aircraft, DOD started to
develop a flight safety program in 1994.  Prior to that time, DOD had
been selling parts with potential flight safety risks.  In some
instances, the potentially dangerous parts reentered defense and
civil aviation and may have been reused on aircraft.  According to
the Department of Transportation's Inspector General, for example, a
parts distributor misrepresented severely worn aircraft parts as
usable and sold them to a civil aviation industry customer for reuse. 
The distributor bought worn out scrap military jet aircraft engine
combustion liner assemblies, attempted to refurbish the assemblies by
welding the cracks and in other ways making the assemblies appear
serviceable, and modified the assemblies so that they would fit the
civil aviation version of the jet engine. 


      FLIGHT SAFETY PROGRAM HAS
      SIX KEY INITIATIVES
---------------------------------------------------------- Letter :4.2

In May 1994, DOD formed a team that consisted of representatives from
the Office of the Deputy Under Secretary of Defense (Logistics), the
military services, the Defense Logistics Agency, the Federal Aviation
Administration, the General Services Administration, and the Coast
Guard.  The team's mission was to develop a departmentwide program to
identify and prevent parts with potential flight safety risks from
being sold intact through disposal offices.  DOD defines a flight
safety critical aircraft part as any part, assembly, or installation
containing a critical characteristic whose failure, malfunction, or
absence could cause a catastrophic failure resulting in loss or
serious damage to the aircraft, or an uncommanded engine shutdown
resulting in an unsafe condition.  In May 1995, the team identified
six initiatives for the military services and the Defense Logistics
Agency to follow when implementing the flight safety program.  The
program initiatives were to

  -- standardize and incorporate the definition for items with flight
     safety implications into regulations and directives and make
     procedural changes as necessary;

  -- identify parts considered flight safety critical;

  -- code items with flight safety implications in provisioning,
     cataloging and supply data systems and records, designating that
     special handling is required when the item is sent to disposal;

  -- maintain historical documentation on all flight safety items;

  -- require that historical documentation accompany parts sent to
     disposal offices and that flight safety items without historical
     documentation be destroyed before disposal; and

  -- require parts manufacturers to provide an Airworthiness Approval
     Tag for all flight safety items delivered to DOD that have both
     civil and military aviation applications and develop procedures
     for providing the Airworthiness Approval Tag to the disposal
     offices when such flight safety items are no longer needed by
     DOD. 

Under the program, parts with flight safety implications must either
be accompanied by paperwork showing that the parts are safe to use or
the parts must be destroyed.  DOD began departmentwide implementation
of the flight safety program in July 1995. 


      PROGRAM IMPLEMENTATION
      VARIES BY COMPONENT
---------------------------------------------------------- Letter :4.3

The DOD directive initiating the flight safety program did not
establish milestones and priorities for accomplishing the program
initiatives.  DOD gave the responsibility for setting program
timetables and priorities to the military services and the Defense
Logistics Agency.  However, our review of documents and our
discussions with officials from DOD and its components showed that
the components have not aggressively pursued program implementation. 
As a result, after 3 years, none of the DOD components have fully
implemented all of the initiatives, but some have made greater
progress than others.  The varying progress is illustrated by two of
the key initiatives discussed below. 


         IDENTIFYING FLIGHT SAFETY
         PARTS
-------------------------------------------------------- Letter :4.3.1

According to DOD, the military services must review the flight safety
characteristics of tens of thousands of aircraft parts and
determining which parts are flight safety critical is difficult. 
Table 1 shows that the Army has made the most progress and the Navy
has made the least in identifying parts for inclusion in the flight
safety program.  Flight safety critical aircraft parts not identified
may be sold through DOD's disposal system and reenter civil or
defense aviation as usable. 



                                Table 1
                
                 Aircraft Parts Identified With Flight
                          Safety Implications

                       Number of parts
                    with flight safety
DOD component             implications  Description of parts
------------------  ------------------  ------------------------------
Air Force                          878  Mostly repairable engine parts
Army                             4,549  Repairable and nonrepairable
                                         engine and airframe parts
Navy                                 0  None identified at the time of
                                         our fieldwork\a
Defense Logistics                  817  Nonrepairable engine and
 Agency                                  airframe parts
----------------------------------------------------------------------
\a In June 1998, Navy officials stated that they recently identified
15,009 parts for inclusion in the flight safety program. 

As shown in table 1, the Army identified 4,549 items with flight
safety implications for inclusion in the program.  The Army also
identified 730 nonrepairable parts used on Army aircraft, but managed
by the Defense Logistics Agency, as having flight safety
implications.  The Army is continuing its efforts to identify
additional parts with flight safety implications. 

The Air Force identified 878 mostly repairable engine components as
having flight safety implications.  The Air Force also identified 87
nonrepairable parts used on Air Force aircraft engines, but managed
by the Defense Logistics Agency, as having flight safety
implications.  The Air Force has not developed any time frames for
identifying airframe components and other nonrepairable parts with
flight safety implications. 

The Navy has made the slowest progress among the military services in
identifying flight safety parts.  The Navy official first assigned
responsibility for implementing the flight safety program initiatives
said that, because of higher priority work, the Navy initially could
not allocate resources to the program.  However, in late 1997, the
Navy started identifying aircraft parts with flight safety
implications. 

Defense Logistics Agency officials stated that they do not have the
engineering expertise to assess flight safety implications of parts. 
This responsibility rests with the military services, which have
identified 817 flight safety parts managed by the Agency. 


         DATA SYSTEM CHANGES
-------------------------------------------------------- Letter :4.3.2

One of the initiatives involves coding items with flight safety
implications in provisioning, cataloging, and supply data systems and
records.  The code designates that special handling is required when
the item is sent to disposal.  Each of the DOD components has to make
data system changes to accommodate flight safety identifier codes. 
The Air Force's data systems, in their current configuration, do not
have the data fields needed to recognize the flight safety
identifiers.  However, the Air Force anticipates that all of the
system changes necessary to implement the flight safety identifiers
will be completed in November 1998.  As an interim measure, the Air
Force is separately tracking its flight safety items to ensure that
documentation showing whether the parts are safe to use accompanies
the items when they are processed at the DRMOs. 

The Army also has to change its data system to include flight safety
identifier codes.  This change is needed because the Army's systems
do not have the data fields in place to include identifiers for parts
with flight safety implications.  The Army plans to install a new
automated system that will include the identifier codes, but it has
not projected a completion date.  As an interim measure, the Army is
using a demilitarization code to identify these items.  DRMO
representatives said that using this code requires the disposal
offices to call the item manager for disposition instructions, which
is extremely time-consuming and confusing because demilitarization
codes should be used only to identify the military technology
inherent in the part and not whether the part has flight safety
implications.  An Army official responsible for the flight safety
program stated that identifying flight safety items in this manner
causes additional work but is warranted. 

Similar to the other DOD components, the Navy's and the Defense
Logistics Agency's supply data systems do not have the data fields to
include the identifier codes for items with flight safety
implications.  The Navy is in the process of revising the data fields
to accommodate flight safety codes and expects the changes to be
completed in late 1998.  The Defense Logistics Agency expected to
correct this problem in June 1998. 


      POTENTIALLY DANGEROUS DOD
      AIRCRAFT PARTS ARE SOLD BY
      DISPOSAL OFFICES
---------------------------------------------------------- Letter :4.4

DOD's slow progress in implementing flight safety program initiatives
results in the continuing sale of potentially dangerous flight safety
critical aircraft parts through the disposal system.  In addition,
some of the parts that the military services identified as having
flight safety implications were sold through DOD's disposal system
without required paperwork showing that the parts were safe to use. 

Disposal office sales information from October 1994 to March 1998 for
parts identified by the Air Force as having flight safety
implications shows the disposal offices sold 76,525 of these parts to
the public without the appropriate paperwork.  For example, the Air
Force identified a compressor vane used on F-15 and F-16 aircraft
engines as a flight safety part.  According to the Air Force engineer
responsible for the engines, if the compressor vane breaks during a
flight, its metal fragments would damage the engine and could cause
the aircraft to crash.  Disposal office records show that, on March
6, 1996, the San Antonio DRMO sold 10,101 of these compressor vanes
at a public auction without knowing whether the parts were safe to
use. 

Also, in February 1998, the Kaiserslautern DRMO was offering for sale
three tail rotor control assemblies used on the AH-1 Cobra helicopter
(see
fig.  4).  If this part were to fail, the aircraft would spin
uncontrollably and crash.  The parts were not accompanied by required
documentation stating it was safe to reuse them.  DRMO officials said
that they had not received any notification from the Army that this
item had flight safety implications.  Sales history information
showed that this same part, described as being in severely worn
condition, was sold in July 1996 by the DRMO in Columbus, Ohio,
without any assurance that the part was safe to reuse. 

   Figure 4:  Tail Rotor Control
   Assembly

   (See figure in printed
   edition.)


   CONCLUSIONS
------------------------------------------------------------ Letter :5

While DOD recognizes the dangers associated with selling surplus
parts with military technology to the public and has taken certain
actions to address the problem, DOD's disposal offices have
inadvertently sold surplus parts with military technology intact. 
These sales occurred for three reasons.  First, the military services
assigned the wrong demilitarization codes to the parts.  Because
guidance was inadequate, codes assigned to parts with military
technology incorrectly indicated that the parts did not contain the
technology.  DOD has been considering ways to address this situation
but has not yet reached a final decision.  Second, an initiative
intended to correct inaccurately assigned demilitarization codes did
not ensure that data systems were updated with the corrected codes. 
As a result, disposal offices continued to sell parts with military
technology intact after the codes for the parts were determined to be
inaccurately assigned.  Personnel responsible for correcting the
inaccurately assigned codes did not always update their data systems
with the corrected codes.  Third, the methods that the disposal
offices used to demilitarize some parts did not adequately destroy
the military technology contained in the parts.  Guidance to disposal
offices on how to destroy the military technology inherent in some
items was not adequate. 

DOD and its components have not aggressively pursued implementation
of initiatives to prevent the sale of potentially dangerous flight
safety critical aircraft parts through the disposal system.  DOD and
the components have not set timelines for implementing the flight
safety program.  Also, none of the components have fully implemented
all of the program initiatives, but some have made greater progress
than others.  For example, at the time our fieldwork was completed,
the Army had identified over 4,500 aircraft parts with flight safety
implications, whereas the Navy had not identified any aircraft parts
with these implications.  DOD plans to increase its interaction and
involvement in the program, but the military services and the Defense
Logistics Agency continue to have problems accomplishing flight
safety program initiatives. 


   RECOMMENDATIONS
------------------------------------------------------------ Letter :6

We recommend that the Secretary of Defense take the following actions
to prevent the sale of parts with military technology and flight
safety implications. 

  -- Develop an action plan with specific milestones for addressing
     the problem of inaccurately assigned demilitarization codes.  In
     developing the plan, consider (1) the recommendations of the DOD
     Inspector General and the Defense Science Board, (2) our
     previous recommendation to provide guidance on selecting
     appropriate codes, and (3) procedures to ensure that items
     listed in different data systems have the same demilitarization
     code in each system. 

  -- Establish milestones for completing the imaging system that will
     provide guidance on how to destroy the military technology
     inherent in items. 

  -- Establish milestones for fully implementing the Flight Safety
     Critical Aircraft Parts Program initiatives and institute
     requirements for the Secretaries of the Army, the Air Force, and
     the Navy and the Director of the Defense Logistics Agency to
     periodically report on the progress being made. 


   AGENCY COMMENTS AND OUR
   EVALUATION
------------------------------------------------------------ Letter :7

In commenting on a draft of this report, DOD agreed with our
recommendations but expressed concerns that (1) the report does not
fully reflect the progress DOD continues to make in the reported
areas and (2) some of the statements in the report are based on
information requested of DOD personnel not in a position to provide
such information.  DOD's comments are included as appendix II. 

With regard to our recommendation for developing an action plan to
address inaccurately assigned demilitarization codes, DOD stated that
an action plan addressing improvements needed in the demilitarization
program will be developed 6 months after publication of the Defense
Science Board's final report, which is expected in the summer of
1998.  DOD further stated that the action plan will incorporate
milestones for completing the imaging system that will provide
guidance on how to destroy the military technology inherent in items. 
Regarding our recommendation to establish milestones for complete
implementation of the flight safety program, DOD stated that new
milestones for fully implementing the program will be established no
later than October 1998.  Also, DOD stated that the military services
and the Defense Logistics Agency will continue to report progress
toward full implementation of the flight safety program on a
quarterly basis to the Office of the Secretary of Defense. 

Regarding DOD's two concerns, our draft report recognized that DOD
has initiated several projects to address problems with the
demilitarization and flight safety programs.  However, we modified
the final report to further recognize this in our results in brief
and conclusions.  With regard to DOD's comment on information
sources, DOD was referring to our discussions of demilitarization
coding accuracy with disposal office and Defense Reutilization and
Marketing Service personnel.  DOD stated that the personnel are not
technically qualified to make decisions on coding accuracy and that
it is the equipment specialists who are responsible for assigning
demilitarization codes.  Our report notes that our analysis includes
items that had been challenged and closed out after equipment
specialists had determined that they had been miscoded.  Also, as
stated in the report, we judgmentally selected items for review to
determine if they had been coded correctly.  For those we identified
as miscoded, we selectively confirmed our analysis with equipment
specialists.  Therefore, these steps provide us with confidence that
our findings are adequately supported. 


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

We are sending copies of this report to the appropriate congressional
committees; the Secretaries of Defense, the Army, the Navy, and the
Air Force; the Director, Defense Logistics Agency; and the Director,
Office of Management and Budget. 

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

Sincerely yours,

David R.  Warren, Director
Defense Management Issues


SCOPE AND METHODOLOGY
=========================================================== Appendix I

To determine the Department of Defense's (DOD) policies and practices
for destroying military parts during the disposal process, we met
with officials and performed work at the Office of the Deputy Under
Secretary of Defense (Logistics), Washington, D.C.; Army, Navy, and
Air Force Headquarters, Washington, D.C.; the Defense Logistics
Agency, Fort Belvoir, Virginia; the Defense Reutilization and
Marketing Service, Battle Creek, Michigan; and the DOD Inspector
General, Washington, D.C., and Columbus, Ohio.  We also reviewed
policies, procedures, disposal and transaction histories, and related
records obtained from the Defense Reutilization and Marketing Offices
(DRMO) and item managers, and documented disposal practices.  We
interviewed policy officials, DRMO personnel, item managers, and
equipment specialists. 

To obtain information on how surplus parts with military technology
and flight safety implications are received and processed for sale,
we performed work at five DRMOs, located in San Antonio and Killeen
(Fort Hood), Texas, and in Germersheim, Kaiserslautern, and
Seckenheim, Germany.  We selected these locations because, according
to DOD records, they sold large volumes of parts and equipment with
military technology implications.  We also collected information from
item managers, equipment specialists, and policy officials at the
Oklahoma City Air Logistics Center, Tinker Air Force Base, Oklahoma;
the San Antonio Air Logistics Center, Kelly Air Force Base, Texas;
the Army's Aviation and Missile Command, Huntsville, Alabama; the
Naval Inventory Control Point, Philadelphia, Pennsylvania; and the
Defense Supply Centers, Columbus, Ohio, and Richmond, Virginia. 

To determine the adequacy of DOD's policies and procedures to
identify and destroy parts with military technology, we discussed
procedures, problems, and challenges with officials from the Defense
Logistics Agency and the Defense Reutilization and Marketing Service;
obtained data and Defense Reutilization and Marketing Service
analyses showing instances in which parts got into the wrong hands
through the disposal process and had different demilitarization codes
assigned to the same item in different data systems; and judgmentally
selected 48 items at the Texas DRMOs and 216 items at the Germany
DRMOs involving the accuracy of assigned demilitarization codes.  We
selected these items for review because they were parts for weapons
and weapon systems but at the time of selection were coded in the
DRMO's records as having no military technology content.  We compared
the assigned codes with the codes available in DOD's Demilitarization
Manual and discussed the correct codes and military technology
implications of the items with disposal office personnel, item
managers, and equipment specialists. 

For historical perspective and illustrations of past problems, we
reviewed the results of prior DOD internal studies and DOD Inspector
General reports.  We also used documentation and computer data
obtained during our prior work on disposal operations. 

We used the same computer programs, reports, records, and statistics
that DOD, the military services, the Defense Logistics Agency, and
the Defense Reutilization and Marketing Service use to manage excess
and surplus inventories, make decisions, and determine the correct
demilitarization codes.  We did not independently determine the
reliability of all of these sources.  However, as stated above, we
did assess the accuracy of the demilitarization codes by comparing
the codes assigned to the same item in different data systems and by
comparing assigned codes to the codes available in the
Demilitarization Manual. 

To determine whether parts requiring demilitarization were being
adequately destroyed, we reviewed available guidance, interviewed
demilitarization personnel at the five DRMOs, and observed items
being destroyed. 

To determine the status of DOD's flight safety program, we identified
DOD's program initiatives and documented the military services and
the Defense Logistics Agency's progress in implementing the program
initiatives.  We reviewed the policies, procedures, and related
records of the military services and the Defense Logistics Agency and
held discussions and performed work at the Office of the Deputy Under
Secretary of Defense (Logistics).  We obtained sales history
information from the Defense Reutilization and Marketing Service to
determine if some of the parts that the military services have
identified with flight safety implications were sold through DOD's
disposal system without any paperwork showing that the parts were
safe to use.  To further determine whether the parts identified by
the military services as having flight safety implications are being
sold through the disposal process, we obtained a listing of the
flight safety items identified by the Air Force and the Army.  We
compared these items with the listing of parts being offered for sale
by the Kaiserslautern DRMO.  We interviewed DRMO personnel to
determine whether they were aware that the items we identified had
flight safety implications. 

We performed our review between November 1997 and May 1998 in
accordance with generally accepted government auditing standards. 




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



(See figure in printed edition.)

Now on p.  19. 

Now on p.  20. 

Now on p.  20. 


MAJOR CONTRIBUTORS TO THIS REPORT
========================================================= Appendix III

NATIONAL SECURITY AND
INTERNATIONAL AFFAIRS DIVISION,
WASHINGTON, D.C. 

Charles Patton
James Murphy

DALLAS FIELD OFFICE

Roger Tomlinson
Jackie Kriethe
Bonnie Carter
Frederick Lyles

*** End of document. ***