Defense Inventory: Improved Management Framework Needed To Guide Army
Best Practice Initiatives (Letter Report, 09/14/1999, GAO/NSIAD-99-217).

Pursuant to a legislative requirement, GAO evaluated the Army's schedule
for implementing best commercial inventory practices for the acquisition
and distribution of secondary inventory items, focusing on: (1) the
extent to which that 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 Army's best practice initiatives.

GAO noted that: (1) the Army's schedule is generally responsive to the
act; (2) specifically, the schedule describes 18 initiatives that
address the Army's inventory management functions, and for most of the
initiatives, it provides for implementation to be completed within 5
years; (3) the initiatives are primarily aimed at improving the Army's
information management, maintenance, and acquisition processes and
transferring logistics activities to the private sector; (4) specific
timeframes for full implementation of three of the initiatives were not
included in the schedule; (5) therefore, GAO could not determine whether
these initiatives are to be implemented within the required 5-year
timeframe; (6) though generally responsive to the act's requirements,
the schedule provides a management framework that lacks specific
elements such as an overall strategy and outcome-oriented goals and
performance measures; (7) while the initiatives are generally guided by
the Army's Revolution in Military Logistics, there is no comprehensive
strategy or plan that guides the efforts; (8) consequently, no detailed
framework exists to increase the likelihood that the initiatives are
coordinated and do not conflict or duplicate efforts; (9) also, there
are no specific performance goals established to measure the overall
results of the initiatives; (10) in GAO's 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; (11) without
a more effective management framework, opportunities for oversight by
Congress and DOD managers would be limited since meaningful evaluations
of progress and results would be impossible; and (12) the Government
Performance and Results Act offers a model for developing an effective
management framework to assess the results of the initiatives and
improve the likelihood of successful implementation and assessment.

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

 REPORTNUM:  NSIAD-99-217
     TITLE:  Defense Inventory: Improved Management Framework Needed To
	     Guide Army Best Practice Initiatives
      DATE:  09/14/1999
   SUBJECT:  Private sector practices
	     Army procurement
	     Inventory control systems
	     Logistics
	     Performance measures
	     Military inventories
	     Federal supply systems
	     Federal property management
	     Strategic planning
IDENTIFIER:  Army Strategic Logistics Plan

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Rev-LG logo.eps GAO United States General Accounting Office

Report to Congressional Committees

September 1999 DEFENSE INVENTORY

Improved Management Framework Needed to Guide Army Best Practice
Initiatives

GAO/NSIAD-99-217

Page 1 GAO/NSIAD-99-217 Defense Inventory United States General
Accounting Office

Washington, D. C. 20548 National Security and International
Affairs Division

B-281458 Letter September 14, 1999 Congressional Committees
Section 347 of the Strom Thurmond National Defense Authorization
Act for Fiscal Year 1999 provides for 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. 1 A best commercial inventory practice
is defined as a practice that enables military departments 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 enactment, or by October 17, 2003. The
section 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 Army's best
practices implementation schedule, which the Assistant Secretary
of the Army for Acquisition, Logistics, and Technology submitted
to the Congress on June 14, 1999. This report provides our
evaluation of that schedule. 2 Specifically, we (1) evaluated the
extent to which that 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 Army's best practice initiatives. Results in
Brief The Army's schedule is generally responsive to the act.
Specifically, the schedule describes 18 initiatives that address
the Army's inventory

management functions, and for most of the initiatives, it provides
for implementation to be completed within 5 years. The initiatives
are primarily aimed at improving the Army's information
management, maintenance, and acquisition processes and
transferring logistics activities to the private sector. Specific
time frames for full implementation of three 1 Secondary inventory
includes spare parts, clothing, and medical supplies to support
Department of Defense (DOD) operating forces worldwide. 2 We are
providing separate reports on the Army, Air Force, and Navy best
practice implementation schedules.

Letter

Page 2 GAO/NSIAD-99-217 Defense Inventory

of the initiatives were not included in the schedule. Therefore,
we could not determine whether these initiatives are to be
implemented within the required 5- year time frame. Though
generally responsive to the act's requirements, the schedule
provides a management framework that lacks specific elements such
as an overall strategy and outcome- oriented goals and performance
measures. While the initiatives are generally guided by the Army's
Revolution in

Military Logistics, there is no comprehensive strategy or plan
that guides the efforts. Consequently, no detailed framework
exists to increase the likelihood that the initiatives are
coordinated and do not conflict or duplicate efforts. Also, there
are no specific performance goals established to measure the
overall results of the initiatives. In our prior work, we noted
that the lack of a detailed management framework contributed to
DOD's difficulty in implementing new initiatives. Without a more
effective management framework, opportunities for oversight by the
Congress and DOD managers would be limited since meaningful
evaluations of progress

and results would be impossible. The Government Performance and
Results Act offers a model for developing an effective management
framework to assess the results of the initiatives and improve the
likelihood of successful implementation and assessment. To make
progress and results information available to the Congress and DOD
managers, we are recommending that the Secretary of the Army
develop a Results Act management framework for the initiatives in
the

schedule that includes an overall strategy and performance plan.
Background To provide reparable parts for its aviation and ground
equipment, the Army uses an extensive logistics system that is
based on management processes, procedures, and concepts that have
evolved over time. Reparable parts are expensive items that can be
fixed and used again, such as hydraulic pumps, navigational
computers, engines, and landing gear. The Army's logistics system,
often referred to as a logistics pipeline or a supply chain,
consists

of a number of interrelated activities that provide reparable
parts where and when they are needed. 3 These activities include
the acquisition, 3 The Army also purchases, stores, and
distributes consumable parts that are used extensively to fix
reparable parts and aircraft. The Defense Logistics Agency
provides most of the consumable parts that Army repair activities
use and handles a large portion of the warehousing and
distribution of reparable parts.

Letter

Page 3 GAO/NSIAD-99-217 Defense Inventory

storage, repair, and distribution of parts, which together require
billions of dollars of investments in personnel, equipment,
facilities, and inventory. Figure 1 is a general illustration of
the interrelationship of the major functions of the Army's
logistics pipeline for secondary items.

Figure 1: Army's Logistics Pipeline for Secondary Items

Source: Office of the Army Deputy Chief of Staff for Logistics.
Base level or unit

level maintenance Base level or unit level maintenance Base level
or unit

level supply Base level or unit

level supply Unit Unit Acquisition Acquisition

Depot storage Depot storage Depot maintenance Depot maintenance

Maintenance centers of excellence Maintenance

centers of excellence

Other Army unit or military service

supply Other Army unit

or military service supply

Page 4 GAO/NSIAD-99-217 Defense Inventory

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. 4
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. 5 While DOD has made some
improvements, these general conditions still exist, and this area
remains on our high- risk list. 6 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 act also required that the schedule provide for
the implementation of such practices to be completed by November
2000. The Strom Thurmond National Defense Authorization Act for
Fiscal Year 1999 placed a similar requirement on the secretary of
each military department. The military departments' schedules are
to provide for the implementation of such best practices 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, 4 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 much- needed focus to problems that
were costing the government billions of dollars. 5 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 (GAO/ T- AIMD/ NSIAD- 99- 171, May 4, 1999).

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

Page 5 GAO/NSIAD-99-217 Defense Inventory

which called for a revolution in DOD's business affairs and
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 notes 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 testimony, the Under
Secretary of Defense (Acquisition Reform) stated that DOD needed a
revolution in business affairs . . . one

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. Army's Schedule Generally
Responds to the Act's Requirements The Army's schedule is
generally responsive to the requirements of the act. It contains
18 initiatives that address the acquisition and distribution of
secondary inventory items the Army manages and, for most of the

initiatives, it provides for implementation within 5 years (see
table 1). The18 initiatives are primarily aimed at improving the
information management, maintenance, and acquisition processes and
transferring logistics activities to the private sector. For
example, the Logistics Integrated Data Base initiative will
integrate 66 separate databases that will allow data to be stored
once, yet be used in multiple applications. The

Velocity Management initiative is intended to examine the entire
Army logistics pipeline to speed up the distribution and repair of
component parts and better utilize existing Army inventory.

Page 6 GAO/NSIAD-99-217 Defense Inventory

Table 1: Army Initiatives and Projected Completion Date

For most of the initiatives, the schedule provides background
information, an overview of each initiative's goals and
objectives, implementation sites, funding requirements, projected
savings, and projected dates for completion. However, for three of
the initiatives, the schedule does not specify a planned
completion date. Without this information, we cannot determine
whether implementation will be completed within the required 5-
year time frame. (See app. I for a description of each
initiative.)

Initiative category Initiative Projected completion date

Information management Logistics Integrated Data Base Virtual
Integrated Materiel Management Center Wholesale Logistics
Modernization Program Global Combat Support System Army Army Total
Asset Visibility

Dec. 2000. Sept. 2001. Information not provided. Sept. 2002.
Completed. Maintenance National Maintenance Program

Depot Repair Process Improvements Electronic Sustainment Support
Centers

Sept. 2003. Dec. 2000. Information not provided. Acquisition Lead
Time Reduction

Modernization Through Spares Paperless Contracting

Fiscal year 2001. Information not provided. Jan. 2000. Outsourcing
Apache Prime Vendor Support

M109 Family of Vehicles Fleet Management Focused Sustainment
Consolidated Contractor Life Cycle Support Training Aids and
Simulators

Fiscal year 2004. December 1999 contract award. 10- year contract
awarded in 1998.

Completed. Other initiatives Velocity Management

Single Stock Fund Lateral Redistribution

Completed. Sept. 2002. Completed.

Page 7 GAO/NSIAD-99-217 Defense Inventory

Management Framework Is Key to Implementing Initiatives Though
generally responsive to the act's requirements, the schedule
provides a management framework that lacks an overall strategy and
outcome- oriented goals and performance measures. Specifically, it
does not have a comprehensive strategy or plan to ensure that the
efforts are coordinated and do not conflict or duplicate efforts,
nor does it establish specific performance goals to measure the
overall results of the initiatives. The Government Performance and
Results Act offers a model for developing an effective management
framework to guide the implementation of the initiatives and
provide the Congress and other decisionmakers 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. 7 For example, we reported that DOD
did not have an adequate management framework to clearly determine
the progress being made in realizing the Total Asset Visibility
initiative's goals and that the initiative's strategic and
implementation plans were inadequate. 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 DOD's overall goals and objectives. We
also reported that there was confusion over who would use the
Total Asset Visibility system and how it would be used. The Army's
schedule represents a collection of best practice initiatives the

Army plans to complete within the next 5 years to improve the
acquisition and distribution of secondary supply items managed by
the Army. The schedule describes the initiatives within the
context of the Army's Strategic Logistics Plan and other DOD
planning documents, but it does not contain a comprehensive
strategy or overall outcome- oriented goals and performance
measures. For most of the initiatives, the Army identified general
goals and objectives, describing an end state that the Army hopes

to achieve, such as maximize repair capabilities and optimize the
use of available resources, and reduce asset inventories, but it
did not establish specific performance measures for those goals. 7
Defense Inventory: DOD Could Improve Total Asset Visibility
Initiative With Results Act Framework (GAO/NSIAD-99-40, Apr. 12,
1999).

Page 8 GAO/NSIAD-99-217 Defense Inventory

In addition, the Army associated each schedule initiative with
specific aspects of its Revolution in Military Logistics, which is
its overall process of changing logistics operations in support of
DOD goals. However, the

schedule does not define the way the individual initiatives will
support these goals and objectives, the extent to which they may
reduce the Army's $9.6 billion secondary inventory, 8 or the
extent to which they will improve the responsiveness of the supply
system to user needs. Without this information, it is impossible
to determine the magnitude of impact these initiatives may have on
the Army's overall logistics operations and objective information
about implementation progress and whether the initiatives are
achieving their desired outcomes may not be available to the
Congress and DOD managers.

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 includes (1) establishing
broad general initiative goals and objectives, (2) linking these
goals to DOD's

overall goals and objectives, (3) establishing quantifiable
performance measures 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 to measure progress
toward full implementation, and (6) defining an evaluation plan to
periodically compare actual results to established goals and
objectives. This information allows the Congress and DOD managers
to measure initiative

implementation progress and determine if 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 the various
logistics activities are viewed as a series of interrelated
processes rather than isolated functional areas. 9 For example,
when one airline began changing the way it purchased parts from
suppliers, it considered 8 Inventory value reported in the
Department of Defense Supply System Inventory Report, Sept. 30,
1998. The Army Working Capitol Fund financial statements report
this inventory value at $10. 5 billion.

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

Page 9 GAO/NSIAD-99-217 Defense Inventory

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. Conclusions The Army's
schedule generally meets the requirements of the act by providing
information on 18 initiatives, most of which are scheduled to be

completed within 5 years. Achieving the Army's goal of improved
management of secondary items will depend on the successful
implementation of these initiatives. Implementation of the
initiatives is generally guided by processes the Army refers to as
a Revolution in Military Logistics. However, the processes set
forth in that document are general in nature and implementation
and assessment of initiatives of this magnitude and complexity
would benefit from more specific guidance. The Results Act
provides a framework for implementing and assessing the

initiative results. Without a more effective management framework,
opportunities for oversight by the Congress and DOD managers would
be limited since meaningful evaluations of progress and results
would be impossible. Recommendation To provide a mechanism to
improve the potential for successfully

implementing the Army initiatives and measure results, we
recommend that the Secretary of the Army develop a management
framework for implementing the 18 initiatives based on the
principles embodied in the Results Act. Specifically, the
management framework should include  a comprehensive 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 Army's logistics
pipeline, such as reducing pipeline time, improved customer
service, and reductions in total inventory and

 a performance plan that includes clearly defined goals and
objectives, defined levels of accountability, quantifiable
performance measures, 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.

Page 10 GAO/NSIAD-99-217 Defense Inventory

Agency Comments and Our Evaluation

In commenting on a draft of this report, DOD concurred with our
recommendation and stated that the Army is revising its Strategic
Logistics Plan to more clearly articulate the relationships,
goals, objectives, and metrics of logistics initiatives. They will
also provide regularly scheduled review and analysis to the
Assistant Secretary of the Army (Acquisition, Logistics, and
Technology). DOD further stated that approval of the

revised Army Strategic Logistics Plan structure by the Assistant
Secretary is anticipated during the first 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 is inadequate. DOD stated that the Army's
current management framework is guided by the Army's Revolution in
Military Logistics and that each initiative supports an element of
that process. Further, DOD cited results that have been achieved
and asserted that such results would not have been possible
without an adequate management framework. We did not conclude that
the Army's framework was inadequate. However, we clearly believe
it can be improved. We have revised our conclusion to more clearly
reflect our position. Scope and Methodology

We have evaluated the Army, Air Force and Navy best practice
implementation schedules separately. This report summarizes our
evaluation of the Army's schedule. Our analysis was based on the
information contained in the schedule, discussions with Army
officials, and our prior work comparing DOD and private sector
logistics practices. We reviewed the schedule to determine the
extent to which it responds to the act's requirements.
Specifically, we evaluated the extent to which (1) the

initiatives cover the acquisition and distribution of secondary
inventory items and (2) the implementation of the initiatives will
be completed within 5 years. In addition to determining whether
the schedule responds to the act's requirements, we identified
areas in which it 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
provides an overall strategy for adopting best practices and
contains key management information to guide implementation. We
did

Page 11 GAO/NSIAD-99-217 Defense Inventory

not assess the merits of the initiatives or the initiatives'
likelihood for success.

We interviewed officials and obtained information about ongoing
and planned initiatives at Army Headquarters, Washington, D. C.;
the Office of the Secretary of the Army for Research, Development
and Acquisition and the Army Materiel Command, Arlington,
Virginia; and the Combined Arms Support Command, Fort Lee,
Virginia. We also discussed the results of implementing the
initiatives, the impact on supply operations, and customer
satisfaction with logistics personnel at Fort Bragg, North
Carolina, and Fort Campbell, Kentucky. In addition, we used
information

from reports that we have issued since 1995 and are listed in GAO
related products. We conducted our review from November 1998 to
June 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 Louis Caldera, Secretary of
the Army; 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 on (202) 512- 8412 if you or your staff
have any questions concerning this report. Major contributors to
this report are listed in appendix III. David R. Warren, Director
Defense Management Issues

Page 12 GAO/NSIAD-99-217 Defense Inventory

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

Page 13 GAO/NSIAD-99-217 Defense Inventory

Page 14 GAO/NSIAD-99-217 Defense Inventory

Contents Letter 1 Appendix I Summary of Army Initiatives

16 Appendix II Comments From the Department of Defense

23 Appendix III GAO Contacts and Staff Acknowledgments

25 Related GAO Products 28 Tables Table 1: Army Initiatives and
Projected Completion Date 6 Figures Figure 1: Army's Logistics
Pipeline for Secondary Items 3

Abbreviations

DOD Department of Defense

Page 15 GAO/NSIAD-99-217 Defense Inventory

Page 16 GAO/NSIAD-99-217 Defense Inventory

Appendix I Summary of Army Initiatives Appendi x I

The Army's best practices implementation schedule lists 18 best
practice initiatives. We have categorized the initiatives into
information management, maintenance, acquisition, outsourcing, and
other. This appendix summarizes the information contained in the
schedule submitted to the Congress on June 14, 1999.

Information Management Initiatives Five initiatives listed in the
Army's implementation schedule involve

replacing old or developing new logistics information management
systems. For example, with the Logistics Integrated Data Base
initiative, the Army plans to integrate over 60 databases into a
single database. A new system being developed by the Army, the
Global Combat Support System Army, is intended to provide field
commanders with a comprehensive logistics picture for their units.

Logistics Integrated Data Base Under the Logistics Integrated Data
Base initiative, the Army plans to reengineer the current
structure of the databases within its Logistics

Support Activity. This initiative is designed to integrate 66
databases into a single database that will allow data to be stored
once and used in multiple applications, to use commercial off-
the- shelf components, and to provide user friendly windows- like
applications. This initiative began in August

1997, and it is scheduled for completion in December 2000. The
data elements developed for this initiative are also intended to
support the Global Combat Support Army initiative. Virtual
Integrated Materiel Management Center

The Army intends to reduce costs and improve performance by
integrating logistics life- cycle management functions into one
virtual materiel management center with this initiative. These
functions include weapon system sustainment and integration,
readiness analysis, and management support. Under this initiative,
the Army's geographically dispersed materiel

management centers will operate in an integrated data environment,
with the majority of life- cycle management data being stored in
digital format. The Army began work on this initiative in
September 1997, and it expects implementation to be completed by
September 2001. Wholesale Logistics Modernization Program

The Wholesale Logistics Modernization Program initiative is a
program designed to ensure the Army's combat readiness by
modernizing the Army's wholesale logistics processes. Under this
program, the Army will rely on a

Appendix I Summary of Army Initiatives

Page 17 GAO/NSIAD-99-217 Defense Inventory

contractor to reengineer its business process and sustain a
modernized software system, which will replace its 30- year old
supply and depot management systems. The Army had planned to
release the solicitation for this contract upon approval of an A-
76 study 1 and award the contract 10 months later. On April 20,
1999, the Army waived the A- 76 requirement for this initiative.
The union representing the affected Army civilian employees has
appealed the waiver, and the final determination of this issue is
pending. As a result, we were unable to determine if this
initiative will be completed by 2003. Global Combat Support System
Army

The Global Combat Support System-- Army initiative is a logistics
information system that builds on the functions and processes of
existing systems to generate data, integrate databases, and
combine combat service support information from external sources
as necessary to execute the Army's Revolution in Military
Logistics. This initiative was begun in the second quarter of
fiscal year 1997, and it is projected to be completed during the
fourth quarter of fiscal year 2002. Initially, the system will

integrate the functions in the Standard Army Management
Information Systems into a single database with a common
programming language and operating environment. Ultimately, the
system is intended to integrate with joint systems to serve as the
land force combat support system. The system is intended to
provide field commanders with the full logistics picture. For
example, once in place, this system will enable field commanders
to quickly determine the status of all supply requests. Army Total
Asset Visibility As we have reported, 2 the Army's Total Asset
Visibility capability is an automated tool that is designed to
improve the ability of soldiers, logisticians, and managers to
obtain and act on information about the location, quantity,
condition, and movement of assets through the Army's logistics
pipeline. Fielding of the tool, completed in 1996, provides
visibility of 99 percent of Army inventories across all classes of
supply, 1 In 1966, the Office of Management and Budget issued
Circular A- 76, which established federal policy for the
government's performance of commercial activities and set forth
the procedures for studying

them for potential contracting. The circular and its Supplemental
Handbook provide guidance to federal agencies on procedures to be
followed in determining whether commercial activities should be
performed by in- house personnel, another federal agency through
interservice support agreements, or the private sector. 2 Defense
Inventory: DOD Could Improve Total Asset Visibility Initiative
With Results Act Framework (GAO/NSIAD-99-40, Apr. 12, 1999).

Appendix I Summary of Army Initiatives

Page 18 GAO/NSIAD-99-217 Defense Inventory

according to the Army. The Army believes that some key benefits
include easier distribution of assets, reduced inventories and
receipt processing time, and fewer duplicate requisitions due to
improved asset tracking. This initiative, which the Army considers
to be completed, will also support the Department of Defense's
(DOD) Total Asset Visibility initiative. Maintenance Initiatives
Three initiatives focus on improving maintenance operations. The
National

Maintenance Program and Depot Repair Process Improvements
initiatives are designed to improve maintenance operations at the
installation and depot levels. The depot improvement initiative is
also intended to simplify how units obtain contractor services for
the maintenance and logistics support of communication equipment.
The Electronic Sustainment Support Center initiative relates to
maintaining and providing logistics support of communication
equipment.

National Maintenance Program

This Army- wide initiative is to maximize repair capabilities and
optimize the use of available resources at all maintenance levels
within the Army. The initiative centralizes the management of all
Army sustainment maintenance programs while decentralizing the
actual repair of the components and end items. The workload will
be distributed across depot and installation activities, and
repairs will be made based on the national need for an item.
Implementation of this initiative began in February 1996, and its
completion is projected by the end of September 2003. Depot Repair
Process Improvements

The Depot Repair Process Improvements initiative is intended to
improve depot maintenance process efficiencies by meeting
production schedules, decreasing production costs, reducing parts
and asset inventories, and accelerating repair times. This
initiative began in March 1996, and it is scheduled for completion
by the end of December 2000. Electronic Sustainment Support
Centers

Under this initiative, the Army established Electronic Sustainment
Support Centers to provide units with a single focal point for the
maintenance and logistics support of communication equipment and
systems. In turn, the centers work with the myriad of contractor
and Army organizations that repair and provide logistics support
for communication equipment and systems. The Army has regional
centers at Fort Bragg, North Carolina, and Fort Hood, Texas, and
plans to establish another center in Korea during the

Appendix I Summary of Army Initiatives

Page 19 GAO/NSIAD-99-217 Defense Inventory

third quarter of 1999. In its schedule, the Army described this
initiative as ongoing, but the schedule did not provide for any
further expansion beyond establishing a center in Korea. As a
result, we could not determine if this initiative is planned to be
completed within 5 years as required by the act.

Acquisition Initiatives The three acquisition initiatives are
intended to reduce the time involved in ordering and receiving
supplies to replenish inventory, enhance the performance of spare
parts through technology insertion, and reduce the paperwork
required when ordering supplies. Lead Time Reduction This
initiative is the Army's effort to reduce the time it takes to
order and receive supplies to replenish inventory levels. By
reducing lead time, the

Army intends to reduce its inventory levels. This initiative began
in fiscal year 1995, and it is planned to be completed in fiscal
year 2001. Modernization Through Spares This initiative is
intended to reduce operation and support costs and to be
accomplished through the spare parts acquisition process. Under
this initiative, suppliers will be given greater design and
manufacturing flexibility to incorporate technology that the
commercial marketplace uses into the spare parts they manufacture
for the Army. The Army believes that replacement parts will last
longer if they are equipped with state- of- the- art technology.
This initiative is an ongoing program, and there were 10

projects underway as of June 1999. The projected completion date
for this initiative, as indicated by the schedule, remains to be
determined. Therefore, we were unable to determine when this
initiative will be completed. Standard Retail Supply System
Interface

Paperless Contracting The Army's paperless contracting initiative
is intended to reduce the

amount of paperwork when local (Army units, installations, and
depots) supply activities order items from local vendors. This
project began in January 1999, and it is scheduled for completion
in January 2000. Outsourcing Initiatives The Army included four
outsourcing initiatives in its schedule. With two of the
initiatives, Apache Prime Vendor Support and M109 Family of
Vehicles Fleet Management, the Army hopes to outsource much of the
weapon system logistics requirements for the Apache attack
helicopter and the

Appendix I Summary of Army Initiatives

Page 20 GAO/NSIAD-99-217 Defense Inventory

Paladin mechanized field artillery. The Focused Sustainment
initiative provides units with a means to obtain contractor
logistics support for equipment ranging from tanks to rifles. The
Army has outsourced logistics support for a large portion of its
training equipment with the Consolidated Contractor Life Cycle
Support initiative. We have reported on DOD efforts to outsource
existing workloads. 3

Apache Prime Vendor Support This initiative is a contractor's
proposal to use commercial practices to reengineer logistics
support, improve readiness, reduce life- cycle costs, and provide
savings that can be used to modernize the Apache aircraft.

The prime vendor program is intended to rely on private- sector
capital to upgrade Apache components in conjunction with its
management of the parts pipeline. The initiative is being studied
by the Army to address unresolved issues. The Army does not know
when a decision will be made on whether the program will go
forward. 4 According to the schedule, the

initiative's projected completion date is fiscal year 2004. M109
Family of Vehicles Fleet Management

This initiative is similar to the Apache Prime Vendor Support
initiative in that logistics support is to be reengineered for
self- propelled artillery to improve readiness and reduce life-
cycle costs (supply and maintenance expenditures). The schedule
projects a December 1999 contract award; however, the Army is
studying the initiative, and it is unknown when a decision will be
made on whether the initiative will go forward. As a result, we
were not able to determine when this initiative is planned to be
completed. Focused Sustainment The Focused Sustainment initiative
consists of a group of six contracts that provide sustainment
services, such as maintenance, diagnostics, training, and parts
supply, for all Tank and Automotive Command weapon systems. These
services are available to all Army customers, anywhere in the
world. The Command manages over 3,000 weapon systems, including
tanks, 3 Defense Depot Maintenance: DOD Shifting More Workload for
New Weapon Systems to Private Sector

(GAO/NSIAD-98-8, Mar. 31, 1998) and Outsourcing DOD Logistics:
Savings Available but Defense Science Board Projections Are
Overstated (GAO/NSIAD-98-48, Dec. 8, 1997) cover a variety of
outsourcing issues. 4 Army Logistics: Status of Proposed Support
Plan for Apache Helicopter (GAO/ NSIAD 99- 140, July 1, 1999)
examines many of the issues the Army must address before the
Apache Prime Vendor Support contract can be awarded.

Appendix I Summary of Army Initiatives

Page 21 GAO/NSIAD-99-217 Defense Inventory

trucks, trains, boats, rifles, and machine guns. Contracts were
awarded in October 1998, and they will be in effect for 10 years.
Consolidated Contractor Life Cycle Support Training Aids and
Simulators

This initiative, which is completed, has resulted in the Army
outsourcing 95 percent of the life- cycle sustainment for its
training aids, simulators, and simulations. The contracts awarded
provide worldwide on- site supply and maintenance support for a
variety of systems, such as flight simulators and battle
simulation systems. According to Army documentation, these
contracts have produced savings of 30 to 50 percent. The Army
began this contracting practice in May 1990.

Other Initiatives The Army plans to implement several other
initiatives to improve its logistics pipeline, integrate two
separately managed levels of inventory, and share its excess
inventory with the other services. Velocity Management In
September 1995, the Army established its Velocity Management
program to develop a faster, more flexible, and more efficient
logistics pipeline. The program's goals, concept, and top
management support parallel improvement efforts in private sector
companies. The program's overall goal is to eliminate unnecessary
steps in the logistics pipeline that delay the flow of supplies
through the system. The program consists of Army- wide process
improvement teams for the following four areas: ordering and
shipping of supplies, repair cycle, inventory levels and locations
(also known as stockage determination), and financial management.
Velocity

Management is an ongoing program. Single Stock Fund The Single
Stock Fund initiative will integrate separately managed wholesale
and installation inventories into a single entity. This initiative
will improve the acquisition and distribution of supply items by
eliminating numerous inefficiencies (e. g., multiple points of
sale, multiple billing ledgers, and duplicative automated systems,
all used to manage the same inventory). By October 2000, stock-
funded supplies owned and managed by installations and corps are
expected to become wholesale assets to be managed by the Army
Materiel Command. In addition, division- level stock funded
supplies are expected to become wholesale assets by October 2001.
The Army projects completion of this program by September 2002.

Let t er

Appendix I Summary of Army Initiatives

Page 22 GAO/NSIAD-99-217 Defense Inventory

Lateral Redistribution DOD's Lateral Redistribution Program
improves national inventory managers' stewardship of resources by
providing the ability to redistribute assets within DOD, both
intraservice and interservice, to fill backorders and offset
repair and procurement decisions. These actions are accomplished
through the transfer of assets from the Army's, and other

services', retail and wholesale systems. As part of this program,
the Army has automated the redistribution process for secondary
items. With lateral redistribution, the Army and the other
services expect to reduce excess inventories and the number of
requisitions on the services' wholesale

systems. The program is an ongoing initiative that began in fiscal
year 1996.

Page 23 GAO/NSIAD-99-217 Defense Inventory

Appendix II Comments From the Department of Defense Appendi x I I

Appendix II Comments From the Department of Defense

Page 24 GAO/NSIAD-99-217 Defense Inventory

Now on p. 9.

Now on p. 9.

Page 25 GAO/NSIAD-99-217 Defense Inventory

Appendix III GAO Contacts and Staff Acknowledgments Appendi x I I
I

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

Acknowledgments In addition to those named above, Penney Harwell,
Robert Malpass, and William Woods made key contributions

to this report.

Page 26 GAO/NSIAD-99-217 Defense Inventory

Page 27 GAO/NSIAD-99-217 Defense Inventory

Page 28 GAO/NSIAD-99-217 Defense Inventory

Related GAO Products Inventory Management: More Information Needed
to Assess DLA's Best Practice Initiatives (GAO/NSIAD-98-218, Sept.
2, 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,
July12, 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).

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