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Defense > 13. Defense Excess Property Disposal

Federal civilian agencies could potentially achieve millions of dollars in cost savings if they were able to obtain more of the Department of Defense’s available excess personal property through the disposal process rather than purchasing similar property through a private sector supplier.

Why This Area Is Important

Each year the military services identify thousands of items of personal property—including military equipment and materiel—that they need to dispose of because the property is obsolete, not repairable, or excess to their requirements but still usable.[1]  According to Department of Defense (DOD) guidance for disposing of its excess personal property, the objectives of the defense material disposition process are to dispose of the property in a manner that ensures maximum use to satisfy valid needs, permits authorized donations of surplus property, obtains optimum monetary return to the U.S. government for property sold, and, among other things, minimizes the need for abandoning or destroying property.[2] The Defense Logistics Agency’s (DLA) Disposition Services executes the disposal of DOD personal property. Because this property was originally purchased with federal funds, the government seeks to promote its reuse by federal agencies to minimize new procurement costs. GAO has reported that the federal government is facing serious long-term fiscal challenges, and that DOD and other federal agencies will likely encounter considerable budget pressures over the coming years.[3] These challenges make it potentially attractive for DOD and other federal agencies to obtain usable personal property that is already in the federal inventory, rather than procuring similar new items.

DOD‘s disposal process allows multiple opportunities for potential recipients to obtain personal property no longer needed by DOD. The process includes a 42-day period known as the “screening cycle,” during which potential recipients may screen, request, and obtain excess property at the stages in which they are eligible to do so, after which any remaining property may be sold. The property may remain a specific number of days in each stage, as shown in the figure below. If the property is not disposed of during one stage of the cycle, it moves on to the next stage. First, usable property may be reutilized within DOD or provided to certain special programs, such as the program authorized by Section 2576a of the United States Code, Title 10 that provides excess DOD property to state and local law enforcement agencies.[4] If not reutilized, this property may be transferred—working through the General Services Administration (GSA)—to federal agencies, after which it becomes surplus and may be donated to other parties, such as state governments. Remaining property may be sold to the general public, if appropriate and safe, or rendered useless for its original military purpose (demilitarized) and sold as scrap or destroyed. For fiscal year 2014, DOD reported that excess and surplus property with a total original acquisition value of approximately $3.18 billion in nominal dollars was reutilized within DOD or provided to special programs, transferred to other federal agencies, or donated to eligible organizations (such as state and local governments or nonprofit organizations).[5] DOD further reported total revenues of almost $128 million from items sold in fiscal year 2014.[6]

Overview of DOD’s Disposal Process

Overview of DOD’s Disposal Process


[1] DOD defines personal property as all DOD property except real property, records of the federal government, and certain naval vessels (battleships, cruisers, aircraft carriers, destroyers, and submarines). DOD excess property is not required for the needs and the discharge of the responsibilities of any DOD activity. DOD defines property disposition as the process of reusing, recycling, converting, redistributing, transferring, donating, selling, demilitarizing, treating, destroying, or other ultimate disposition of personal property. DOD Manual 4160.21, Defense Materiel Disposition: Disposal Guidance and Procedures, vol. 1 (Oct. 22, 2015).

[2] Department of Defense, DOD 4160.21-M, Defense Materiel Disposition Manual (August 1997). According to the manual, eligible recipients of Department of Defense (DOD) excess and surplus property are responsible for all costs associated with the preparation, handling, and movement of the property. During the audit period for the January 2016 report, GAO relied on the August 1997 manual, which implemented the requirements of the Federal Property Management Regulation and other laws as appropriate, as they apply to the disposition of DOD’s excess, surplus, and foreign excess personal property. On October 22, 2015, DOD released an updated four-volume Materiel Disposition Manual, which, in general, clarifies aspects of DOD’s disposition process while maintaining the essential structure of the program. Because the 1997 manual was in effect during the audit period, GAO’s report relied on the 1997 guidance.

[3] GAO, The Federal Government's Long-Term Fiscal Outlook: Spring 2013 Update, GAO-13-481SP (Washington, D.C.: Apr. 11, 2013). This report is part of GAO’s body of work on the federal debt and long-term fiscal challenges.

[4] There are 12 special programs that may screen and request DOD excess personal property during the reutilization stage of the disposal process. Of these, 6 programs are found in laws and codified in statutes, and 6 were established by DOD, and no separate legal authorities apply. Programs found in law and statute include the program that authorizes DOD to transfer excess DOD property that is suitable for use by law enforcement activities, including counter-drug and counter-terrorism activities (called the “1033 program,” for the section of the law that authorizes it). Programs established by DOD include the civil air patrol, which is the official auxiliary of the U.S. Air Force, and is eligible to receive excess DOD property without reimbursement.

[5] The acquisition value is the amount identified as the original cost of the property or the estimated replacement cost. DLA uses this figure when reporting on its excess property disposal process. During the transfer stage, both federal and nonfederal agencies may view the property on the GSA website. Federal agencies—including DOD components—may also request property during this stage.

[6] DOD reported approximately $39 million in sales of usable property, $34 million in scrap sales, and $55 million from other contracts in fiscal year 2014.

 

What GAO Found

GAO found in the January 2016 report that the priorities outlined in DOD’s disposal process guidance place special program recipients in the first stage of the process (reutilization) versus the later stages (transfer or donation). This approach gives some nonfederal entities priority for excess property over some federal civilian agencies that may have similar needs.[1] One of these special programs is the 1033 program, which provides excess DOD personal property to federal, state, local, and tribal law enforcement agencies. Among the special programs, the 1033 program receives the largest proportion of DOD excess personal property in terms of original acquisition value.

For fiscal year 2014, approximately 85 percent of the property obtained under the 1033 program, by original acquisition value, went to state and local law enforcement agencies.[2] DLA’s 1033 program guidance states that participating law enforcement agencies must meet eligibility requirements and comply with program guidelines. Specifically, program participants must be government agencies whose primary function is the enforcement of applicable federal, state, and local laws, and whose compensated law enforcement officers have powers to apprehend and arrest. All requests for property are required to be based on current, bona fide law enforcement requirements, and any property obtained is to be placed into use within 1 year.[3] Within the 1033 program, law enforcement agencies may obtain DOD property even if the property does not appear to be exclusively related to law enforcement activities so long as the law enforcement agency provides the required justification for obtaining the property, and a state coordinator and the Law Enforcement Support Office at DLA Disposition Services approve the request.

In January 2016, GAO reported that law enforcement agencies at all levels have used the 1033 program to obtain property—such as excavating equipment, fencing, and musical instruments—that could also be used by other types of potential recipient organizations, including federal civilian agencies. During calendar years 2013 and 2014, 150 law enforcement agencies obtained 285 pieces of earth-moving and excavating equipment through the 1033 program, with original acquisition values totaling just over $25 million.[4] GAO reported in January 2016 that at least 9 federal agencies purchased earth-moving equipment to meet their mission requirements during the same period. For purposes of this report section, GAO performed additional analyses outside of the January 2016 report, reviewing financial obligation data related to 249 federal agency contracts for earth-moving and excavating equipment from those 9 agencies in calendar years 2013 and 2014. GAO found that federal agencies obligated over $28 million to purchase earth-moving and excavating equipment similar to the equipment obtained by state and local law enforcement agencies through the 1033 program. The following table shows more information about federal civilian agency contracts for earth-moving and excavating equipment.

Categories of Earth-Moving and Excavating Equipment Procured by Federal Civilian Agencies during 2013-2014

Property type

Total number of contractsa

Total number
of federal agencies

Total action
obligation valueb

Ditching machines

1

1

$28,465

Dump trucks and trailer

5

2

416,833

Excavators

50

7

5,096,764

Loadersc

160

8

14,537,004

Road graders

22

4

6,760,585

Tractor scrapers

11

2

1,177,946

Total

249

9d

$28,017,597

Source: GAO analysis of Federal Procurement Data System data.  |  GAO-16-375SP

aContracts may include procurements for more than one asset.

bTotal action obligation values are rounded to the nearest dollar.

cLoaders include scoop loaders, backhoes, skid steer loaders, and multiterrain loaders.

dAgencies procured multiple product types, and so the total reflects the total number of unique agencies contracting for these products. Federal agencies include the Department of Agriculture; Department of Justice; Department of Transportation; Department of Health and Human Services; Department of Homeland Security; International Boundary and Water Commission: U.S.-Mexico; Department of the Interior; Department of State; and Department of Veterans Affairs.

As reported in January 2016, GAO could not determine whether any specific item that DLA Disposition Services provided to state and local law enforcement agencies would have filled the need that one of these federal agencies met by using appropriated funds for a new procurement. Nonetheless, DLA’s implementation of the disposal process risks such an occurrence because state and local law enforcement agencies obtain the majority of the excess property available under the 1033 program. By providing access to excess property to special programs in the first stage of the disposal process, DOD’s disposal process gives preference to special programs over potential federal civilian agency recipients for obtaining excess property. Consequently, in some cases, federal agencies may be disadvantaged in favor of nonfederal agencies in their ability to obtain property that was originally purchased with federal funds. In such cases, federal agencies are at risk of spending appropriated funds to acquire property that could potentially be obtained through DOD’s disposal process at a lower cost. While the property that was available might not have been suitable to meet federal agency requirements due to matters such as quantity, timing, condition, and transportation costs, it is possible that some of this equipment may have been suitable and could have allowed the federal government to postpone or even avoid some of these purchases—resulting in potentially millions of dollars in cost savings.[5] There may also be additional potential savings for other types of equipment not included in GAO’s analysis.

In October 2015, DOD issued an update to its 1997 disposition guidance. In its new manual, DOD now explicitly gives priority to DOD components over the special programs for obtaining excess property during the reutilization stage.[6] However, special programs remain in the reutilization stage and thus would still be able to obtain property ahead of federal civilian agencies. DOD officials acknowledged that they have the authority within their 1033 program to give preference to federal law enforcement agencies over state and local law enforcement agencies. However, at the time of GAO’s review, these officials told GAO they were not planning further revisions to the screening and issuance priorities in the disposal process because there has been no demand from federal agencies, other than U.S. Customs and Border Protection, to change these priorities.

A key internal control for federal agencies is management’s ability to assess and manage risks associated with achieving agency objectives, including consideration of an assessment of significant interaction between the organization and other parties and development of mechanisms to respond to changes in governmental and operating conditions, among other special risks.[7] Unless DOD further reassesses its disposal process to determine if it needs to make additional changes to its guidance governing the priorities of the disposal process—specifically for property obtained by special programs such as the 1033 program—and revises its guidance reflecting these priorities accordingly, the risk remains that federal civilian agencies may spend additional appropriated federal funds to procure equipment rather than pursue obtaining equal or similar items at little or no additional cost to the federal government through DOD’s disposal process.



[1] In this report, we refer to federal civilian agencies as those which are not military, law enforcement, or firefighting agencies.

[2] The remaining 15 percent of property obtained under the 1033 program went to federal and tribal law enforcement agencies. In total, federal, state, local, and tribal law enforcement agencies obtained 32.6 percent—about $922 million in original acquisition value (in nominal dollars)—of property obtained at the reutilization stage in fiscal year 2014.

[3] Defense Logistics Agency Instruction 8160.01, Law Enforcement Support Office (July 21, 2014).

[4] For instance, officials from U.S. Customs and Border Protection said they use such items for operations such as maintaining roads on the border to ensure safe operations for agents in the field.

[5] GAO does not know what proportion of the $28 million in contracts awarded by federal civilian agencies to private sector suppliers for earth-moving and excavating equipment could have been avoided if similar assets had been obtained through the disposal process for DOD excess property. However, if even a relatively small proportion of such equipment could be obtained through the disposal process, this could result in savings of over a million dollars. Moreover, GAO’s review of contracts awarded by federal civilian agencies was confined to earth-moving and excavating equipment and did not include other categories of excess property, which could also potentially be obtained through the disposal process and yield savings as well. Therefore, GAO concludes that obtaining assets through DOD’s disposal process could eventually result in millions of dollars in savings for federal civilian agencies.

[6] DOD Manual 4160.21, Defense Materiel Disposition: Reutilization, Transfer, and Sale of Property, vol. 3, encl. 5, § 3(b)(3) (Oct. 22, 2015). While special programs may continue to screen and request excess DOD personal property during this stage, property is now not to be issued to the special programs until the reutilization stage has ended.

[7] GAO, Standards for Internal Control in the Federal Government, GAO/AIMD-00-21.3.1 (Washington, D.C.: 1999).

Actions Needed

GAO recommended in January 2016 that the Secretary of Defense direct the Director, DLA, to take the following action:

  • Further reassess DOD’s disposal process to determine whether additional changes are needed in the priority given to recipients within the process, including potential changes to the categories and quantities of property that special programs may obtain, and revise its guidance reflecting those priorities accordingly to better enable DOD to fulfill the disposal program’s objectives.

Federal agencies could potentially save millions of dollars by obtaining excess property from DOD rather than procuring new property. There may also be opportunities for additional savings if federal agencies are able to obtain other types of excess personal property from DOD.

How GAO Conducted Its Work

The information contained in this analysis is based on findings from the report listed in the related GAO products section and additional work GAO conducted. To identify types of excess property obtained by law enforcement agencies, GAO obtained and analyzed data on DOD’s 1033 program from an extract of the Federal Excess Property Management Information System provided by the U.S. Forest Service, which manages this database on behalf of the Law Enforcement Support Office at DLA Disposition Services. To assess the reliability of these data, GAO interviewed knowledgeable officials at the U.S. Forest Service and the Law Enforcement Support Office, performed electronic testing of key data elements, and met with both the 1033 program coordinator and a local law enforcement agency in two states to compare the property on hand with the records in the database. Based on these efforts, GAO concluded that the data were sufficiently reliable for GAO’s purpose of identifying types of excess property obtained by law enforcement agencies. GAO then used the data to examine property obtained by law enforcement agencies from calendar years 2013 and 2014—the most recent full calendar year data available—that did not appear to be exclusive to law enforcement activities and that did not possess military attributes. To provide some examples of types of property that could fall into these categories, GAO analyzed data from six federal supply classes, including earth-moving and excavating equipment (federal supply class #3805); self-propelled warehouse trucks and tractors (3930); fencing, fences, gates, and components (5660); food cooking, baking, and serving equipment (7310); kitchen equipment and appliances (7320); and musical instruments (7710). GAO selected these broad categories of property based on testimonial evidence gathered during site visits to the four states in which the audit team conducted field work, and GAO’s judgment that these types of property, which had recently been obtained by law enforcement agencies, did not seem to be exclusively related to law enforcement activities. GAO used the national stock numbers to calculate the number of items, number of distinct law enforcement agencies, number of states, and range of acquisition values for various equipment types within each federal supply class.[1]

To identify potential savings, GAO did further analysis on the federal supply class of earth-moving and excavating equipment by identifying federal agency contracts for this type of equipment in calendar years 2013 and 2014 that is similar to equipment given to state and local law enforcement agencies through DOD’s 1033 program during the same period. This federal supply class was selected because of the value of such personal property given to state and local law enforcement agencies through the 1033 program, and the likelihood that a number of federal agencies might be able to use such equipment. Using the Federal Procurement Data System, GAO identified procurement records for purchased earth-moving and excavating equipment for all federal agencies that procured such equipment and reviewed all records to identify the procured equipment that was comparable to the equipment given to state and local law enforcement agencies based on the description of the requested equipment. In performing this work, GAO did not determine whether donated property would have been suitable for the needs of the purchasing agency or confirm that the purchased equipment had been delivered.

Table 8 in appendix V lists the program GAO identified that might have opportunities for cost savings or revenue enhancement.



[1] GAO did not include in its analysis property that had been turned in to DLA Disposition Services using locally assigned stock numbers since the numbers vary by location and it is difficult to make comparisons among them. For these federal supply classes, including local stock numbers would increase the amount of property obtained by law enforcement agencies during this time frame.

Agency Comments & GAO Contact

In commenting on the January 2016 draft report on which this analysis is largely based, DOD concurred with GAO’s recommendation and stated that it would continue to assess all aspects of the disposal process as part of its standard operating procedures. As discussed in the report, GAO’s analysis indicates that DOD should separately assess the priorities in its disposal process, to include preferences provided to the special programs. Absent such an assessment, risk remains that federal agencies may spend additional appropriated federal funds to procure equipment, rather than pursue obtaining equal or similar items at little or no additional cost to the federal government through DOD’s disposal process. While GAO understands that DOD already assesses its disposal process as part of its normal operations, GAO maintains that the potential to make more efficient use of federal funds warrants further efforts in this area.

GAO provided a draft of this report section to DOD for review and comment. DOD provided technical comments and in response we made changes to this report when appropriate.

For additional information about this area, contact Brian J. Lepore at (202) 512-4523, or leporeb@gao.gov.