Defense Acquisitions:

Navy Needs Plan to Address Rising Prices in Aviation Parts

GAO-02-565: Published: May 31, 2002. Publicly Released: May 31, 2002.

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Since fiscal year 1999, the Navy's budget for repairing spare parts to support its aviation weapons systems has increased by about 50 percent, from $1.2 billion to $1.8 billion. Some military commands have asserted that the escalating cost of these parts has adversely impacted the funds available for the readiness of military forces. Overall, the prices for Navy repairable spare parts continue to climb for the three aircraft and their engines that GAO focused on in its November 2000 report. GAO's assessment of selected parts being repaired showed that while nearly 45 percent of the parts decreased in price, about 55 percent increased an average of 91.5 percent between fiscal year 1999 and 2002. The price increases were primarily due to the dramatically higher costs of the materials needed to repair spare parts, although other factors, such as overhead fees and labor rates, contributed. However, GAO could not determine the underlying causes for the rising material costs because the Navy's database lacked key information on each repair. The Navy's progress in developing an overall plan to identify and address the reasons for higher spare parts prices has been limited. It has not yet identified and implemented ways to reduce and stabilize prices. Further, the Navy has undertaken several initiatives, but most of these efforts focused on improving the reliability or the maintenance processes for repairing spare parts rather than on identifying why prices continue to rise. One initiative, the establishment of an automated serial number tracking system for spare parts, however, has potential for providing the specific information needed to determine why the spare parts prices are increasing and develop a strategy for stabilizing them. In addition, the Navy may learn from the Defense Logistics Agency's efforts to address causes for price increases--thereby allowing the Navy to better apply its resources supporting the readiness of the forces.

Status Legend:

More Info
  • Review Pending-GAO has not yet assessed implementation status.
  • Open-Actions to satisfy the intent of the recommendation have not been taken or are being planned, or actions that partially satisfy the intent of the recommendation have been taken.
  • Closed-implemented-Actions that satisfy the intent of the recommendation have been taken.
  • Closed-not implemented-While the intent of the recommendation has not been satisfied, time or circumstances have rendered the recommendation invalid.
    • Review Pending
    • Open
    • Closed - implemented
    • Closed - not implemented

    Recommendations for Executive Action

    Recommendation: In order to develop the information and action necessary to address the underlying causes for price increases, the Secretary of Defense should direct the Secretary of the Navy to develop an overall plan with implementation milestones, resource requirements, and accountability within the Naval Supply Systems Command to identify the underlying reasons for price increases in aviation spare parts. The plan should include, but not be limited to, using the comprehensive data on individual spare parts from the serial number tracking system now under development, as well as lessons learned from the Defense Logistics Agency's efforts to address price increases.

    Agency Affected: Department of Defense

    Status: Closed - Implemented

    Comments: The Navy has established a long term investment strategy to address the reasons for price increases among aviation spare parts. The strategy utilizes data from tracking systems such as Supply Maintenance Aviation Reengineering Team Enterprise Resource Planning efforts to provide information relative to logistics costs that will support better logistics decisions. The Navy expects to see tangible improvements in overall parts costs within 3 years.

    Recommendation: In order to develop the information and action necessary to address the underlying causes for price increases, the Secretary of Defense should direct the Secretary of the Navy to utilize information generated from the plan's initiatives to develop management strategies, which provide assurance that future prices represent a reasonable cost to the customer.

    Agency Affected: Department of Defense

    Status: Closed - Implemented

    Comments: The Navy has established a long term investment strategy to address the reasons for price increases among aviation spare parts. The strategy utilizes data from tracking systems such as Supply Maintenance Aviation Reengineering Team Enterprise Resource Planning efforts to provide information relative to logistics costs that will support better logistics decisions. The Navy expects to see tangible improvements in overall parts costs within 3 years.

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