The Navy Can Increase Cancellations of Procurements for Unneeded Material

NSIAD-85-55: Published: Mar 22, 1985. Publicly Released: Mar 22, 1985.

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GAO reviewed the Navy's procedures and practices for cancelling procurements of unneeded material to determine the controls established by the Naval Supply Systems Command (NAVSUP) for monitoring and evaluating the performance of the inventory control points.

The review indicated that the number of procurement cancellations can be increased, thereby reducing unnecessary procurement and inventory investment costs. An examination of cancellations for May 1983, the most current month available at the start of the review, showed that potentially excess procurements identified by the inventory control points totalled $293 million. GAO tests of possible termination actions for that month showed that less than 1 percent were actually cancelled. GAO found that cancellations are not higher because: (1) the inventory control points have established high dollar review thresholds; (2) the inventory control points apply protection levels to provide an added buffer against running out of stock; (3) inventory managers do not always act on cancellation notices in a timely manner; and (4) management and supervisory attention to the cancellation process is limited.

Recommendations for Executive Action

  1. Status: Closed - Implemented

    Comments: Termination recommendations at ASO are susceptible to a supervisory review similar to that required for procurement recommendations. At SPCC, all termination decisions for procurement requests over $25,000 and contracts over $50,000 must have supervisory approval.

    Recommendation: The Secretary of the Navy should direct the Commander, NAVSUP, to direct that supervisors regularly review inventory manager decisions on termination notices.

    Agency Affected: Department of Defense: Department of the Navy

  2. Status: Closed - Implemented

    Comments: ASO implemented a mechanized system for identifying and following up on overdue termination recommendations. SPCC has not implemented a separate review program, but states that an existing mechanized system already provides the information needed to track termination requests.

    Recommendation: The Secretary of the Navy should direct the Commander, NAVSUP, to require that inventory managers review termination notices in a timely and objective manner and give consideration to making this requirement part of the inventory managers' performance evaluation.

    Agency Affected: Department of Defense: Department of the Navy

  3. Status: Closed - Not Implemented

    Comments: The Department of Defense (DOD) disagreed with this recommendation on the basis that added protection levels are required, cost-effective, and directly related to readiness. GAO believes that added protection levels are not needed. However, since DOD disagreed, further follow-up would be fruitless.

    Recommendation: The Secretary of the Navy should direct the Commander, NAVSUP, to discontinue the routine use of added protection levels when making cancellation decisions.

    Agency Affected: Department of Defense: Department of the Navy

  4. Status: Closed - Implemented

    Comments: Based on the Ship Parts Control Center's (SPCC) analyses, termination review thresholds have been reduced to zero on both purchase requests and contracts. At the Aviation Supply Office (ASO), termination thresholds have been reduced to $25 for both purchase requests and contracts.

    Recommendation: The Secretary of the Navy should direct the Commander, NAVSUP, to reconsider the reasonableness of the termination review threshold amounts and base the threshold amounts on a comparison of the administrative cost of cancelling procurements with the money to be saved by not purchasing unneeded material.

    Agency Affected: Department of Defense: Department of the Navy

  5. Status: Closed - Implemented

    Comments: On March 6, 1986, the Navy implemented an automated termination tracking system at SPCC that identifies termination recommendations acted upon by item managers and open recommendations requiring follow-up actions. The Navy implemented a mechanized system at ASO earlier. Operational and procedural instructions have been issued.

    Recommendation: The Secretary of the Navy should direct the Commander, NAVSUP, to establish controls for monitoring and evaluating inventory control point performance in cancelling procurements of unneeded material and obtain data on the value of unneeded material actually cancelled.

    Agency Affected: Department of Defense: Department of the Navy

 

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