Management Review:

Progress and Challenges at the Defense Logistics Agency

NSIAD-86-64: Published: Apr 7, 1986. Publicly Released: Apr 7, 1986.

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GAO reviewed the Defense Logistics Agency's (DLA) management functions in order to: (1) examine its mission, resources, organization, policies, and management objectives, and the various mechanisms it uses to direct, control, and evaluate its operations; (2) identify problems DLA experienced in carrying out some of its major activities; (3) determine how DLA responded to these challenges; and (4) recommend measures to strengthen its management processes.

DLA manages over two million supply items, procures supplies costing billions of dollars every year, maintains an inventory valued at over $10 billion, administers over $186 billion in government contracts, and manages many weapon system spare parts. GAO found that: (1) because of the scope and size of its activities, DLA depends on automation for financial and other management systems; (2) many automated DLA systems, such as supply support, contract administration, and financial management, which depend on upgraded information systems, need modernization; (3) control weaknesses and accounting data reporting errors cause inaccuracies in supply center records and contract administration; and (4) DLA does not have an effective plan for acquiring and managing information resources, but has initiated organizational and managerial changes to improve planning for and cost control over automated systems. GAO also found that: (1) productivity measurement standards cover the majority of DLA personnel; (2) the productivity program has top management support, quantitative goals for improvement, and active employee involvement; and (3) the DLA 4-year productivity growth rate is slightly higher than the trend necessary to achieve the presidential goal for improvement for 1992. The Department of Defense (DOD) and the military services feel that the Weapon System Support Program is effective; however, DLA needs more data from the military services on system and item priorities to ensure that the program is conducted economically and effectively.

Recommendations for Executive Action

  1. Status: Closed - Implemented

    Comments: DLA developed and accomplished an MBO initiative for staff needs planning. Substantial improvements have been made in systems to collect personnel data. DLA initiated uniform data collection procedures, which should improve DLA management capabilities.

    Recommendation: The Director, DLA, should incorporate staff-needs planning concerns, such as the need for uniform data collection and methods, as part of the Management by Objectives (MBO) issue for work force excellence.

    Agency Affected: Department of Defense: Defense Logistics Agency

  2. Status: Closed - Implemented

    Comments: The automated systems being developed in support of the DLA budget formulation process have been completed.

    Recommendation: The Director, DLA, should improve the process and underlying assumptions used in preparing the operations and stock fund budgets by using systematic and comprehensive data on DLA work force characteristics and continuing initiatives to obtain weapon systems spare parts data from the military services.

    Agency Affected: Department of Defense: Defense Logistics Agency

  3. Status: Closed - Implemented

    Comments: DOD/IG issued its report on the status and progress of the weapon system support concept in June 1988. The report makes numerous recommendations to the Secretary of Defense to improve program implementation.

    Recommendation: The Secretary of Defense should review the status and progress of the DLA Weapon System Support Program to ensure that the growth in the systems covered is justified, the program is accomplishing its intended purpose of concentrating resources on the highest-priority systems and items, and the cost of the higher levels of supply support is appropriate to the availability of the systems supported.

    Agency Affected: Department of Defense

  4. Status: Closed - Implemented

    Comments: DOD has issued a new directive specifying how DLA and the military services will determine essentiality of weapon system items. GAO plans to give this area additional attention in the future.

    Recommendation: The Secretary of Defense should ensure that the military services provide complete information to DLA which would enhance management of weapon systems support.

    Agency Affected: Department of Defense

  5. Status: Closed - Implemented

    Comments: DLA is incorporating quality factors into new productivity programs, such as Pay-For-Knowledge and Productivity Gains Sharing. Productivity gain sharing has been implemented at DLA field activities, while pay-for-knowledge is still being evaluated.

    Recommendation: The Director, DLA, should continue to emphasize both product and process quality by applying some of the same approaches used in measuring, evaluating, and improving efficiency towards developing objective measures of quality for the major mission areas of procurement and contract administration, setting goals, and ensuring that managers are held accountable.

    Agency Affected: Department of Defense: Defense Logistics Agency

  6. Status: Closed - Implemented

    Comments: DLA has linked automated systems so that work load data can be passed between operating systems. Data exchange and analysis has been enhanced by creating a database at DLA headquarters, which permits downloading of data for report production, and remote query against master files. Currently, on-line capacity with the database is being developed.

    Recommendation: The Director, DLA, should further improve the agency's productivity management program by ensuring that the data in the Labor and Production Effectiveness Reporting System are accurate and timely.

    Agency Affected: Department of Defense: Defense Logistics Agency

  7. Status: Closed - Implemented

    Comments: OSD approved the implementation plan of the services and DLA for MILSCAP. Initiatives in these plans include uniform standardization of contract forms and record length. Mechanization of the contract administration system is to be completed by December 1988.

    Recommendation: The Secretary of Defense should pursue a greater standardization of contract data by mandating the full implementation of the Military Standard Contract Administration Procedures, or an equivalent abstracting system, and establishing a working group to explore ways to achieve greater uniformity of contract forms.

    Agency Affected: Department of Defense

  8. Status: Closed - Implemented

    Comments: As an interim measure, the Defense Contract Administration Service Regions (DCASR) are being required to review negative ULO balances and report reduction on a quarterly basis. Long-range plans are to correct the problem through system redesign.

    Recommendation: The Director, DLA, should place greater emphasis on the quality of the accounting data produced by the Defense Contract Administration Services regions by directing them to perform the negative unliquidated obligations (ULO) balance reviews and conduct tests of the adequacy of controls over payments.

    Agency Affected: Department of Defense: Defense Logistics Agency

  9. Status: Closed - Not Implemented

    Comments: GAO reports NSIAD-88-113 and NSIAD-88-179, issued in February and July 1988, make new recommendations for improving management controls over in-transit materials. DLA corrective actions will be monitored in conjunction with these reports.

    Recommendation: The Director, DLA, should ensure that DLA internal controls, including managerial accountability, are adequate to control in-transit materials.

    Agency Affected: Department of Defense: Defense Logistics Agency

  10. Status: Closed - Implemented

    Comments: DLA has developed a system to monitor the reconciliation of negative ULO balances. It is tracking and analyzing the reasons that negative ULO balances occur. This information is being used to correct the causes of ULO.

    Recommendation: The Director, DLA, should continue to emphasize the need to control ULO balances, identify the underlying problems that lead to the build-up of the large balances, and establish specific goals for acceptable ULO levels for the fuels commodity.

    Agency Affected: Department of Defense: Defense Logistics Agency

  11. Status: Closed - Implemented

    Comments: DLA has developed a MBO goal for inventory accuracy. The goal was an adjusted rate of 3.5 percent for DLA-managed materials in fiscal year (FY) 1986. The actual adjustment rate was 3.3 percent.

    Recommendation: The Director, DLA, should incorporate, as an MBO issue, goals on inventory accuracy.

    Agency Affected: Department of Defense: Defense Logistics Agency

  12. Status: Closed - Implemented

    Comments: Improvements to the DLA inactive item screening process were completed. DLA verified improvements to the military service screening processes during FY 1988 and recommended additional improvements.

    Recommendation: The Secretary of Defense should direct DLA and the military services to work together to develop the capability to make timely and effective reviews of inactive item candidates.

    Agency Affected: Department of Defense

  13. Status: Closed - Implemented

    Comments: DLA established a goal of 90 percent as the acceptance rate for parts control program recommendations. DLA has recommended substitute items for 95 percent of contractor proposal nonstandard items, but it is only receiving feedback on recommendation acceptance 27 percent of the time. OSD has clarified the program's requirements for feedback on recommendations.

    Recommendation: The Director, DLA, should establish agency goals, such as expected cost savings or proportion of recommendations accepted under the Parts Control Program, and have these results included as a part of his periodic reviews.

    Agency Affected: Department of Defense: Defense Logistics Agency

  14. Status: Closed - Implemented

    Comments: The computer capacity management program was institutionalized. Efforts included a quarterly performance review report and an information resource management capacity regulation.

    Recommendation: The Director, DLA, should complete a comprehensive computer capacity and performance evaluation program.

    Agency Affected: Department of Defense: Defense Logistics Agency

  15. Status: Closed - Not Implemented

    Comments: A GAO follow-up review found that this problem has not been corrected. GAO has recommended new action to DOD to correct the deficiency. GAO will continue to followup on DOD action.

    Recommendation: The Secretary of Defense should review the progress DLA is making in preparing mobilization plans to ensure that timely and appropriate requirements data are made available to DLA by the military services, and that DLA develops necessary plans to effectively transition to supporting wartime missions.

    Agency Affected: Department of Defense

  16. Status: Closed - Implemented

    Comments: DLA is currently integrating its audit follow-up system with an existing productivity tracking system which has most of the capabilities needed to effectively track audit recommendations. The conversion will require about 1 year. GAO believes that the effort is consistent with the intent of this recommendation.

    Recommendation: The Director, DLA, should increase the coverage of the planned automated data system for compiling audit findings to include findings from other review and evaluation groups in DLA, and issue needed procedures to help ensure that actions on audit recommendations are verified.

    Agency Affected: Department of Defense: Defense Logistics Agency

 

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