Military Procurement:

Air Force Should Terminate More Contracts for On-Order Excess Spare Parts

NSIAD-87-141: Published: Aug 12, 1987. Publicly Released: Aug 12, 1987.

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In response to a congressional request, GAO reviewed the Air Force's procedures and practices for terminating procurements of excess spare parts.

GAO found that: (1) the Air Force actually terminated less than 3 percent of the excess on-order parts that GAO reviewed; (2) the Air Force should have terminated about 24 percent of the on-order excess, resulting in savings of approximately $36 million; (3) the requirements system responsible for generating on-order termination lists contained inaccurate information and was unreliable; (4) the Air Force's procedures and practices for terminating on-order excess were inadequate, since it did not consider the cost of holding excess parts in storage and untimely reviewed data generated by the requirements system; and (5) terminating excess on-order parts was more economical than accepting them.

Recommendation for Executive Action

  1. Status: Closed - Implemented

    Comments: Major aspects of this recommendation were implemented by June 6, 1988. For example, AFLC now requires the use of an economic model to decide whether termination will be cost-effective. AFLC has eliminated the use of 75 percent of production lead time as termination criteria. AFLC completed action by issuing policy directives and instructions to AFC.

    Recommendation: The Secretary of the Air Force should emphasize to the Commander, Air Force Logistics Command (AFLC), the importance of an effective program, including appropriate management guidance and oversight, for terminating procurements of excess on-order spares when termination is in the best interest of the government. Such a program should ensure that: (1) item managers base termination decisions on timely comparisons of the costs of accepting excess material with those of terminating procurements; (2) item managers do not routinely conclude that it is uneconomical to terminate on-order material solely because they believe 75 percent or more of the production lead time has expired; (3) the data in the D041 requirements system are accurate; and (4) air logistics centers do not deviate from AFLC termination regulations without proper approval.

    Agency Affected: Department of Defense: Department of the Air Force

 

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