Defense Inventory:

Growth in Air Force and Navy Unrequired Aircraft Parts

NSIAD-90-100: Published: Mar 6, 1990. Publicly Released: Mar 6, 1990.

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Pursuant to a congressional request, GAO reviewed Department of Defense (DOD) aircraft parts inventories, focusing on the causes of unrequired inventory growth and how to minimize it.

GAO found that: (1) the Air Force's unrequired aircraft parts inventories increased 204 percent between 1980 and 1988, from $9.2 billion to $28 billion; (2) overstated use rates caused 31 percent of unrequired stock growth; (3) an increase in economically reparable items accounted for 16 percent of unrequired stocks; (4) recent reductions in Air Force war reserve requirements produced 10 percent of unrequired stocks; (5) improvements in parts reliability accounted for 8 percent of unnecessary stocks; (6) the Air Force and the Navy were not effectively identifying and terminating orders for unrequired items; (7) the Air Force's overestimated procurement lead times for 5 of 29 unrequired items contributed to the growth of unnecessary inventories; (8) for 3 of 22 items, the Navy procured quantities that exceeded economic order requirements; (9) DOD and Air Force reporting initiatives to reclassify some unrequired items as required items could hinder the identification of unrequired stock; (10) the Air Force's aircraft parts inventories were growing beyond current-year and wartime requirements; and (11) the Air Force's spending guidelines encouraged earlier purchases, multiyear contracts, and discounted quantity buys, thereby increasing the likelihood of unrequired stock growth.

Recommendations for Executive Action

  1. Status: Closed - Not Implemented

    Comments: This recommendation should be reevaluated as part of GAO work looking at DOD efforts to clean out warehouses (code 398142).

    Recommendation: The Secretary of Defense should separately identify assets that are uneconomical to repair and modify DOD regulations to ensure consistent treatment by the military services.

    Agency Affected: Department of Defense

  2. Status: Closed - Not Implemented

    Comments: This recommendation should be reevaluated as part of GAO work looking at DOD efforts to clean out warehouses (code 398142).

    Recommendation: The Secretary of Defense should separately identify unrequired inventory that was obtained in the best interest of the government to ensure that such inventory is properly classified.

    Agency Affected: Department of Defense

  3. Status: Closed - Not Implemented

    Comments: This recommendation should be reevaluated in view of recent changes to DOD inventory policy, that is, issuance of DOD 4140.1R.

    Recommendation: The Secretary of Defense should direct the Secretaries of the Air Force and Navy to improve procurement management practices that have contributed to the growth in unrequired stocks. Specifically, the Secretary of the Navy should stop the practice of buying more than the economic order quantity (EOQ), unless there is such specific justification in each case as a quantity discount which more than offsets additional holding costs.

    Agency Affected: Department of Defense

  4. Status: Closed - Not Implemented

    Comments: This recommendation should be reevaluated in view of recent inventory policy changes within DOD, that is, issuance of DOD 4140.1R.

    Recommendation: The Secretary of Defense should direct the Secretaries of the Air Force and Navy to improve procurement management practices that have contributed to the growth in unrequired stocks. Specifically, the Secretary of the Air Force should stop the practice of initiating purchase requests earlier than required.

    Agency Affected: Department of Defense

  5. Status: Closed - Implemented

    Comments: The Navy and Air Force reviewed their policies on terminating orders to ensure that they clearly support termination whenever practical. No other action was taken or planned.

    Recommendation: The Secretary of Defense should direct the Secretaries of the Air Force and Navy to improve procurement management practices that have contributed to the growth in unrequired stocks. Specifically, the Secretaries of the Air Force and Navy should review their policies on terminating orders for unrequired items at all levels to ensure that they clearly support termination whenever practical.

    Agency Affected: Department of Defense

  6. Status: Closed - Not Implemented

    Comments: This recommendation should be reevaluated as part of GAO work looking at DOD efforts to clean out warehouses (code 398142).

    Recommendation: The Secretary of Defense should continue to identify unrequired inventory as such and direct the Secretary of the Air Force to cancel efforts to increase the approved force acquisition objective to include an additional year of requirements. Such a change would mean that inventory managers would not have to consider terminating orders that could have been terminated under current criteria.

    Agency Affected: Department of Defense

 

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