Defense Inventory:

DLA and Navy Suspended Stocks Should Be Processed More Quickly

NSIAD-91-8: Published: Mar 14, 1991. Publicly Released: Apr 3, 1991.

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Pursuant to a congressional request, GAO reviewed the Department of Defense's (DOD) secondary-item inventories to assess its efforts in minimizing stocks of unknown status, focusing on the extent to which required secondary-item stocks may be unessential.

GAO found that: (1) since 1984, the Defense Logistics Agency (DLA) and the Navy have made improvements in their efforts to minimize stock of unknown status, but they did not timely resolve the status of suspended stock; (2) DOD frequently kept suspended items beyond its time standards, since it did not consider resolving the items' status a high priority, include program guidance, or routinely follow existing guidance; (3) DLA personnel did not follow instructions for resolving the status of suspended stocks; (4) overall, stocks valued at about $50 million, or 49 percent of the sampled secondary items, remained suspended more than 6 months; (5) managers considered suspended items in making their procurement decisions after they determined their use, but managers' delays in resolving the status of suspended items could result in unnecessary procurements; and (6) DOD data indicated that it spent approximately $9 million per year to store suspended items.

Recommendations for Executive Action

  1. Status: Closed - Implemented

    Comments: Consultation with the services and DLA has concluded that modification of the time standards to improve management of suspended stock is not warranted as DOD procedures allow extension of the standards to allow for such unusual situations as large volume of customers returns.

    Recommendation: To assist Navy, DLA, and other DOD components' efforts to manage suspended stocks, the Secretary of Defense should consider modifying time standards to allow for resolving the status of large volumes of customer returns if DLA and the Navy believe the current standards are unreasonable.

    Agency Affected: Department of Defense

  2. Status: Closed - Implemented

    Comments: P&L consultation with the services and DLA has concluded that a DOD priority structure is not necessary as the services and DLA have established criteria which considers the type and/or uniqueness of the items managed by their activities. On June 21, 1991, DLA issued guidance reemphasizing the use of and compliance with existing policy and procedural guidance.

    Recommendation: To assist Navy, DLA, and other DOD components' efforts to manage suspended stocks, the Secretary of Defense should establish the priority to be placed on resolving the status of suspended stock vis-a-vis the handling of other stock, and in doing so, consider the need for the items and the cost of storing them.

    Agency Affected: Department of Defense

  3. Status: Closed - Implemented

    Comments: A review of Navy and DLA procedures determined that both have established primary responsibility for resolution of suspended assets at the local level to afford management the latitude required to balance adherence to time standards with the need to avoid a "buy around" and satisfy a high priority backorder. But, ASD(P&L) previously stated it would issue direction.

    Recommendation: To maximize the usefulness of secondary-item inventory, the Secretary of Defense should direct the Secretary of the Navy and the Director, DLA, to ensure that supply organizations develop adequate plans, including objectives and milestones, for meeting DOD time standards in resolving the status of suspended stocks.

    Agency Affected: Department of Defense

  4. Status: Closed - Implemented

    Comments: A Navy, DLA, and P&L review of Navy and DLA procedures determined that both have defined responsibility and accountability of suspended items. However, ASD(P&L) previously indicated it would issue guidance. Planned NSIAD reviews might consider this issue.

    Recommendation: To maximize the usefulness of secondary-item inventory, the Secretary of Defense should direct the Secretary of the Navy and the Director, DLA, to ensure that supply organizations establish responsibility and accountability for resolving suspended stock status, carrying out the action, and following up to make sure the actions are promptly and correctly taken.

    Agency Affected: Department of Defense

  5. Status: Closed - Implemented

    Comments: A Navy, DLA, and P&L review of Navy and DLA procedures determined that both have adequate visibility of suspended items. Prior DOD response indicated that a review of service and DLA comments would result in new guidance. Planned GAO/National Security and International Affairs Division (NSIAD) reviews might consider this issue.

    Recommendation: To maximize the usefulness of secondary-item inventory, the Secretary of Defense should direct the Secretary of the Navy and the Director, DLA, to ensure that suspended items receive adequate visibility at all management levels, up to and including the service level.

    Agency Affected: Department of Defense

  6. Status: Closed - Implemented

    Comments: P&L consultation with the services and DLA has concluded that DOD procedures exist for the item manager to periodically review suspended assets. These procedures, in conjunction with the priority structure established by the services and DLA, should result in the priority resolution of suspended stock when making procurement decisions.

    Recommendation: To assist Navy, DLA, and other DOD components' efforts to manage suspended stocks, the Secretary of Defense should establish organizational and personnel incentives to meet time standards and to consider checking suspended stock when making procurement decisions.

    Agency Affected: Department of Defense

 

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