Army Inventory:

Current Operating and War Reserve Requirements Can Be Reduced

NSIAD-93-119: Published: Apr 14, 1993. Publicly Released: Apr 14, 1993.

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GAO reviewed the Army's efforts to reduce its current operating and war reserve requirements.

GAO found that: (1) two Army commands have significantly overstated their current operating and war reserve needs by $1.6 billion; (2) overstated war reserve requirements result in unnecessary repair programs and unneeded procurements; (3) the Army is revising its war reserve requirements to reflect its current threat and force structure, which should reduce requirements by about 60 percent; (4) the Department of Defense (DOD) has instructed the services to include in their requirements only those items acquired with funds appropriated for that purpose, but one command has not taken action to reduce its funded requirements; (5) the Army Materiel Command (AMC) advised its inventory control points to include in requirement objectives items from contracts that are uneconomical to reduce or terminate; (6) overstated demands contributed to excess inventories; (7) DOD has issued guidance providing for the inclusion of nonrecurring demands in the demand database only if it improves the item forecast; and (8) DOD policy requires that demand data be adjusted to reflect the return of serviceable items, but the commands' data systems preclude them from managing serviceable returns on an item-by-item basis.

Recommendations for Executive Action

  1. Status: Closed - Implemented

    Comments: DOD policy outlined in DOD 4140.1-R requires that demands identified as nonrecurring shall be included in the demand database to the extent that the item manager can demonstrate that a particular quantity on nonrecurring demands will improve its demand forecasts.

    Recommendation: The Secretary of the Army should direct the Commander, AMC, to discontinue the practice of including nonrecurring demands as part of the demand database used to forecast spare parts requirements.

    Agency Affected: Department of Defense: Department of the Army

  2. Status: Closed - Implemented

    Comments: DOD agreed that items not needed to meet current operating and war reserve or contingency or economic retention criteria should be sent to disposal or potential users.

    Recommendation: The Secretary of the Army should direct the Commander, AMC, to process inventory items that do not qualify for economic retention for disposal.

    Agency Affected: Department of Defense: Department of the Army

  3. Status: Closed - Not Implemented

    Comments: DOD disagrees that items due in contract are considered as inventory. Therefore, DOD does not believe that such items should be considered economic retention inventory.

    Recommendation: The Secretary of the Army should direct the Commander, AMC, to recategorize as economic retention-level inventory those items that are being retained as part of the requirements objective because the associated contracts are uneconomical to terminate.

    Agency Affected: Department of Defense: Department of the Army

  4. Status: Closed - Implemented

    Comments: Upon completion of its war reserve recomputation, items not needed will be sent to disposal. This will occur sometime after the June 1993 recomputation.

    Recommendation: The Secretary of the Army should direct the Commander, AMC, to transfer inventory that is no longer needed to meet the revised war reserve requirements to retention-level inventory or send it to disposal.

    Agency Affected: Department of Defense: Department of the Army

  5. Status: Closed - Implemented

    Comments: The Army recomputed its war reserve requirements and reduced them from $10.2 billion to $4.2 billion.

    Recommendation: The Secretary of the Army should direct the Commander, AMC, to establish war reserve requirements based on the latest Army strategy and doctrine giving consideration to the new threat, reduced force structure, and probable type of conflicts the Army can expect in the future.

    Agency Affected: Department of Defense: Department of the Army

  6. Status: Closed - Implemented

    Comments: Guidance was issued on October 29, 1993, requiring item-by-item analysis of serviceable returns to determine whether they should be offset against demand data.

    Recommendation: The Secretary of the Army should direct the Commander, AMC, to begin offsetting all serviceable returns against demands unless an item-by-item analysis shows that systemic deficiencies preclude serviceable returns from being offset against demands. In such cases, the national inventory control point should identify the systemic deficiencies and develop a corrective action plan for resolving the deficiencies.

    Agency Affected: Department of Defense: Department of the Army

 

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