National Defense Stockpile:

Views on DOD's 1992 Report to the Congress and Proposed Legislation

NSIAD-93-60: Published: Mar 16, 1993. Publicly Released: Mar 16, 1993.

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Pursuant to a congressional request, GAO reviewed the: (1) analyses and assumptions used by the Department of Defense (DOD) to determine its strategic material needs; (2) DOD-recommended disposal plans and associated legislative proposals; and (3) U.S. ferroalloy upgrading program.

GAO found that: (1) DOD used a reasonable methodology to determine its material requirements, but its determination process was limited; (2) DOD did not do sensitivity analyses to characterize the uncertainty associated with material consumption ratios (MCR); (3) the levels of disposals in the DOD annual material plans appear reasonable, but DOD should take a cautious approach to some of the proposed disposals; (4) DOD should dispose of such materials as cobalt, ferroalloys, chromium, and manganese ores only after consulting with experts in other federal agencies and producers and users; (5) the continued procurement of the alloys under the upgrade program is not necessary or economical, since stockpile inventories significantly exceed DOD requirements and DOD could obtain the alloys from foreign sources at lower prices; and (6) the Fiscal Year 1993 Defense Authorization Act authorizes the disposal of excess chromite and manganese ores and ferroalloys under certain conditions.

Recommendations for Executive Action

  1. Status: Closed - Implemented

    Comments: DOD increased and decreased key assumptions by 15 to 20 percent, plus it changed combinations of variables in its May 1993 requirements report. It will continue to include expanded sensitivity analysis in future reports. An accomplishment report will be prepared.

    Recommendation: The Secretary of Defense should present a broader range of sensitivity tests to assess the uncertainties associated with a variety of assumptions, including MCR data, foreign country reliability, warning time, and alternative war scenarios.

    Agency Affected: Department of Defense

  2. Status: Closed - Implemented

    Comments: In July 1992, DOD signed an agreement with the Department of Commerce to update the material consumption ration data. Updating of the data has been completed. An accomplishment report is being prepared.

    Recommendation: The Secretary of Defense should obtain and use updated MCR data in determining stockpile requirements or else create working groups or committees composed of experts in the relevant subject areas to determine requirements.

    Agency Affected: Department of Defense

  3. Status: Closed - Implemented

    Comments: DOD did not concur with this recommendation. It believes the law requires the requirement for each material to be expressed as a single point estimate.

    Recommendation: The Secretary of Defense should develop a range of stockpile requirements, based on sensitivity test results, to cover identified U.S. security threats.

    Agency Affected: Department of Defense

  4. Status: Closed - Implemented

    Comments: The Market Impact Committee was institutionalized under an interagency charter and by the National Defense Authorization Act for Fiscal Year 1993. An accomplishment report will be prepared.

    Recommendation: The Secretary of Defense should use the Market Impact Committee or create a new committee comprised of civil federal agency and independent experts to advise and counsel stockpile managers in planning and implementing stockpile disposals and acquisitions.

    Agency Affected: Department of Defense

 

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