Army Inventory:

Changes to Stock Funding Reparables Would Save Operations and Maintenance Funds

NSIAD-94-131: Published: May 31, 1994. Publicly Released: May 31, 1994.

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Pursuant to a congressional request, GAO reviewed the Army's implementation of the stock funding of the depot level reparables (SFDLR) requirement, focusing on whether SFDLR has: (1) reduced demands on and procurements by the wholesale level supply system; and (2) affected the management of maintenance and inventory activities and the use of operation and maintenance (O&M) funds at the unit level.

GAO found that: (1) in fiscal year 1993, the Army's implementation of SFDLR reduced demand for reparable items by 55 percent and the wholesale supply system's procurement of reparables by about 75 percent; (2) Army units increased their O&M purchasing power by $201 million because the retail stock fund granted credit to O&M customers for items that the wholesale level did not need; (3) the Army credit policy is contrary to the SFDLR implementation plan; (4) Army units at the installation level are spending O&M funds to repair items that are in long supply at the wholesale level because it is cheaper for the units to repair the items than buy new ones; (5) Army initiatives to address its reparables inventory include establishing a single stock fund to eliminate the retail stock fund and link the amount of credits received and given, offering some items in long supply at reduced prices, and developing an integrated sustainment maintenance concept where the wholesale level determines what items to repair; and (6) barriers to the initiatives include units' resistance to eliminating the retail stock fund, too few long-supply items being offered at reduced prices, and repair decisions being made at the local level rather than at the wholesale level.

Recommendations for Executive Action

  1. Status: Closed - Implemented

    Comments: The retail credit rates were reduced from 54 percent in FY 1993 to 52 percent in FY 1994 to 47 percent in FY 1995, to bring them into relative balance with what the units are receiving from the retail stock fund.

    Recommendation: The Secretary of the Army should revise the credit rate for items turned in by units so that the amount of credit received by the units is linked to the amount of credit given by the wholesale system.

    Agency Affected: Department of Defense: Department of the Army

  2. Status: Closed - Implemented

    Comments: The number of reduced price initiative items has been expanded and it is expected that an additional 200 items will be added to the list.

    Recommendation: The Secretary of the Army should expand the number of long supply items being offered at a reduced price--not just those items for the older systems that do not have a projected procurement--to encourage the units to buy the items rather than repair them at the local level. The reduced price to the units should be less than the repair cost at the local level. Otherwise, the units will continue to repair the items locally.

    Agency Affected: Department of Defense: Department of the Army

 

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