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Testimony: 

Before the Subcommittees on Readiness and Tactical Air and Land Forces, 
Committee on Armed Services, 

House of Representatives: 

United States Government Accountability Office: 

GAO: 

For Release on Delivery Expected at 1:00 p.m. EST: 

Thursday, March 30, 2006: 

Defense Logistics: 

Preliminary Observations on Equipment Reset Challenges and Issues for 
the Army and Marine Corps: 

Statement of William M. Solis: 
Director, Defense Capabilities and Management: 

GAO-06-604T: 

GAO Highlights: 

Highlights of GAO-06-604T, testimony before the Subcommittee on 
Readiness and Subcommittee on Tactical Air and Land Forces, Committee 
on Armed Services, House of Representatives: 

Why GAO Did This Study: 

The United States is engaged in an unconventional war, not a war 
against military forces of one country, but an irregular war against 
terrorist cells with global networks. Operations Iraqi Freedom and 
Enduring Freedom are sustained military operations, which are taking a 
toll on the condition and readiness of military equipment that, in some 
cases, is more than 20 years old. The Army and Marine Corps will likely 
incur large expenditures in the future to reset (repair or replace) a 
significant amount of equipment when hostilities cease. The Army has 
requested about $13 billion in its fiscal year 2006 supplemental budget 
request for equipment reset. 

Todayís testimony addresses (1) the environment, pace of operations, 
and operational requirements in Southwest Asia, and their affects on 
the Armyís and Marine Corpsís equipping and maintenance strategies; (2) 
equipment maintenance consequences created by these equipping and 
maintenance strategies; and (3) challenges affecting the timing and 
cost of Army and Marine Corps equipment reset. 

GAOís observations are based on equipment-related GAO reports issued in 
fiscal years 2004 through 2006, as well as ongoing related work. 

What GAO Found: 

In response to the harsh operating environments in Iraq and 
Afghanistan, and the unanticipated and prolonged length and pace of 
sustained operations, the Army and Marine Corps have developed and 
implemented several initiatives to equip its forces and maintain the 
extensive amounts of equipment in theater. Environmental factors such 
as heat, sand, and dust have taken their toll on sensitive components. 
In addition, operating equipment at a pace well in excess of peacetime 
operations is generating a large operational maintenance and 
replacement requirement that must be addressed when units return to 
their home stations. To meet ongoing operational requirements, the Army 
and Marine Corps have developed pools of equipment in theater to 
expedite the replacement of equipment damaged during operations and 
directed that equipment necessary for OIF and OEF operations remain in 
theater. In response, the Army and Marine Corps have developed several 
initiatives to increase the maintenance capacity in theater to be able 
to provide near-depot level repair capabilities. 

Although the Army and Marine Corps are reporting high rates of 
equipment readiness and have developed and implemented plans to 
increase the maintenance capabilities in theater, these actions have a 
wide range of consequences. Many of the equipment items used in 
Southwest Asia are not receiving depot-level repair because equipment 
items are being retained in theater or at home units and the Army has 
scaled back on the scope of work performed at the depots. As a result, 
the condition of equipment items in theater will likely continue to 
worsen and the equipment items will likely require more extensive 
repair or replacement when they eventually return to home stations. 

The Army and Marine Corps will face a number of ongoing and long-term 
challenges that will affect the timing and cost of equipment reset, 
such as Army and Marine Corps transformation initiatives, reset of 
prepositioned equipment, efforts to replace equipment left overseas 
from the active, National Guard, and Reserve units, as well as the 
potential transfer of U.S. military equipment and the potential for 
continuing logistical support to Iraqi Security Forces. Also, both the 
Marine Corps and Army will have to better align their funding requests 
with the related program strategies to sustain, modernize, or replace 
existing legacy equipment systems. Finally, both services will have to 
make difficult choices and trade-offs when it comes to their many 
competing equipment programs. While the services are working to refine 
overall requirements, the total requirements and costs are unclear and 
raise a number of questions as to how the services will afford them. 
Until the services are able to firm up these requirements and cost 
estimates, neither the Secretary of Defense nor the Congress will be in 
a sound position to weigh the trade offs and risks. 

www.gao.gov/cgi-bin/getrpt?GAO-06-604T. 

To view the full product, including the scope and methodology, click on 
the link above. For more information, contact William M. Solis at (202) 
512-8365 or solisw@gao.gov. 

[End of section] 

Mr. Chairmen and Members of the Subcommittees: 

We welcome the opportunity to appear before you today to discuss a 
number of maintenance and equipment reset challenges facing the Army 
and Marine Corps. The United States is engaged in what the Department 
of Defense has termed the long war. This is not a conventional war 
against military forces of one country but an irregular war against 
terrorist cells with global networks, with operations currently 
centered in Iraq and Afghanistan. These sustained operations are taking 
a toll on the condition and readiness of military equipment that, in 
some cases, is more than 20 years old. Age, along with the harsh 
environment in theater and combat conditions over long periods of time, 
magnifies an already growing problem of equipment repair, replacement, 
and procurement that existed even before the onset of combat operations 
in Iraq and Afghanistan. While combat units report high readiness 
rates, these reports reflect only that equipment is fully mission 
capable, meaning that the equipment has no critical or safety 
deficiencies as outlined in technical readiness reporting instructions. 
However, equipment that is considered fully mission capable may have a 
number of deficiencies that will need to be addressed in the longer 
term. 

In addition to the billions of dollars already spent to maintain this 
well-worn equipment for ongoing operations, the Army and Marine Corps 
will likely incur large expenditures in the future to repair or replace 
(reset) a significant amount of equipment when hostilities cease. The 
services are currently funding their reset programs entirely through 
the use of supplemental appropriations, and plan to rely on 
supplemental appropriations for reset funding through at least fiscal 
year 2007. The fiscal year 2006 supplemental budget request includes 
$10.4 billion for equipment maintenance and reset. The Marine Corps has 
incurred a cost of more than $12 billion to date to reset equipment. 
The Army estimates its total reset bill for fiscal year 2006 alone to 
be nearly $13.5 billion. The uncertainties of how long ongoing 
operations will continue make it difficult to estimate future equipment 
reset costs. The overall condition of major equipment items at the end 
of these operations, although difficult to predict, will also be a 
significant factor affecting reset costs. Equipment used in operations 
in Iraq and Afghanistan will eventually require more intensive repair 
and overhaul than what is typically expected in peacetime. Furthermore, 
the affordability of these maintenance requirements will be an issue as 
the cost of these requirements compete for available funding in the 
future with other Army and Marine Corps programs, as well as the 
overall Department of Defense budget. 

My statement today reflects our preliminary observations drawn from 
ongoing work as well as recently published reports. As requested, my 
testimony today will focus on the equipment maintenance and reset 
challenges facing the Army and Marine Corps. Specifically, it addresses 
the (1) environment, pace of operations, and operational requirements 
in Southwest Asia, and their effects on the Army's and Marine Corps's 
equipping and maintenance strategies; (2) equipment maintenance 
consequences and issues created by these equipping and maintenance 
strategies; and (3) challenges affecting the timing and cost of Army 
and Marine Corps equipment reset. 

The observations we will discuss today regarding Army and Marine Corps 
equipment maintenance and reset plans is based on reports we issued in 
fiscal years 2004 through 2006, as well as preliminary observations 
based on related ongoing work. Several GAO teams conducted audit work 
related to these issues in Iraq and Kuwait from November 2005 through 
January 2006. We conducted our work in accordance with generally 
accepted government auditing standards. 

Summary: 

The harsh operating environment, prolonged length and pace of 
operations, and operational requirements in Iraq and Afghanistan have 
placed tremendous stress on deployed equipment. In response to these 
environmental and operational challenges, the Army and Marine Corps 
have developed and implemented initiatives to keep large amounts of 
equipment in theater and have developed enhanced maintenance capacity 
in theater above the unit level to sustain major equipment items. 

While these initiatives and enhanced in-theater maintenance capability 
have reportedly contributed to high equipment readiness rates for 
combat units and improved availability of equipment in theater, they 
have presented the Army and Marine Corps with a wide range of 
consequences and issues. The consequences include (1) equipment items 
not receiving depot-level maintenance for long periods, (2) depots in 
the United States not operating at full capacity, and (3) reduced scope 
of depot repair packages because of affordability reasons. In addition, 
Army officials are concerned that contractors are not meeting 
performance expectations, and the condition and availability of theater 
sustainment stocks are not sufficient to meet replacement needs. These 
potential concerns may have long-term effects such as a decrease in 
near-term or long-term readiness of equipment or an increase in overall 
repair or replacement costs. 

In addition, the Army and Marine Corps will likely face a number of 
ongoing and longer-term challenges and issues that will affect the 
timing and cost of equipment reset. These challenges include force 
structure and transformation initiatives; equipment requirements for 
prepositioned equipment sets; future equipment replacement needs for 
active, guard, and reserve forces; potential equipment transfer and 
logistical support to the Iraqi Security Forces; the lack of a 
comprehensive equipment strategy; and issues related to the timing of 
supplemental funding for depot maintenance. Lastly, the Army and Marine 
Corps will need to make difficult choices when it comes to their many 
competing equipment programs. While the services are working to refine 
overall requirements, the total requirements and costs are unclear and 
raise a number of questions as to how the services will afford them. 
Until the services are able to firm up these requirements and cost 
estimates, neither the Secretary of Defense nor the Congress will be in 
a sound position to weigh the trade offs and risks. 

Background: 

The scope of equipment reset efforts that will be required as a result 
of ongoing operations related to Operation Iraqi Freedom (OIF) and 
Operation Enduring Freedom (OEF) is enormous. The services have 
committed a significant amount of equipment to these operations. From 
2003 until April 2005, the Army had deployed more than 40 percent of 
its equipment in support of OIF and OEF. As of March 2005, the Marine 
Corps had about 22 percent of its total fleet assets engaged in Iraq. 
Recently, the Marines estimated that approximately 40 percent of all 
Marine Corps ground equipment, 50 percent to 55 percent of 
communications equipment, and 20 percent of aircraft assets are in use 
in support of current operations. 

According to the Army, reset comprises a series of repair, 
recapitalization, and replacement actions to restore units' equipment 
to a desired level of combat capability commensurate with mission 
requirements and availability of resources. The purpose of reset is to 
bring unit equipment to combat-ready condition, either for the unit's 
next rotation in support of current operations or for other, unknown 
future contingencies. 

The Army's standard level of maintenance is known as 10/20. This 
standard requires that all routine maintenance be executed and all 
deficiencies be repaired. Equipment at less than the 10/20 standard can 
be fully mission capable, which means there are no critical maintenance 
deficiencies as outlined in the technical manuals and instructions, and 
no safety deficiencies. Unit commanders have the authority to supersede 
the technical manuals and declare a system fully mission capable even 
though it has a non-mission capable deficiency. The Marine Corps's 
equivalent term is "mission capable." 

The Army's reset strategy for ground vehicles includes an additional 
set of maintenance procedures known as Delayed Desert Damage (3D) which 
are designed to address damage that results from these vehicles 
operating in a desert environment. These procedures are designed to 
address damage that might otherwise not be visible. These 3D checks are 
initially performed at the unit level. Equipment that goes to a depot 
is subjected to more extensive 3D maintenance procedures. Army aviation 
equipment is subject to Special Technical Inspection and Repair (STIR). 
Similar to 3D, this maintenance is designed to address damage caused by 
operation in a desert environment. STIR also includes other routine 
maintenance. 

Although the terms may be slightly different, the Marine Corps 
equipment repair and replacement process and equipment standards 
parallel the Army process and standards for equipment maintenance. The 
Marine Corps equivalent to the Army's reset process is termed 
"recovery." Marine Corps equipment returning from combat theaters is 
evaluated and transported to either a maintenance depot or to a Marine 
Corps unit's home station for repair. The Marine Corps's equipment 
recovery process entails restoring all equipment used in Global War on 
Terror (GWOT) operations to its pre-GWOT condition. For equipment in 
the Marine Corps prepositioning fleet, this means restoring to a "like 
new condition," for all other equipment, this means is restoring to a 
mission capable status. The Marine Corps also applies procedures 
similar to the 3D as appropriate. 

The Department of Defense (DOD) reported in April 2005 that they 
expected a new set of protocols to emerge based on experience with 
equipment used in OIF and OEF.[Footnote 1] These protocols may be 
similar to 3D and STIR which emerged as maintenance procedures based on 
experience from Operation Desert Storm. DOD, as part of its ongoing 
effort to assess stress on equipment, plans to look for unusual wear 
patterns and methods to address them as well as examining maintenance 
trends. 

Depot maintenance is defined as the highest level of maintenance 
activity, where the most complex maintenance work is done, from 
overhaul of components to complete rebuilds. Military depots and 
defense contractors throughout the United States perform depot-level 
maintenance. 

Environment, Pace of Operations, and Operational Requirements Have 
Shaped Current Army and Marine Corps Equipping and Maintenance 
Strategies: 

In response to the harsh operating environments in Iraq and Afghanistan 
and the unanticipated and prolonged length and pace of sustained 
operations, the Army and Marine Corps have developed and implemented 
several initiatives to equip their forces and maintain extensive 
amounts of equipment in theater. Specifically, the Army and Marine 
Corps have implemented initiatives to keep large amounts of unit 
equipment in theater after the units redeploy to their home stations in 
the United States for the purpose of rapidly equipping follow-on units, 
and have developed additional maintenance capacity in theater above the 
unit level to sustain major equipment items such as high mobility multi-
purpose wheeled vehicles (HMMWVs), other tracked and wheeled vehicles, 
and aviation equipment. 

Environment and High Operational Tempo Have Increased Wear and Tear on 
Equipment Above What Would Normally Be Expected: 

Environmental factors such as heat, sand, and dust have taken their 
tolls on major equipment items. In addition, as we have previously 
reported, the Army and Marine Corps are operating equipment at a pace 
well in excess of their normal peacetime levels, which is generating a 
large operational maintenance and replacement requirement that must be 
addressed when the units return to their home stations.[Footnote 2] 
Continued operations have increased the operational tempo for a great 
deal of Army and Marine Corps equipment. In April 2005, the Department 
of Defense (DOD) reported Army equipment usage rates averaged two to 
eight times that of peacetime rates. Senior Marine Corps officials 
recently testified that the Marine Corps usage rates for ground 
equipment in ongoing operations were four to nine times that of 
peacetime rates. Despite these high usage rates, the deployed Army 
units have generally reported high levels of overall readiness and 
relatively high levels of equipment readiness. Deployed Marine Corps 
units, however, report more degraded levels of overall and equipment 
readiness. Unit commanders in both services are able to subjectively 
upgrade their overall readiness ratings, although this has been done to 
a lesser extent by the Marine Corps. Absent such upgrades, overall 
readiness levels (particularly for the Army) would be significantly 
lower as a result of units' low levels of equipment and supplies on 
hand. 

Army and Marine Corps Hold Large Amounts of Unit Equipment in Theater: 

To meet ongoing operational requirements, the Army and Marine Corps 
have developed and implemented initiatives to concentrate equipment in 
theater. When the Army initially developed its strategy of retaining 
equipment from redeploying units in theater, it did not envision this 
to be a long-term mechanism for managing equipment needs, but rather a 
short-term measure to conserve transportation assets and, more 
importantly, ensure that units were rapidly equipped. The Marine Corps, 
like the Army, developed a similar equipment management initiative. 
Additionally, the Army has developed a pool of equipment in theater to 
expedite the replacement of equipment damaged during these operations, 
referred to as theater sustainment stocks (TSS), which includes, for 
example, tanks, HMMWVs, Bradley Fighting Vehicles, and support 
vehicles. As of January 2006, TSS included an estimated 400 different 
types of vehicles and other equipment. The Marine Corps recently 
testified that they have developed a similar pool of ground equipment 
known as Forward In-Stores to replace damaged major equipment items. 

To ensure that deployed units receive required amounts of equipment 
critical for their missions, the Army has designated certain major 
equipment items, such as add-on-armor vehicles, up-armored HMMWVs, 
selected communications and intelligence equipment, and other items 
deemed critical for OIF and OEF missions as "theater provided 
equipment" (TPE). According to Army officials, based on operational 
decisions, these theater-specific items are being left in theater 
because these are force protection items. This equipment is taken from 
active, Guard, and Reserve forces when they return to the United States 
and is retained in theater to hand off to follow-on units. TPE includes 
equipment such as armored vehicles, individual soldier body armor, and 
equipment used to counter improvised explosive devices. As of November 
2005, the Coalition Forces Land Component Commander estimated that 
there were approximately 300,000 equipment items in the TPE inventory 
in Iraq, including more than 26,000 vehicles. The Army's TPE initiative 
began in late 2003, when the first Army units were directed to leave 
equipment in theater, then known as "stay behind equipment." The Army, 
in November 2005, replaced the term "stay behind equipment" with the 
term TPE to better manage equipment accountability and also reflect 
items that were procured directly for the theater. Unlike other less 
intensely managed equipment items, TPE is transferred directly from 
units leaving the theater to deploying units taking their place. In 
most cases, these transfers take place at the unit's forward station in 
Iraq. As a result, most of this equipment has been in heavy use in 
harsh desert and combat conditions since it was first left in theater 
by the units that originally deployed with the equipment. Because TPE 
is maintained at the unit level, this strategy has not provided the 
Army with an opportunity to periodically rotate TPE back to the United 
States for depot level maintenance. As discussed in a later section, 
keeping large amounts of equipment in theater for long periods of time 
without the opportunity for depot-level repair has created a number of 
related consequences. 

The Marine Corps, like the Army, has directed that equipment necessary 
for OIF and OEF operations remain in theater. Because many Marine Corps 
mission requirements have been exceeding the unit's typical combat 
equipment allowances, Marine Corps commanders in theater have developed 
expanded equipment packages for deploying units that are designed to 
ensure that units have the required equipment for their missions. 
Deploying Marine Corps units fall in on and assume custody of equipment 
left by other units departing the theater. According to recent Marine 
Corps testimony, this initiative allows it to provide the best 
equipment possible to forces in theater while also reducing equipment 
rotation costs. Marine Corps officials estimated they had deployed 
about 30 percent of its ground equipment, and 20 percent of aviation 
assets in support of ongoing operations. However, the percentage of 
ground equipment deployed in support of operations has been as high as 
40 percent according to recent Marine Corps testimony. While this 
initiative has met equipment needs to date, it has caused some major 
equipment items to remain in constant operation, often in harsh desert 
conditions. 

Initiatives to Develop More Extensive Maintenance Capacity in Theater: 

To address the effects of the harsh operating environments and the 
maintenance needs of rapidly deteriorating equipment that is being held 
in theater for extensive periods, the Army and Marine Corps have 
developed initiatives to increase the maintenance capacity in theater 
to be able to provide near-depot level repair capabilities. For 
example, the Army has developed a refurbishment facility for HMMWVs in 
Kuwait and a Stryker maintenance facility in Qatar to limit the repair 
time and resupply time of these assets. The HMMWV refurbishment 
facility in Kuwait began operations in July 2005 and is operated by a 
defense contractor. The primary objective of this refurbishment 
facility is to mitigate the effects of high mileage, heavy weights, 
high temperatures, and lack of sustained maintenance programs. The 
HMMWV refurbishment facility workload includes refurbishment 
maintenance, as well as modernization and upgrades. As of December 
2005, this facility had refurbished a total of 264 HMMWVs. Similarly, 
the Marine Corps created a limited aircraft depot maintenance 
capability in theater. 

Additionally, both the Army and Marine Corps have taken other steps to 
increase maintenance capacity and the availability of spare parts in 
theater. For example, at the time of our visit to Kuwait in January 
2006, the Army was developing plans to increase the maintenance 
capacity at contractor maintenance facilities in Iraq. In addition, 
according to recent Army testimony, the Army Materiel Command (AMC) and 
the Defense Logistics Agency have taken steps to allow the rapid 
delivery of critical, low-density parts to the theater to maximize 
their availability and minimize transportation costs. The Marine Corps 
has also recently testified on efforts to leverage Army ground depot 
maintenance capabilities in the theater, and developed a rotation plan 
for major equipment items. 

Equipment Maintenance Consequences and Issues Created By Army and 
Marine Corps Equipping and Maintenance Strategies: 

Although the Army and Marine Corps are reporting high rates of 
equipment readiness for combat units and have developed and implemented 
plans to increase the maintenance capabilities in theater, these 
actions have a wide range of consequences and issues. The services have 
made a risk-based decision to keep equipment in theater, to forego 
depot repairs, and to rely almost exclusively on in-theater repair 
capabilities to keep equipment mission capable. As a result, much of 
the equipment has not undergone higher level depot maintenance since 
the start of operations in March 2003. While Army officials noted that 
not all equipment would undergo full depot-level maintenance, much of 
this equipment has incurred usage rates ranging from two to nine times 
the annual peacetime rate meaning that, in some cases, some equipment 
may have added as much as 27 years of use in the past three years. 
Continued usage at these rates without higher levels of maintenance 
could result in the possibility that more equipment will require more 
extensive and expensive repairs in the future or may require 
replacement rather than repair. Because most equipment is staying in 
Iraq, there are other ramifications that have implications for the 
depots in the United States such as the fact that depots are not 
operating at full capacity and that the scope of depot repair work is 
being reduced to meet operational needs. In addition, other maintenance 
issues are beginning to surface, which could have a variety of 
consequences such as a decrease in near-term and long-term readiness of 
equipment or an increase in repair or replacement costs. These 
additional issues include questions regarding contractor performance 
for in-theater maintenance and the condition and availability of the 
Army's TSS in Kuwait. 

Most Equipment Not Receiving Depot-Level Repair: 

Many of the equipment items used in Southwest Asia are not receiving 
depot-level repair because they are being retained in theater or at 
home units and the Army has scaled back on the scope of work performed 
at the depots. As a result, the condition of equipment items in theater 
will likely continue to worsen and the equipment items will likely 
require more extensive repair or replacement when it eventually returns 
to home stations. The Army retains equipment in theater to support 
ongoing operations. For example, as of November 2005, the Army had 
about 300,000 pieces of equipment retained in theater to support troop 
deployment rotations. Very little of this equipment is being returned 
from theater to depots in the United States for repair. Instead, 
redeploying units are expected to maintain their assigned equipment to 
a fully mission capable condition to facilitate the transfer of 
equipment to deploying units. Since TPE is transferred directly from 
units leaving the theater to deploying units taking their place, 
usually at the units' forward station in Iraq, the strategy has not 
allowed the equipment to receive periodic depot-level maintenance. 
Further, some units have commented that the TPE they received, while 
operable, requires higher levels of maintenance. The fully mission 
capable definition is to some extent a broad and malleable term. Unit 
commanders have reported concerns with downtimes, availability of spare 
parts, repair and replacement of damage or combat losses, and the need 
for additional contractor support. The Army is also reconfiguring its 
prepositioned equipment set and consequently is retaining some 
deploying units' equipment in theater to support this Army 
Prepositioned Set, Kuwait (APS-5) reconstruction. For example, 
according to officials at the U.S. Army Forces Command, approximately 
13,000 pieces of equipment from a redeploying unit were transferred to 
prepositioned stocks in Kuwait instead of returning to the United 
States with the unit. This included about 7,000 tactical wheeled 
vehicles. While this equipment is supposed to be reset to a 10/20 
standard before being transferred to prepositioned equipment stocks, it 
is not being returned for depot overhaul. According to Army officials, 
this equipment was not returned for depot overhaul because of short 
timeframe requirements. This equipment was reset to a fully mission 
capable standard. 

In some instances, Army units retain equipment to reconstitute their 
unit quickly rather than send this equipment to depot for overhaul. 
According to officials in the Office of the Secretary of Defense, 
warfighters are not readily willing to give up equipment, which 
contributes to fewer equipment items being returned to the depots for 
repair. Officials at the U.S. Army Forces Command and at army depots 
echoed this concern, stating that availability of assets to induct into 
the depot repair program is limited by units' need and desire to have 
equipment available for training. These officials added that the units 
fear that they will have to wait for replacement equipment because 
their unit priority is not high enough within the Army to ensure 
immediate replacement of the equipment items. To increase the number of 
equipment items going to depots from units, the Army created a list of 
equipment that it will now require units to automatically send to the 
Army depots for reset. The list is based on lessons learned from 
earlier experiences that damage and wear to certain types of equipment 
items used in Southwest Asia require more extensive depot level 
repairs. For example, some equipment reset at the units' home station 
was failing at higher than expected rates in theater during follow-on 
deployments. The list contains about 200 equipment items and has been 
updated several times, most recently in October 2005, to include items 
such as the Bradley Fighting Vehicle and the Abrams Tank. According to 
the implementing memorandum, unit commanders are required to nominate a 
minimum of 25 percent of the listed equipment for return to depots for 
reset. According to the memorandum, the intent is to provide units the 
flexibility to maintain equipment for training while placing the 
maximum possible into reset programs, and items retained for training 
are to be maintained in fully mission capable condition. 

Depots Are Not Operating At Full Capacity Due to Fewer Equipment 
Returns and Enhanced In-Theater Maintenance Capability: 

Because the services are retaining most equipment in theater, depots in 
the United States, tasked with complex maintenance work above and 
beyond in-theater maintenance reset, are not operating at full 
capacity. For example, DOD has estimated that Army depots can produce 
about 19 million direct labor hours of production on a single shift 
basis--8 hours a day, 5 days a week. Based on this measure, the Army 
depots are currently utilized at about 110 percent of capacity. 
However, according to depot officials, the Army could double or triple 
depot capacity by adding more work shifts at the depots. Using this 
multiple shift approach the Army could produce up to approximately 57 
million direct labor hours of production or 170 percent more than the 
current workload at Army depots. Army depots are currently using some 
second shifts; however, second shifts are primarily limited to 
manufacturing process shops such as cleaning, machining, sand-blasting 
and painting, which depot officials say could easily be contracted out 
to increase throughput. According to depot officials, the factors that 
impact their decision to add more shifts and increase throughput are a 
stable commitment of funding throughout the year, the availability of 
retrograde equipment to repair, and the right mix of spare parts 
inventory to support production. 

Scope of Depot Repair Work Is Being Reduced to Meet Operational Needs: 

In addition, the Army has reduced the scope of work performed on some 
equipment items to less than a full overhaul. According to U.S. Army 
Tank and Automotive Command (TACOM) officials, the Army cannot afford 
to do a full overhaul of its ground equipment and has therefore made a 
risk-based decision to perform a reduced scope of work for equipment at 
the depots. To determine what the repair scope should be, the Army 
focused on major readiness components on the vehicles. For example, the 
engine on the Abrams tank is the component that fails the most often 
and is the most expensive to replace. Consequently this was the number 
one component included in the reduced scope of depot repair work. The 
less robust depot level repair being performed speeds repair time and 
reduces expenditures on depot repair. For example, the reduced scope of 
work on the Abrams costs approximately $880,000 versus $1.4 million for 
a complete overhaul. This scope does not include complete disassembly 
of the vehicle and identifies 33 items to be inspected and repaired 
only if necessary. During a full overhaul these items would be 
reconditioned to like new condition, and consequently would be less 
likely to fail after the depot visit although it is unclear what actual 
failure rates might be. According to TACOM officials, the reduced 
overhaul represents what the Army can afford to do. 

The Marine Corps recently instituted an annual equipment rotation plan 
to begin returning equipment from Southwest Asia to the United States 
for reset. The first of this returning equipment was received in the 
first quarter of fiscal year 2006. Previously, Marine Corps reset 
strategy was to overhaul equipment located in the United States, then 
provide the equipment to deploying units to fill requirements that 
could not be satisfied with the pool of mission capable equipment in 
theater. According to depot officials, the Marine Corps found it 
necessary to begin returning equipment from the theater because it is 
running short of available equipment in the United States for depot 
overhaul. However, depot officials told us that the equipment returning 
from theater is in much worse condition than they anticipated so they 
may not be able to reset as many vehicles as planned with available 
reset funds. 

Army Concerned That Maintenance Contractors Are Not Meeting Performance 
Expectations: 

While we did not review copies of the contracts, our review of other 
Army documents and discussions with Army officials identified two 
examples to indicate that maintenance contractors are not meeting 
performance expectations. Army officials estimated that about 70 
percent of equipment maintenance in theater above the unit level is 
being done by contractors. Some of these contractors have experienced a 
number of problems in the past few years, such as not being able to 
quickly acquire skilled maintenance personnel. Specifically, we 
identified a number of maintenance issues regarding the HMMWV 
refurbishment facility in Kuwait and the reset of equipment in the 
prepositioned set of equipment in Kuwait. 

As of January 2006, according to Army maintenance officials in Kuwait, 
the contractor operating the HMMWV refurbishment facility in Kuwait had 
not been able to meet original production goals. In some cases, for 
example, the contractor's actual labor requirements for some vehicles 
exceeded the original estimates by almost 200 percent. This contributed 
to the facility falling over 200 vehicles short of its output goal of 
refurbishing 300 vehicles per month since the facility became 
operational in July 2005.[Footnote 3] Also cited as contributing to the 
facility's poor performance were difficulties the contractor 
experienced in obtaining the required number of third country national 
workers, mostly due to difficulties meeting host country visa 
requirements. Furthermore, according to Army maintenance officials in 
Kuwait, during the first 6 months the facility was operational, the 
contractor repeatedly failed to gather data on resources expended on 
vehicle refurbishments. Without accurate information on the actual 
level of resources required to refurbish these vehicles, it will be 
more difficult for the contractor to estimate and plan for future 
requirements. Since the original contract was issued in April 2005, it 
has been modified multiple times, increasing the total funding 
requirement from slightly more than $36 million over the contract's 
first year of performance, an increase of over 100 percent. 

In addition to concerns about the contractor management of the HMMWV 
refurbishment facility, theater commanders have also expressed concerns 
about contractor performance in support of efforts to reset equipment 
for reconfiguring Army prepositioned stocks. The Army has contracted 
for the maintenance and management of Army prepositioned equipment in 
Kuwait. The Army has recently noted several concerns about contractor 
performance in the areas of personnel and maintenance. For example, 
there is a shortage of contractor personnel which contributes 
significantly to a decline in production. The contractor also 
attributed the shortages to difficulties obtaining the required number 
of third country national workers due to problems with host country 
visa requirements. The Army had to resort to acquiring additional 
vehicle mechanics and supply personnel from another contractor and an 
active duty Army unit and an Army maintenance company. The Army also 
reports that the contractor does not conduct thorough technical 
inspections. If thorough inspections were conducted it would 
significantly reduce the amount of time the equipment spends in 
maintenance shops. According to officials at the U.S. Army Field 
Support Command, equipment is often rejected because of the 
contractor's lack of attention to detail and inadequate maintenance 
inspection procedures. 

Condition of Theater Sustainment Stocks Is Not Sufficient to Rapidly 
Meet Replacement Needs: 

The condition of TSS is not sufficient to replace battle damaged 
equipment without additional maintenance, which may delay the 
equipment's availability and strain in-theater maintenance providers. 
The purpose of TSS is to ensure that equipment is on hand to quickly 
fill unit requirements that may arise due to battle damage or other 
losses. The Army created this stockpile of equipment in Kuwait as a 
quick source to provide replacement equipment, as needed. As of January 
2006, an AMC official responsible for TSS estimated that there were 
approximately 174,000 pieces of equipment in Kuwait and Qatar, 
representing 400 different types of equipment. TSS includes, for 
example, tanks, HMMWVs, Bradley Fighting Vehicles, and support 
vehicles. Expected loss rates are taken into consideration in setting 
TSS equipment levels. When a requirement arises in Iraq, equipment 
items are taken from TSS, maintenance is performed in theater to ensure 
the equipment is in suitable condition, and it is sent to units. Much 
of TSS requires additional maintenance before it can be reissued to 
operational units in Iraq and, in some cases, to restore it to fully 
mission capable. For example, as of January 2006, for a cross-section 
of several types of ground vehicles in TSS, less than 7 percent were 
fully mission capable. As such, TSS that requires additional 
maintenance before it can be reissued as replacement equipment 
increases requirements on the in-theater maintenance capability, which 
may affect other efforts to refurbish equipment in theater for 
prepositioned stocks. The Army Field Support Battalion at Camp Arifjan, 
Kuwait, is responsible for the management and reconstitution of 
prepositioned stocks, the management and repair of TSS in support of 
ongoing requirements, as well as a number of other logistics missions. 
The same contract workforce the Army Field Support Battalion employs 
for maintenance on prepositioned stocks is responsible for maintenance 
of TSS. The capacity of the Army Field Support Battalion to conduct 
reset of equipment being used to reconstitute prepositioned stocks in 
Kuwait is directly affected by ongoing requirements to manage TSS and 
is affected by other missions in support of deployed units in Iraq. 

A Number of Challenges Will Affect the Timing and Cost of Army and 
Marine Corps Equipment Reset: 

The Army and Marine Corps will face a number of ongoing and longer-term 
challenges that will affect the timing and cost of equipment reset. As 
previously mentioned, current military operations are taking a toll on 
equipment, which will affect the cost of repairing equipment as well as 
the amount and cost of equipment that will need to be replaced. In 
addition, other issues such as the Army and Marine Corps efforts to 
modularize and transform their forces, respectively, the reconstitution 
and reset of prepositioned equipment, and the ongoing and longer-term 
efforts to replace equipment from the active, National Guard, and 
Reserve units, as well as the potential transfer of U.S. military 
equipment and potential for continuing logistical support to Iraqi 
Security Forces will also affect the timing and cost of reset. 
Furthermore, both the Army and Marine Corps will have to better align 
their funding and program strategies to sustain, modernize, or replace 
existing legacy equipment systems. Similarly, both services will need 
to face difficult choices for the many competing equipment programs. 
Finally, working with the Congress, both services will have to 
determine the best approaches for dealing with the issues created by 
the timing of depot maintenance supplemental appropriations. 

Army Modularity and Marine Corps Transformation: 

The Army's and Marine Corps's equipment reset programs will also have 
to compete with ongoing and planned force structure changes designed to 
provide more flexibility in deploying forces for ongoing and future 
operations. The Army began its modular force transformation in 2004 to 
restructure itself from a division-based force to a modular brigade-
based force. The modular forces are designed to be stand-alone, self-
sufficient units that are more rapidly deployable and better able to 
conduct joint and expeditionary operations than their larger division-
based predecessors. Modular restructuring will require the Army to 
spend billions of dollars for new equipment over the next several years 
while continuing to reset and maintain equipment needed for ongoing 
operations. The Army estimates that the equipment costs alone will be 
about $41 billion. In addition to creating modular units, the Army 
plans to continue to develop and fund the Future Combat System, which 
the Army recognizes is one of the greatest technology and integration 
challenges it has ever undertaken. 

The Marine Corps has also initiated force structure changes to provide 
flexibility in deploying troops, which will also likely affect the 
Marine Corps's equipment reset strategies. Its force structure 
initiative is designed to reduce the effects of operational tempo on 
the force and reshape the Marine Corps to best support current and 
future operations. In 2004, the Marine Corps conducted a comprehensive 
force structure review to determine how to restructure itself to 
augment high demand, low density capabilities, reduce deployed tempo 
stress on the force, and shape the Marine Corps to best support the 
current and future warfighting environments. 

Requirements to Reconstitute and Reset Army and Marine Corps 
Prepositioned Equipment: 

Both the Army and Marine Corps drew heavily upon prepositioned stocks 
for operations in Iraq and Afghanistan.[Footnote 4] As we reported in 
September 2005, DOD faces some near term operational risks should 
another large scale conflict emerge, because it has drawn heavily on 
prepositioned stocks to support ongoing operations in Iraq. And 
although remaining stocks provide some residual capability, many of the 
programs face significant inventory shortfalls and, in some cases, 
maintenance problems. 

The focus of the Army's current prepositioned equipment reset program 
is building two brigade-sized equipment sets in Kuwait, as well as 
battalion-sized sets in Qatar and Afghanistan. Prepositioned stocks in 
Kuwait are not designated to serve as a pool of equipment available to 
support current missions. Equipment to form these sets is coming from a 
combination of equipment left in theater, as well as equipment being 
transferred from U.S. depots and from units around the world. While a 
sizeable portion of the needed equipment is now in place, much of this 
equipment needs substantial repair. Maintenance facilities are limited 
as are covered storage facilities. Lack of covered storage facilities 
presents yet another challenge. Prepositioned stock, like TSS, is 
stored in the open desert environment, which in some cases may lead to 
further degradation. Harsh environmental conditions such as sand and 
high humidity levels accelerate equipment corrosion, which may not be 
apparent until extensive depot maintenance is performed. We have 
previously reported that outdoor storage aggravates corrosion and the 
use of temporary shelters with climate-controlled facilities is cost 
effective, has a high return on investment, reduces maintenance and 
inspections and, as a result, increases equipment availability. The 
Marine Corps has also drawn on a significant portion of its 
prepositioned stocks from five ships to support current operations. It 
is unclear when this equipment will be returned to prepositioned stocks 
because much of this equipment will be left in Iraq to support the 
continuing deployment of Marine Corps forces there. 

Our September 2005 report also raised serious concerns about the future 
of the department's prepositioning programs, and we believe these 
concerns are still valid. No department-wide strategy exists to guide 
the programs, despite their importance to operational plans as 
evidenced in OIF. Without an overarching strategy, the services have 
been making decisions that affect the future of the programs without an 
understanding of how the prepositioning programs will fit into an 
evolving defense strategy. The Army's decision to accelerate the 
creation of substantial combat capabilities in Southwest Asia is 
understandable because it could speed buildup in the future, especially 
if large numbers of troops are withdrawn. However, the Army's decisions 
in other parts of its prepositioning programs are questionable. For 
example, the Army recently decided to cut its afloat combat capability 
in half (from two brigade sets to one) by the end of fiscal year 2006 
as a result of a budget cut from the Office of Secretary of Defense. 
However, internal planning documents that we reviewed indicated that 
the Office of Secretary of Defense directed terminating a planned third 
set afloat, cutting an existing capability that would likely be 
critical to responding to another crisis should it occur. In the 
meantime, the Army is making plans to reduce its contractor workforce 
in Charleston, South Carolina, where it performs the maintenance on its 
afloat stocks. At the same time, in Europe, the Army has a $55 million 
military construction project well underway at a site in Italy, but the 
Army's draft prepositioning strategy identifies no significant 
prepositioning mission in Europe. In our discussions with Army 
managers, they told us they are planning to use the Italian workforce 
to perform maintenance on equipment that ultimately will be placed 
afloat in 2013 or later. 

Army and Marine Corps Will Need to Replace Active, Guard, and Reserve 
Equipment Left in Theater: 

The Army and Marine Corps must also plan for replacement of active, 
National Guard, and Reserve equipment left in theater to support 
ongoing operations. In late 2003, the Army began to direct redeploying 
Guard and Reserve units to leave their equipment in theater for use by 
deploying forces. As we have previously testified, DOD policy requires 
the Army to replace equipment transferred to it from the reserve 
component including temporary withdrawals or loans in excess of 90 
days,[Footnote 5] yet the Army had neither created a mechanism in the 
early phases of the war to track Guard equipment left in theater nor 
prepared replacement plans for this equipment, because the practice of 
leaving equipment behind was intended to be a short-term 
measure.[Footnote 6] As of March 2006, only three replacement plans 
have been endorsed by the Secretary of Defense, all to replace Guard 
equipment, while 33 plans are in various stages of approval. 

Lack of equipment for the active, Guard, and Reserve forces at home 
stations affects the ability of the forces to conduct unit training, 
and adversely affects the ability of the Guard and Reserve forces to be 
compatible with active component units. As operations have continued, 
the amount of Guard equipment retained in theater has increased, which 
has further exacerbated the shortages in nondeployed Guard units. For 
example, when the North Carolina 30th Brigade Combat Team returned from 
its deployment to Iraq in 2005, it left behind 229 HMMWVs, about 73 
percent of its pre-deployment inventory of those vehicles, for other 
units to use. Similarly, according to Guard officials, three Illinois 
Army National Guard units were required to leave almost all of their 
HMMWVs, about 130, in Iraq when they returned from deployment. As a 
result, the units could not conduct training to maintain the 
proficiency they acquired while overseas or train new recruits. In all, 
the Guard reports that 14 military police companies left over 600 
HMMWVs and other armored trucks, which are expected to remain in 
theater for the duration of operations, which according to Army 
officials, would be required regardless of Guard, Reserve, or active 
unit. Lack of equipment for training also adversely affects Marine 
Corps units. For example, in the interest of supporting units in 
theater by leaving certain pieces of equipment in theater and drawing 
on equipment from elsewhere to meet theater needs, the Marine Corps has 
experienced home station equipment shortfalls, among both active and 
reserve components. According to a senior Marine Corps official, these 
shortfalls may have detrimental effects on the ability of the Marine 
Corps to train and to respond to any contingencies. In addition, the 
Army has acknowledged that the benefits of prepositioned stocks are 
diminished when units are not trained on equipment that matches that 
present in the stocks. 

The Army and Marine Corps strategy for retaining and maintaining 
significant numbers of low density, high demand equipment items in 
theater will affect plans to replace equipment left in theater by the 
Guard and Reserve. We have previously reported that to meet the demand 
for certain types of equipment for continuing operations, the Army has 
required Army National Guard units returning from overseas deployments 
to leave behind many items for use by follow-on forces.[Footnote 7] 
According to the National Guard and Reserve Equipment Report for Fiscal 
Year 2007, the Army National Guard has been directed to transfer more 
than 75,000 pieces of equipment valued at $1.76 billion, to the Army to 
support OIF and OEF.[Footnote 8] However, the Army does not have a 
complete accounting of these items or a plan to replace the equipment, 
as DOD policy requires. The Army expects that these items will 
eventually be returned to the Guard, although the Guard does not know 
whether or when the items will be returned. We have also previously 
reported that like the Army National Guard, Army Reserve units have 
been required to leave certain equipment items, such as vehicles that 
have armor added, in theater for continuing use by other forces. This 
further reduces the equipment available for training and limits the 
Army Reserve's ability to prepare units for mobilizations in the near 
term. The Army is working with both the Army National Guard and the 
Army Reserve to develop memoranda of agreement on how equipment left in 
Iraq will be replaced. Until these plans are completed and replacement 
equipment provided, the Army Reserve and Army National Guard will face 
continuing equipment shortages while challenged to train and prepare 
for future missions. 

According to Marine Corps testimony, the policy of retaining equipment 
in theater to meet the needs of deployed forces has led to some home 
station equipment shortfalls, among both active and reserve units, 
which if allowed to continue could have a direct impact on the ability 
of Marine Forces to train for known and contingent deployments. 
Furthermore, according to the National Guard and Reserve Equipment 
Report for fiscal year 2007, more than 1,800 major Marine Corps 
equipment items, valued at $94.3 million have been destroyed, and an 
additional 2,300 require depot maintenance. 

Potential Requirements for Transferring Equipment and Providing 
Logistical Support to the Iraqi Security Forces Are Unclear: 

Future requirements to transfer equipment and provide logistical 
support to the Iraqi Security Forces and the extent of required U.S. 
support are unclear. In its report to Congress in April 2005, DOD 
stated that the primary constraint on future maintenance processes is 
the lack of equipment that is available for reset and recovery 
activities. DOD noted that a large amount of equipment is being held in 
the theater as a rotational pool for deploying units, and will remain 
in theater for the long term. DOD noted that when hostilities cease, 
some of the equipment being held in theater may be turned over to Iraqi 
Security Forces, if authorized by law. In addition, some equipment will 
be scrapped and the rest would be assessed for maintenance. Military 
service officials have recently testified that some types of equipment 
may be left for Iraqi Security Forces, and cited concerns with 
supporting that equipment in the future. Until the determination of 
what equipment will be given to the Iraqi Security Forces is made, it 
will be difficult to determine what will be available for reset. As the 
United States military draws down its combat forces, any continued 
logistical support using equipment such as wheeled vehicles and 
helicopters will have to come from the Army or Marine Corps and will 
have to be factored into plans for reset and reconstitution. 

Lack of Comprehensive Sustainment, Modernization, and Replacement 
Strategies for Certain Army and Marine Corps Equipment Items: 

We have previously reported that, for certain equipment items, the Army 
and Marine Corps have not developed complete sustainment, 
modernization, and replacement strategies or identified funding needs 
for all priority equipment items such as the Army Bradley Fighting 
Vehicle and Marine Corps CH-46E Sea Knight Helicopter.[Footnote 9] 
Given that funding for the next several years to sustain, modernize, 
and replace aging equipment will compete for funding with other DOD 
priorities, such as current operations, force structure changes, and 
replacement system acquisitions, the lack of comprehensive equipment 
strategies may limit the Army's and Marine Corps's abilities to secure 
required funds. Furthermore, until the services develop these plans, 
Congress will be unable to ensure that DOD's budget decisions address 
deficiencies related to key military equipment. 

We first reported in 2003 that the condition of 25 selected military 
equipment items varied from very good to very poor and that, although 
the services had program strategies for sustaining, modernizing, or 
replacing most of the items reviewed, there were gaps in some of those 
strategies. Since this report, DOD's continued operations in Iraq and 
Afghanistan have resulted in additional wear and tear on military 
equipment. Given continued congressional interest in the wear and tear 
being placed on military equipment and the funding needed to 
reconstitute the equipment, we issued a follow up report in October 
2005 in which we assessed the condition, program strategies, and 
funding plans for 30 military equipment items, including 18 items from 
our December 2003 report. With respect to these 30 selected equipment 
items, we identified that the military services had not fully 
identified near-and long-term program strategies and funding plans to 
ensure that all of these items can meet requirements. For many of the 
equipment items included in our assessment, average fleet wide 
readiness rates had declined, generally due to the high pace of recent 
operations or the advanced age or complexity of the systems. Although 
selected equipment items have been able to meet wartime requirements, 
the high pace of recent operations appears to be taking a toll on 
selected items and fleet wide mission capable rates have been below 
service targets, particularly in the Army and Marine Corps. For 
example, the Army's Bradley Fighting Vehicle, Abrams Tank, and AH-64A/D 
Apache Helicopter, and the Marine Corps's Light Armored Vehicle and Sea 
Knight Helicopter were assessed as warranting additional attention by 
DOD or the military services due to the high pace of operations 
increasing utilization beyond planned usage. Furthermore, according to 
officials, the full extent of the equipment items' degradation will not 
be known until a complete inspection of the deployed equipment is 
performed. 

Marine Corps legacy aviation equipment in use faces special readiness 
challenges due to the increased usage rates coupled with the absence of 
new production of that equipment. Existing equipment must be maintained 
and managed to provide the warfighter with needed equipment until next 
generation equipment is constructed. We have recently reported severe 
problems or issues that warrant immediate attention by DOD or the 
military services with the near term program strategies and funding 
plans for the Marine Corps CH-46E Sea Knight Helicopter program due to 
anticipated parts shortages and maintenance issues, as well as 
potential problems with the readiness of Marine Corps M1A1 tanks, Light 
Armored Vehicles, and CH-53E helicopters stemming from the high pace of 
operations and increased utilization beyond planned usage. In recent 
Congressional testimony, Marine Corps officials discussed problems with 
a lack of active production lines for the CH-46 and CH-53 helicopters. 
Given that no replacement aircraft is available, as these platforms are 
lost in combat they cannot be replaced. The Marine Corps has requested 
funds in the fiscal year 2006 supplemental to bring CH-53E helicopters 
out of desert storage and refurbish them to replace those destroyed 
during current operations. 

Army and Marine Corps Face Difficult Choices For Competing Equipment 
Programs: 

The Army and Marine Corps will need to make difficult choices for 
competing equipment programs, such as Army modularity and equipment 
reset, when considering future equipment budget requests. While the 
services are working to refine overall requirements, the total 
requirements and costs are unclear and raise a number of questions as 
to how the services will afford them. The growing requirement for 
future equipment repair, replacement, and reset will only serve to 
exacerbate the problem. For example, based on our preliminary 
observations, the Army's cost estimate, to create modular units has 
increased from $28 billion in 2004 to its current estimate of $52.5 
billion. Of that $52.5 billion, $41 billion or 78 percent has been 
allocated to equipment. However, our preliminary observations also 
indicate that it is not clear how the Army distinguishes between costs 
associated with modularity and costs for resetting equipment used 
during operations. According to recent Army information, the Army's 
requirement for equipment reset is more than $13 billion for fiscal 
year 2006. This includes funds to repair equipment in theater or at the 
depots, replace battle losses, and recapitalize equipment. In fiscal 
year 2006 alone, the Army estimated it would need to reset about 6,000 
combat vehicles, 30,000 wheeled vehicles, 615 aircraft, and 85,000 
ground support items. In addition, according to recent Marine Corps 
testimony, accurately forecasting the total cost to reset the force is 
dependent upon calculations of what percentage of current inventory in 
theater will be repairable or will need to be replaced, how much 
equipment may be left behind for Iraqi forces, and other determinations 
dependent on circumstances and conditions that cannot be easily 
predicted. The Army has also indicated that additional supplemental 
funding will be required for equipment reset for at least two years 
after hostilities cease. The Army and Marine Corps must consider these 
affordability challenges in the context of future fiscal constraints. 

Depots Experience Difficulties With Executing Supplemental 
Appropriations Received Late in the Fiscal Year: 

The Army depots received their fiscal year 2005 supplemental in the 
June/July 2005 timeframe, at which time they began executing their 
reset workload. Subsequently, some of these funds were later pulled 
back by the AMC. According to AMC officials, the funds were pulled back 
from the depots for three reasons: (1) the depots could not complete 
the reset workload until several months after the end of fiscal year 
2005, (2) the funds were needed to meet other Army-wide requirements, 
and (3) the Army wanted to avoid potential Congressional cuts to its 
fiscal year 2006 budget for depot carry over workload. In total, AMC 
pulled back $193 million, or about 10 percent of reset funds for fiscal 
year 2005 for Army depot maintenance. According to AMC officials, the 
command did not use these funds for contract depot maintenance, but 
rather gave them back to Army headquarters to meet other unfunded 
fiscal year 2005 operation and maintenance requirements. According to 
Army and Marine Corps depot officials, receipt of funds too late in the 
fiscal year does not allow timely execution of major item workload 
within the current fiscal year. Given the time it takes to preposition 
parts and materials (at best 60 days), plus the repair cycle time to 
complete repairs (approximately another 60 to 90 days for major items) 
there is basically little end item production to be achieved at the 
depot within the fiscal year the funding is received. Receiving the 
supplemental late in the year of execution reduced the amount of 
planned depot maintenance work for 2005. Depot officials anticipate 
that the condition may repeat itself in fiscal year 2006. For example, 
one Army depot reported that its planned fiscal year 2006 workload of 
27 million direct labor hours will likely be reduced to 21 million 
hours, a reduction of 6 million, or 22 percent, of planned direct labor 
hours. 

Depot officials commented that the timing of the supplemental 
appropriations compounds problems depots have in efficiently managing 
their maintenance workload. The depots face the challenge of managing 
changes in funded requirements during the year of execution, obtaining 
the equipment they have programmed for overhaul, and ensuring that the 
right spare parts are purchased in advance of equipment overhauls. For 
example, in preparing its fiscal year 2006 supplemental budget request, 
AMC included the repair of HMMWVs at its depots. The depots planned 
accordingly to support this requirement. However, since the 
supplemental was submitted to Congress, the Army has requested that 
Congress shift $480 million in HMMWV reset funds to new procurement. 
This change has reduced the planned depot workload by almost 6,000 
HMMWVs creating disruptions in depots' workforce structure plans. Until 
the reduction, Red River depot anticipated hiring additional employees 
to perform the HMMWV and Bradley workloads, and Letterkenny Army Depot 
recently reduced its contract workforce by 150 employees due to 
declining work on the HMMWV and the Patriot missile system. 

Concluding Observations: 

Prior to the Global War on Terror, the Department of Defense, the Army, 
and the Marine Corps faced significant challenges in sustaining and 
modernizing legacy equipment as well as funding the procurements of 
replacement weapons systems. With the advent and continuation of 
military operations over the past several years in Afghanistan and 
Iraq, the challenges of sustainment and modernization of legacy weapons 
systems, and procurement of new and replacement weapons systems has 
been significantly exacerbated. The harsh operating environment and 
high operational tempo, coupled with the operational requirement to 
keep equipment in theater without significant depot repair, could lead 
to higher than anticipated reset costs and more replacements than 
repair of equipment. 

Although the precise dollar estimate for the reset of Army and Marine 
Corps equipment will not be known until operations in Iraq and 
Afghanistan cease, it will likely cost billions of dollars to repair 
and replace the equipment used. As the funding requirements increase 
over time, the Army and Marine Corps will be forced to make difficult 
choices and trade-offs for the many competing equipment programs. While 
the services are working to refine overall requirements, the total 
requirements and costs are unclear and raise a number of questions as 
to how the services will afford them. Until the services are able to 
firm up these requirements and cost estimates, neither the Secretary of 
Defense nor the Congress will be in a sound position to weigh the trade 
offs and risks. 

Mr. Chairman, this concludes my statement. I would be happy to answer 
any questions. 

FOOTNOTES 

[1] Department of Defense, Ground Force Equipment Repair, Replacement, 
and Recapitalization Requirements Resulting From Sustained Combat 
Operations (Washington, D.C.: Apr. 2005). 

[2] GAO, Defense Management: Processes to Estimate and Track Equipment 
Reconstitution Costs Can Be Improved, GAO-05-293 (Washington, D.C.: May 
5, 2005). 

[3] Based on production data from July 2005 through December 2006. 

[4] Prepositioned stocks are protected, go-to-war assets which reduce 
the demand on scarce mobility assets required to project forces from 
the United States and to sustain early arriving forces until the sea 
lines of communication are established. 

[5] Department of Defense Directive 1225.6, Equipping the Reserve 
Forces, April 7, 2005. 

[6] GAO, Reserve Forces: Army National Guard's Role, Organization, and 
Equipment Need to be Reexamined, GAO-06-170T (Washington D.C.: Oct. 20, 
2005). 

[7] GAO, Reserve Forces: Plans Needed to Improve Army National Guard 
Equipment Readiness and Better Integrate Guard into Army Force 
Transformation Initiatives, GAO-06-111 (Washington, D.C.: Oct. 4, 
2005). 

[8] Department of Defense, National Guard and Reserve Equipment Report 
for Fiscal Year 2007 (Washington, D.C.: Feb. 2006). 

[9] GAO, Military Readiness: DOD Needs to Reassess Program Strategy, 
Funding Priorities, and Risks for Selected Equipment, GAO-04-112 
(Washington, D.C.: Dec. 19, 2003).