Recovery of the Cost of Normal Inventory Operating Stock Losses on Sales of Articles to Foreign Governments

FGMSD-77-43: Published: Sep 8, 1977. Publicly Released: Sep 8, 1977.

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The Department of Defense (DOD) is losing millions of dollars on sales of articles to foreign governments because normal inventory losses are not being recovered. Pricing policies and systems used by military services to recover normal inventory losses are inadequate.

Sufficient management attention has not been given to the recovery of normal inventory losses on the sale of nonstock fund inventory items. It has been over 8 years since DOD issued instructions requiring the recovery of these losses from foreign governments on sales under supply support arrangements. Unless timely action is taken by DOD to change its policy guidance and by the military services to implement the guidance provided, additional millions of dollars of normal inventory losses related to the sale of secondary items to foreign governments will not be recovered.

Recommendation for Executive Action

  1. Status: Closed

    Comments: Please call 202/512-6100 for additional information.

    Recommendation: The Secretary of Defense should direct: the Department to change its pricing policy for foreign military sales, requiring the inclusion of normal inventory losses in charges to foreign governments for all nonstock fund items sold from DOD inventories; and the military services to implement DOD policies on the recovery of these losses and services to attempt to recover previously unbilled costs for normal inventory losses on sales of nonstock fund inventory items for all sales agreements for which a final billing has not been made and for supply support arrangements for which a final billing has been made.

    Agency Affected:


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