Defense Supply Chain:

DOD Needs Complete Information on Single Sources of Supply to Proactively Manage the Risks

GAO-17-768: Published: Sep 28, 2017. Publicly Released: Sep 28, 2017.

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What GAO Found

The Department of Defense's (DOD) 2016 report on risks associated with single sources of supply did not fully address two of the four elements directed by a Senate report and did not include other information that would have provided further insight into those risks. DOD included information on major defense acquisition programs and supporting parts provided by each single source of supply. However, DOD did not include implementation plans and timelines for risk mitigation actions or information about the effects of the loss of suppliers, as directed. In addition, complete information about DOD organic facilities was not included. While DOD is not required to update its report, it regularly reports industrial base information to congressional committees. Without complete information about critical suppliers, congressional and DOD decision makers do not know all potential risks and effects associated with the loss of single sources of supply for weapon systems.

GAO Assessment of Department of Defense (DOD) 2016 Report on Single Source of Supply

Reporting element from Senate Report 114-49

Assessment

Identify major defense acquisition programs with operational implications.

Include a list of critical components provided by single-source and single- provider suppliers.

Identify risk management actions with associated implementation plans and time lines DOD will take to prevent negative operational impact in the event of a loss of such suppliers

Identify severity of operational impact of the loss of such suppliers.

Legend: ● Addressed ◐ Partially Addressed  Did not address

Source: GAO analysis of DOD report. | GAO-17-768

Program offices do not have complete information to fully identify and manage single source of supply risks. First, program officials GAO spoke with were not aware of DOD's 2016 report, and thus did not have information about parts from single-source suppliers that are considered to be most critical, which could provide important focus for managing these risks. Second, program offices often rely on the prime contractor to identify single source of supply risks, among other types of risks, and GAO found that program offices in some instances had limited information to manage those risks because DOD does not have a mechanism to ensure program offices obtain complete information from contractors. Without such a mechanism, program offices may not be aware of risks early enough to take proactive actions to understand and, as appropriate, mitigate those risks. Third, DOD has a program intended to provide information regarding the loss of suppliers and shortages and to proactively manage these risks, called the Diminishing Manufacturing Sources and Material Shortages (DMSMS) program, but GAO found that DMSMS implementation varied at selected program offices. DOD is taking steps toward improving DMSMS management, but there is no department-wide policy that clearly defines the requirements for DMSMS implementation at the program office level throughout the acquisition life cycle. Without such a policy there is no clearly defined requirement for program managers to proactively manage DMSMS issues.

Why GAO Did This Study

DOD has an extensive network of suppliers that provide millions of parts needed to sustain its weapon systems. Some parts are provided by a single source of supply (e.g., one manufacturing facility), and if that single source were no longer able to provide the part, DOD could face challenges in maintaining systems. Senate Report 114-49 directed DOD to report on risks associated with single sources of supply. DOD completed its report in October 2016.

House Report 114-102, accompanying a bill for the National Defense Authorization Act for Fiscal Year 2016, included a provision that GAO review single sources of supply for major defense acquisition programs. This report evaluates the extent to which (1) DOD's 2016 report addressed the direction in the Senate report and (2) DOD's weapon systems program offices have information for identifying and managing single source of supply risks. GAO reviewed DOD policy and procedures, analyzed DOD's report, and interviewed officials from a non-generalizable selection sample of nine program offices.

What GAO Recommends

GAO is recommending that DOD provide complete information to decision makers on risk mitigation plans and timeframes, potential effects from losses, and all critical facilities, commercial and organic, regarding risks from single sources of supply; share information on critical risks with program offices; develop a mechanism to ensure program offices obtain complete information; and issue a DMSMS policy. DOD concurred with GAO's six recommendations.

For more information, contact Zina D. Merritt at (202) 512-5257 or merrittz@gao.gov.

Recommendations for Executive Action

  1. Status: Open

    Comments: DOD concurred with this recommendation. In June 2019, DOD provided follow up information and identified key corrective actions for recommendations from this report. The key corrective actions identified for this recommendation include the issuance of the mission assurance instruction in August 2018 that guides the identification, prioritization, and assessment of defense critical infrastructure. Further, Executive Order 13806 required that DOD perform a whole-of-government assessment of the manufacturing and the defense industrial base, assess risk, identify impacts, and propose mitigation strategies. DOD issued the resulting report in October 2018, which includes a focus on numerous single source and sole supply risks. Lastly, DOD officials stated that DOD senior leadership and Congress were briefed in May 2019 on investments planned to reduce risks and updates will be included in an annual Industrial Capabilities Report to Congress. DOD placed considerable focus on defense industrial base issues in the past year, we will review the next annual report to ensure this focus is continued and that detailed information on DOD's industrial base risks and task critical assets is provided to DOD and Congressional decision makers.

    Recommendation: The Under Secretary of Defense for Acquisition, Technology and Logistics, in conjunction with the Defense Contract Management Agency (DCMA) and the military departments, should assess whether risk mitigation actions have been identified in the event of a loss of each task critical assets (TCA) facility in the defense industrial base and, based on this assessment, develop risk mitigation actions with associated implementation plans and time lines, and provide this information to congressional and DOD decision makers. (Recommendation 1)

    Agency Affected: Department of Defense: Office of the Secretary of Defense: Office of the Under Secretary of Defense for Acquisition, Technology, and Logistics

  2. Status: Open

    Comments: DOD concurred with this recommendation. In June 2019, DOD provided follow up information and identified key corrective actions for recommendations from this report. The key corrective actions identified for this recommendation include a description of the mission assurance process and the annual report on the industrial capabilities that were already in place at the time of issuance of this report, therefore do not represent a change or response to this recommendation. Another key corrective action identified is the issuance of the report in response to the Executive Order 13806 in October 2018, which provides a whole of government assessment of the defense industrial base risks and impacts and associated Hill briefing. DOD placed considerable focus on defense industrial base issues in the past year as a result of the Executive Order, we will review the next annual report to ensure this focus is continued and that detailed information on DOD's industrial base risks and task critical assets is provided to DOD and Congressional decision makers.

    Recommendation: The Under Secretary of Defense for Acquisition, Technology and Logistics, in conjunction with DCMA and the military departments, should provide congressional and DOD decision makers with information on potential effects on defense capabilities in the event of a loss of each TCA facility in the defense industrial base. (Recommendation 2)

    Agency Affected: Department of Defense: Office of the Secretary of Defense: Office of the Under Secretary of Defense for Acquisition, Technology, and Logistics

  3. Status: Open

    Comments: DOD concurred with this recommendation. In June 2019, DOD provided follow up information and identified key corrective actions for recommendations from this report. The key corrective actions identified for this recommendation include the mission assurance process that was already in place at the time of the issuance of this report, which does not reflect a change in response to this recommendation. However, other key corrective actions identified include the identification of several DOD-owned assets in the report DOD issued in response to Executive Order 13806 in October 2018. Further, DOD states that it will provide yearly updates to Congress in its Industrial Capabilities report. Lastly, the corrective actions state that DOD will continue to execute risk mitigation identified in its October 2018 report. DOD placed considerable focus on defense industrial base issues in the past year as a result of the Executive Order, we will review the next annual report to ensure this focus is continued and that detailed information on DOD's industrial base risks and task critical assets is provided to DOD and Congressional decision makers.

    Recommendation: The Under Secretary of Defense for Acquisition, Technology and Logistics, in conjunction with DCMA and the military departments, should provide congressional and DOD decision makers with information on DOD organic facilities that have been identified as TCAs, similar to the information provided previously on commercial facilities. This information also should include (1) the potential effects on defense capabilities in the event of a loss of the facility and (2) risk mitigation actions and associated implementation plans with time lines. (Recommendation 3)

    Agency Affected: Department of Defense: Office of the Secretary of Defense: Office of the Under Secretary of Defense for Acquisition, Technology, and Logistics

  4. Status: Open

    Comments: DOD concurred with this recommendation. As of August 2018, DOD officials stated that they are in the process of developing proactive steps to share information on risks identified through the annual CAIP with relevant program managers, or other designated service or program officials as necessary. However, in June 2019, DOD shared the key corrective actions identified for this recommendation, which include a description of the mission assurance process that was already in place at the time of issuance of this report, therefore do not represent a change or response to this recommendation. It further states that the Critical Asset Identification Process is addressed in semi-annual Joint Industrial Base Working Group meetings, which are attended by all service and agency industrial base representatives. As of November 2019, DOD officials did not respond to a request for more detail, we will continue to assess DOD's actions.

    Recommendation: The Under Secretary of Defense for Acquisition, Technology and Logistics, in conjunction with DCMA and the military departments, should take steps to share information on risks identified through the annual Critical Asset Identification Process with relevant program managers or other designated service or program officials. At a minimum, relevant officials should receive information on the most critical facilities (such as TCAs) that produce parts supporting their programs. This information-sharing could occur through service-specific channels of communication or another method of internal communication deemed appropriate by DOD. (Recommendation 4)

    Agency Affected: Department of Defense: Office of the Secretary of Defense: Office of the Under Secretary of Defense for Acquisition, Technology, and Logistics

  5. Status: Open

    Comments: DOD concurred with this recommendation. As of August 2018, DOD officials stated that assessing the health of the defense industrial base and associated supply chains was the focus of an Executive Order issued in July 2017 and that the resulting inter-agency report will be released within the next year. DOD officials stated that the issuance of this report will provide significant information towards addressing this recommendation. However, in June 2019, DOD provided key corrective actions for this recommendation, which stated that multiple services and agencies began in 2018 to incorporate contracting language to require prime contractors to track and provide sub-tier data and that this effort will expand to cover more programs. Further, it states that in the Industrial Base Integrated Data System, suppliers are indicated as either single or sole source suppliers and that the services and agencies have access to this list. As of November 2019, DOD officials did not respond to a request for more detail, we will continue to assess DOD's actions.

    Recommendation: The Under Secretary of Defense for Acquisition, Technology and Logistics, in conjunction with the military departments, should develop a mechanism to ensure that program offices obtain information from contractors on single source of supply risks. (Recommendation 5)

    Agency Affected: Department of Defense: Office of the Secretary of Defense: Office of the Under Secretary of Defense for Acquisition, Technology, and Logistics

  6. Status: Open

    Comments: DOD concurred with this recommendation. The DOD official that is the lead for the Diminishing Manufacturing Sources and Material Shortages (DMSMS) program stated that as of July 2019, the department has completed the draft DMSMS instruction and accompanying manual that details program requirements, responsibilities, and procedures to be followed. The draft instruction is undergoing legal review and the official expects the instruction and manual to be issued by December 2019. As of November 2019, this recommendation will remain open and we will review the instruction once issued.

    Recommendation: The Under Secretary of Defense for Acquisition, Technology and Logistics, in conjunction with the military departments, should issue department-wide DMSMS policy, such as an instruction, that clearly defines requirements of DMSMS management and details responsibilities and procedures to be followed by program offices to implement the policy. (Recommendation 6)

    Agency Affected: Department of Defense: Office of the Secretary of Defense: Office of the Under Secretary of Defense for Acquisition, Technology, and Logistics

 

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