Defense Acquisitions:

Prices of Marine Corps Spare Parts Have Increased

NSIAD-00-123: Published: Jul 31, 2000. Publicly Released: Jul 31, 2000.

Additional Materials:


Jack L. Brock, Jr
(202) 512-3000


Office of Public Affairs
(202) 512-4800

Pursuant to a congressional request, GAO provided information on the increasing prices of Marine Corps spare parts, focusing on: (1) changes in the prices of reparable parts compared with the prices of similar items in the private sector and the reasons for the price changes; and (2) the accuracy of prices set by the Marine Corps.

GAO noted that: (1) prices of the 703 parts GAO examined increased by an average of about 14 percent over the 4-year period from fiscal year 1995 through 1999, while prices for similar items sold in the private sector dropped by 0.2 percent over the same period; (2) prices for these 703 parts fluctuated during this 4-year period, dropping by about 10 percent during the first 2 years and increasing by about 27 percent during the last 2 years; (3) prices of the 313 parts sold to customers followed the same pricing pattern; (4) the major cause of the sharp price increase during the latter years was increases in surcharge rates; (5) the cost of procuring the parts from suppliers influenced the price of only 26 parts; (6) the Marine Corps did not follow Department of Defense pricing regulations in setting prices and, as a result, the prices of most parts sold to Marine Corps customers were not correct; (7) in particular, the approach used to adjust prices of repaired parts from year to year was not consistent with Defense regulations; (8) the Marine Corps' approach led to wider price fluctuations than the approach called for in Defense pricing regulations; (9) moreover, prices for many parts were higher than they would have been had repair costs been used to set prices; (10) mathematical and computer program errors were also made; (11) these problems contributed to the Marine Corps having an accumulated gain of about $48 million from the sale of spare parts at the end of fiscal year 1999; and (12) Defense policy requires revolving funds to operate with the long-term objective of breaking even.

Recommendation for Executive Action

  1. Status: Closed - Implemented

    Comments: In October 2000, the Office of the Under Secretary of Defense, Director for Revolving Funds, provided a letter to GAO stating that the action plan for correcting prices (per report recommendation) was no longer necesary because the Marine Corps had already reviewed and corrected the prices of all reparable spare parts and implemented the other changes and recommendations in the report. According to the Director's letter, the Navy reports that these actions were completed in July 2000.

    Recommendation: The Secretary of Defense should direct the Commandant of the Marine Corps to prepare an action plan with target dates for completing corrective actions so that changes are incorporated in fiscal year 2001 prices.

    Agency Affected: Department of Defense


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