DOD Warranties:

Effective Administration Systems Are Needed to Implement Warranties

NSIAD-89-57: Published: Sep 27, 1989. Publicly Released: Sep 27, 1989.

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GAO reviewed the Department of Defense's (DOD) administration of its warranty program for 48 weapons system contracts, focusing on the extent to which the military services: (1) had effective warranty administration systems; and (2) performed DOD- and service-required cost-effectiveness analyses.

GAO found that: (1) DOD delegated responsibility for warranty administration to the military services, which have not fully established effective warranty administration and evaluation systems; (2) DOD did not actively oversee the services' progress in establishing effective warranty administration systems, and functioned in a reactive mode to deal with issues raised by audit groups and other interested organizations; (3) the Navy issued several general instructions and regulations for warranty administration, but did not provide detailed implementing directives, define roles and responsibilities, or establish overall procedures and controls; (4) the Air Force issued June 1988 guidance defining administrative procedures and responsibilities and estimated that it would implement an automated warranty tracking and management system by November 1991; (5) the Army was experiencing difficulties in implementing its defined warranty administration responsibilities and procedures; (6) the services' procurement activities either did not perform the required cost-effectiveness analyses or performed analyses that did not adequately support conclusions that warranties were cost-effective, resulting in the activities not considering waivers for warranties that were not cost-effective; and (7) the procurement activities did not perform post-warranty evaluations to determine the warranties' benefits, and lacked the information necessary to ensure that warranties were cost-effectively accomplishing their purposes.

Recommendations for Executive Action

  1. Status: Closed - Not Implemented

    Comments: According to the DOD Inspector General (IG), the services have not been responsive to the recommendation. As a result, no further action is planned to respond to the recommendation. A letter will be sent to GAO within 60 days, closing out the case.

    Recommendation: The Secretary of Defense should expand his oversight role in warranty administration by establishing milestones for the services to meet in implementing effective warranty administrative systems or making changes to correct deficiencies in present systems. Periodic progress reports on achievements and problems being experienced should be required from the services.

    Agency Affected: Department of Defense

  2. Status: Closed - Not Implemented

    Comments: According to the DOD/IG, the services have not been responsive to the recommendation. As a result, no further action is planned to respond to the recommendation. A letter will be sent to GAO within 60 days, closing out the case.

    Recommendation: The Secretary of Defense, as part of the oversight role, should ensure that the services consider the use of waivers as viable options when it can be shown that a warranty is not cost-effective.

    Agency Affected: Department of Defense

 

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