Defense Inventory:

Defense Logistics Agency's Excess Materiel on Order

NSIAD-90-105: Published: Mar 6, 1990. Publicly Released: Mar 6, 1990.

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Pursuant to a congressional request, GAO reviewed the Defense Logistics Agency's (DLA) efforts to control excess materiel on order from contractors.

GAO found that DLA: (1) supply centers' excess on-order materiel ranged in value from $204 million to $449.1 million, but DLA had requested termination for only $49.9 million; (2) item managers incorrectly recomputed or arbitrarily increased requirements to avoid recommending termination; (3) did not have the appropriate data to assess progress in terminating unnecessary contracts and orders before delivery; (4) contracting officers did not determine termination costs when negotiating contracts; and (5) did not provide appropriate guidance to item managers and contracting officers.

Recommendations for Executive Action

  1. Status: Closed - Implemented

    Comments: Excess-on-order actions have been included in the DLA internal control program. Defense supply centers were notified of the importance of supervisory review of terminations and reportable tracking mechanisms are being implemented to monitor progress.

    Recommendation: The Secretary of Defense should instruct the Director, DLA, to require that supervisors review item managers' decisions concerning terminations.

    Agency Affected: Department of Defense

  2. Status: Closed - Implemented

    Comments: A termination model that eliminates the need for local thresholds/procedures has been implemented.

    Recommendation: The Secretary of Defense should instruct the Director, DLA, to review and approve locally implemented operating procedures that limit the dollar value of termination requests initiated by item managers.

    Agency Affected: Department of Defense

  3. Status: Closed - Implemented

    Comments: Guidance implementing the Office of the Secretary of Defense policy was issued January 31, 1990. The cost comparison model was tested and implemented in late 1990/early 1991.

    Recommendation: The Secretary of Defense should instruct the Director, DLA, to implement the Defense policy and require development and implementation of a cost comparison methodology or model to assist supply center personnel in making cost-effective termination decisions.

    Agency Affected: Department of Defense

  4. Status: Closed - Implemented

    Comments: Guidance on this issue was provided by HQ DLA to the centers on April 2, 1990.

    Recommendation: The Secretary of Defense should instruct the Director, DLA, to require contracting officers to obtain termination costs, in appropriate cases, so item managers can make cost-benefit analyses.

    Agency Affected: Department of Defense

  5. Status: Closed - Implemented

    Comments: Guidance was provided by HQ DLA on February 1, 1990.

    Recommendation: The Secretary of Defense should instruct the Director, DLA, to continue to stress the importance of timely and accurate processing of potential excess on-order reports.

    Agency Affected: Department of Defense

 

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