Army Logistics:

Low Returns of Reparable Assets Are Costing the Army Millions

NSIAD-91-272: Published: Sep 25, 1991. Publicly Released: Sep 25, 1991.

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Pursuant to a congressional request, GAO examined the Army's efforts in returning assets in need of repair to reduce procurement costs and improve military readiness, focusing on whether the: (1) Army has bought additional assets or cancelled repairs because it has not met its return-rate goal; (2) Army's reported return rate accurately reflects the actual rate of return; (3) Army's goal to return 85 percent of assets that need repair was established to maximize savings and efficiency; and (4) Army's efforts to improve rates of return will strengthen its materiel returns program.

GAO found that: (1) the Army is purchasing additional assets and reducing the quantity of assets scheduled for repair because returns are not meeting its minimum goal; (2) four of the Army's six inventory control points were buying between $369 million and $815 million of assets that would not have been necessary if returns had been at the 85-percent goal; (3) one inventory control point, the Army Missile Command, improved returns management by identifying items with low returns and requiring item managers to determine the causes and report on the actions taken to improve them, visiting users to reinforce the need to promptly turn in reparable assets, and providing monthly management updates on the progress in improving rates; (4) the Army reported a return rate of 75 percent for fiscal year 1990, but this figure does not accurately reflect the program's effectiveness, since the return-rate goal was based on computations of historical rates without a detailed analysis of what the rate should be; and (5) the Army does not yet have a materiel returns program that optimizes its goal to reduce inventory costs and maximize military readiness.

Recommendations for Executive Action

  1. Status: Closed - Implemented

    Comments: The AMSAA study was deferred due to higher priority projects as a result of the Army's transition to stock funding of reparables in 1992. During this time, the Army increased its returns goal from 85 to 90 percent, and since the transition to stock funding, the return rate averaged over 90 percent. GAO believes these actions effectively accomplish the intent of the recommendation.

    Recommendation: The Secretary of the Army should direct the Commander, AMC, to establish a reparable asset rate-of-return standard that assumes all assets will be returned except for the shortfall due to disposal of assets authorized at the retail level.

    Agency Affected: Department of Defense: Department of the Army

  2. Status: Closed - Implemented

    Comments: LCA completed its review on June 4, 1992. The review concluded that calculations of rates-of-return for assets routinely issued and grouping related items together are currently being accomplished under the Recovery Improvement Program Reporting System. GAO believes this action accomplishes the intent of the recommendation.

    Recommendation: The Secretary of the Army should direct the Commander, AMC, to direct the Logistics Control Activity (LCA) to include in its calculation of return rates only items with assets the Army routinely issues and requires corresponding returns of assets needing repair and to group related items for calculating rates-of-return.

    Agency Affected: Department of Defense: Department of the Army

  3. Status: Closed - Implemented

    Comments: On January 6, 1992, the Army tasked AMC to examine the Missile Command's techniques. According to AMC inventory control points, some of the Command's techniques were already in place; others were being implemented; and some were partially adopted where cost versus benefits were favorable. The Army also believes that the new stock funding concept has increased reparable item management.

    Recommendation: The Secretary of the Army should direct the Commander, Army Materiel Command (AMC), to instruct its inventory control points to adopt management emphasis techniques similar to those used by the Army Missile Command to improve the rates of return for reparable items. Management emphasis should include early detection of items with low rates, determination of causes, identification and execution of specific actions to improve returns, and follow-up analysis to determine whether return rates have improved.

    Agency Affected: Department of Defense: Department of the Army

  4. Status: Closed - Implemented

    Comments: On January 14, 1992, the Army sent a message to all major commands reemphasizing the need to return depot-level reparables.

    Recommendation: The Secretary of the Army should reemphasize to the commanders of all major Army commands the importance of complying with Army policy and requirements for the prompt return of assets needing repair.

    Agency Affected: Department of Defense: Department of the Army

  5. Status: Closed - Implemented

    Comments: The Army reported the low rate-of-return for reparable assets as a material weakness in its Statement of Internal Controls, dated November 13, 1991.

    Recommendation: The Secretary of the Army should direct the Commander, AMC, to report again the low rate of return for reparable assets as a material weakness in the Army's next assessment of internal controls, as required by the Federal Managers' Financial Integrity Act.

    Agency Affected: Department of Defense: Department of the Army

 

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