Planned Expansion of Hines Supply Depot Has Not Been Justified

PSAD-80-31: Published: Feb 26, 1980. Publicly Released: Feb 26, 1980.

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The Veterans Administration (VA) planned to expand the Hines Supply Depot to meet projected inventory increases. The depot is one of three responsible for storing and distributing medical supplies and food to VA medical centers and other Government facilities. VA hired a private consultant to calculate future warehouse space requirements and design a new depot complex to meet projected growth. For years, VA has predicted that the depot would run out of space, but these predictions have not materialized.

The Government's policy of relying more on commercial supply source and distribution channels than on in-house storage facilities was not considered in the VA space requirements projection. However, VA officials stated that they had reduced the number of centrally managed stock items as a direct result of their efforts to implement the policy. The Marketing Center determines what, how much, and when supplies enter the supply depot. Yet, the record indicated that it provided little input to the space assessment. VA used an unreliable indicator, projected dollar growth, to demonstrate a need for additional space. Alternatives to the expansion plan such as reducing inventory levels or leasing external storage space were not fully considered. Office of Management and Budget guidelines were not followed. VA did not consider critical cost factors such as the Government's cost to finance the expansion and the cost of inflation.

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