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GAO reviewed operations at the five Army commands which function as inventory control points. Four of the five Army inventory control points are not doing enough to use the material in their long supply inventories as government-furnished material on major end-item contracts. Often, onhand quantities of secondary items, including parts, components, and assemblies, exceed the estimated amount of material needed to support U.S. and allied forces during peacetime and from the beginning of a war until industry can produce the material at a rate equal to expected wartime usage. This material is classified as being in long supply and, to the extent it does not exceed authorized retention levels, is retained for possible future use. Department of Defense (DOD) regulations require that this material be screened and furnished, when practicable, as government-furnished material to contractors for use on major systems and equipment production contracts, thereby reducing the amounts paid to contractors. This should be done whenever substantial net savings are attainable with acceptable risks. Each of the five Army control points are required to implement these procedures and have substantial amounts of long supply material on hand which have potential use as government-furnished material. Only one control point had instituted a required screening procedure to ensure that material was provided to contractors when practicable. They had devised a computer program for use with each impending end-item procurement, which produces a list of long supply items which are part of the end items to be procured. Contractor representatives inspect and approve the material to avoid the problem of the contractor not being satisfied with the quality or condition of the government-furnished material.

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Recommendations for Executive Action

Agency Affected Recommendation Status
Department of the Army 1. The Secretary of the Army should: (1) establish reasonable timeframes for DARCOM to develop and implement the procedures; and (2) monitor the progress of DARCOM to avoid further delay.
Closed - Implemented
RAILS is now a working program in use by all Army inventory control points. Action is being taken to consider a redesign of the system to accumulate statistical data on screened assets.
Department of the Army 2. The Secretary of the Army should direct the Commanding General, DARCOM, to take prompt action to develop procedures to ensure that all Army inventory control points make maximum and economical use of long supply inventories as government-furnished material on production contracts.
Closed - Implemented
When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.

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