Air Force Logistics: Some Progress, But Further Efforts Needed to Terminate Excess Orders
NSIAD-94-3
Published: Oct 13, 1993. Publicly Released: Oct 13, 1993.
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Highlights
Pursuant to a congressional request, GAO followed up on an earlier report concerning the Air Force's failure to terminate excessive materiel orders, focusing on: (1) the Air Force's progress in terminating excessive materiel orders; and (2) additional opportunities for improvement and savings.
Recommendations
Recommendations for Executive Action
| Agency Affected | Recommendation | Status |
|---|---|---|
| Department of the Air Force | The Secretary of the Air Force should require the Commander, Air Force Materiel Command, to eliminate the 6-month buffer from the consumable item requirement systems and identify all potentially terminable on-order items. |
The management of nearly all consumable items is now in the process of being transferred from the military services to the Defense Logistics Agency. Of the items remaining under Air Force management, most items will not be subject to the underlying controls inherent in the recommendation. GAO, therefore, has closed out this recommendation.
|
| Department of the Air Force | The Secretary of the Air Force should require the Commander, Air Force Materiel Command, to revise the reparable item termination model to fully consider all costs of carrying excess inventories, including capital (interest) and obsolescence costs, as prescribed by Department of Defense policy. |
In its final response, DOD stated that its new Materiel Management Standard System will include a cutback/termination model that will incorporate the specific factoring for capital (interest) costs and obsolescence costs now being used by the Army, Navy, and the Defense Logistics Agency in their termination models. The action being taken conforms with the recommendation and GAO is closing it out as of this date.
|
| Department of the Air Force | The Secretary of the Air Force should require the Commander, Air Force Materiel Command, to revise policy to require that all potential contract terminations for excess orders, including those related to aircraft with declining programs, are subjected to economic termination analyses. |
This recommendation was based on consumable item examples. Therefore, GAO has withdrawn the recommendation, since nearly all consumables are being transferred to the Defense Logistics Agency for management of the items.
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| Department of the Air Force | The Secretary of the Air Force should require the Commander, Air Force Materiel Command, to ensure that potential on-order termination analyses are accurately performed and termination decisions are promptly made after receipt of contractor termination penalty costs. |
The Air Force has provided additional clarification on termination policy to the Air Logistics Centers. The guidance should help ensure that termination analysis and decisions are appropriately performed. GAO views the actions taken to date as responsive and is closing out this recommendation on this data collection cycle.
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| Department of the Air Force | The Secretary of the Air Force should require the Commander, Air Force Materiel Command, to ensure that accurate and complete information is used in the economic termination analyses. |
On November 1, 1993, Air Force Headquarters directed the Air Force Materiel Command to reiterate the importance of ensuring that accurate and complete information is used in economic termination analyses. The Air Force stated that it will monitor the effectiveness of this effort. GAO views the Air Force directive and intention to monitor as responsive to the recommendation. GAO has closed this recommendation.
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| Department of the Air Force | The Secretary of the Air Force should require the Commander, Air Force Materiel Command, to consider the average annual availability of deobligated funds resulting from contract terminations on an historical basis in determining the upcoming budget year's funding requests for consumable and reparable items. |
In response to this recommendation, the Air Force reduced its fiscal year 1995 funding requirements by $200 million for repairable and consumable items to reflect the availability of deobligated funds from contract terminations. The Air Force also stated that future adjustments will be made as required to ensure that obligation authority reflects anticipated deobligations. An accomplishment report with a measurable budgetary savings of $200 million was processed, and approved by the Director, NSIAD/MOC on June 8, 1994.
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Topics
Air Force procurementAir Force suppliesContract terminationContract termination costsCost effectiveness analysisInventory control systemsLogisticsMilitary cost controlSpare partsMilitary forces