Background

The Army has divided nonstandard equipment into two broad categories:    Nontactical nonstandard equipment, which consists primarily of  durable goods that are used to provide services for soldiers as well as  foreign governments. This equipment includes but is not limited to fire  trucks and ambulances, as well as equipment used for laundry and  food service. Most of this equipment has been acquired through the  Logistics Civil Augmentation Program (LOGCAP) and is managed and  sustained by contractors under the LOGCAP contract (hereinafter  referred to as contractor-managed, government-owned property).    Tactical nonstandard equipment, which is commercially acquired or  nondevelopmental equipment that is rapidly acquired and fielded  outside the normal Planning, Programming, Budgeting, and Execution  System and acquisition processes, in order to bridge capability gaps  and meet urgent warfighter needs.
According to Army documents, as of March 2011, 36.5 percent of all  Army equipment in Iraq was contractor-managed, government-owned  property, with a value of approximately $2.5 billion. Furthermore, as of  March 2011 an additional 10.7 percent of Army equipment in Iraq, valued  at approximately $1.6 billion, was categorized as nonstandard equipment.  According to Army officials, all equipment—standard and nonstandard— must be out of Iraq by December 31, 2011.
We have reported on issues related to nonstandard equipment in Iraq in  the past. In September 2008 we identified several issues that could affect  the development of plans for reposturing U.S. forces from Iraq. One of  those issues was that DOD, CENTCOM, and the military services had not  clearly established roles and responsibilities for managing and executing  the retrograde of standard and nonstandard equipment from Iraq. We  also noted that data systems used during the retrograde process were  incompatible, and although a fix for the data system incompatibility had  been identified, it had not been implemented. As a result, we  recommended that the Secretary of Defense, in consultation with  CENTCOM and the military departments, take steps to clarify the chain of  command over logistical operations in support of the retrograde effort. We  also recommended that the Secretary of Defense, in consultation with the  military departments, correct the incompatibility weaknesses in the  various data systems used to maintain visibility over equipment and  materiel while they are in transit. DOD partially concurred with our first  recommendation, and took steps to clarify the chain of command over  logistical operations in support of the retrograde effort. DOD fully  concurred with our second recommendation, stating that it was actively  assessing various data systems used to maintain visibility over equipment  and materiel while in transit. Finally, though we made no  recommendations on this issue, we noted that maintaining accountability  for and managing the disposition of contractor-managed, government- owned property may present challenges to reposturing in Iraq. In  February 2009, in testimony before the Committee on Armed Services of  the House of Representatives, we addressed factors that DOD should  consider as the United States refines its strategy for Iraq and plans to  draw down forces. We then included a section on managing the  redeployment of U.S. forces and equipment from Iraq in our March 2009  report on key issues for congressional oversight. In November 2009, in a  statement before the Commission on Wartime Contracting in Iraq and  Afghanistan, we presented some preliminary observations on DOD’s  planning for the drawdown of U.S. forces from Iraq, and in April 2010  issued a report that highlighted actions needed to facilitate the efficient  drawdown of U.S. forces and equipment from Iraq. In our April 2010  report, we noted that DOD had created new organizations to oversee,  synchronize, and ensure unity of effort during the drawdown from Iraq,  and had established goals and metrics for measuring progress. We also  noted that, partly in response to our September 2008 report  recommendations, representatives from the Secretary of Defense’s Lean  Six Sigma office conducted six reviews to optimize theater logistics, one  of which focused on the process for retrograding equipment from Iraq,  including disposition instructions. Results from the Lean Six Sigma  study influenced the development of a new data system—the Theater  Provided Equipment Planner—which is intended to automate the  issuance of disposition instructions for theater provided equipment.  Complementing the Theater Provided Equipment Planner database was a  second database—the Materiel Enterprise Non-Standard Equipment  database—which catalogued all types of nonstandard equipment in Iraq  in order to provide automated disposition. However, we also noted that  officials in Iraq and Kuwait stated that, of all categories of equipment, they  had the least visibility over contractor-managed, government-owned  property, and that U.S. Army Central Command officials said they had low  confidence in the accountability and visibility of nonstandard equipment.  While these reports, testimonies, and statements focused primarily on  plans, procedures, and processes within the CENTCOM area of  responsibility, especially in Iraq and Kuwait, this report’s focus will be  specifically on nonstandard equipment and MRAPs, and primarily on the  plans, processes, and procedures that affect its disposition once it leaves  the CENTCOM area of responsibility.
MRAPs were first fielded in Iraq in May 2006 by the Marine Corps for use  in western Iraq. A year later, the Secretary of Defense affirmed the MRAP  program as DOD’s most important acquisition program. As of July 2011,  DOD’s acquisition objective was 27,744 MRAPs; according to DOD  officials, funding appropriated through fiscal year 2011 is sufficient to  cover 27,740. The vast majority of these MRAPs were allocated to the  Army for use in Iraq and, increasingly, in Afghanistan. According to Joint  Program MRAP statistics, as of February 2011, MRAPs had been  involved in approximately 3,000 improvised explosive device events, and  have saved thousands of lives.
We have also reported on MRAPs in the past. In October 2009, we  reported positively on the quick action taken by the Secretary of Defense  to declare the MRAP program DOD’s highest priority. However, we also  noted as key challenges that long-term sustainment costs for MRAPs had  not yet been projected and budgeted and that the services were still  deciding how to incorporate MRAPs into their organizational structures.  In November 2009, in a statement before the Commission on Wartime  Contracting in Iraq and Afghanistan, we noted that although the Army had  not yet finalized servicewide requirements for its MRAPs, it had  designated Red River Army Depot as the depot that would repair MRAPs,  and had issued a message directing the shipment of 200 MRAPs from  Kuwait to Red River Army Depot as part of an MRAP Reset Repair Pilot  Program. However, we also noted that as of October 2009, there were  approximately 800 MRAPs in Kuwait awaiting transportation to the United  States. In April 2010 we noted that the Army’s strategy for incorporating  MRAPs into its ground vehicle fleet was still pending final approval.

	Army Has Policies for Disposition of Nontactical Nonstandard Equipment

		Army Has Plans and Processes for the Disposition of Nontactical Nonstandard Equipment

As part of the Iraqi drawdown effort, excess nonstandard equipment that  is no longer needed in Iraq is either redistributed in the CENTCOM  theater, disposed of, provided to other nations through foreign military  sales, or packaged for retrograde to a variety of Defense Logistics  Agency Distribution Depots or Sierra Army Depot in the United States.  According to Army Materiel Command, the majority of the excess  nontactical nonstandard equipment is sent to Sierra Army Depot.  According to officials at Sierra Army Depot, as of April 2011 the depot had  received a total of 22,507 pieces of nontactical nonstandard equipment  worth over $114.9 million, and still has on hand approximately 13,200  items worth more than $75 million. Smaller items, which are stored in a  warehouse, include such items as desktop computers, computer  monitors, printers, laptop computers, handheld palm computers, distress  beacons, night vision goggles, rifle scopes, laser sights, radios, and radio  frequency amplifiers. Larger items, which are stored outside, include all- terrain vehicles, generators, tractors, fire suppression systems, large  refrigerators, and light sets.
Once the items are received at Sierra Army Depot, they are removed  from their containers, inventoried, evaluated for serviceability, catalogued,  and placed in the appropriate location in the warehouse or, if they are  larger items, in the appropriate outside storage location. Simultaneously,  once the items are catalogued, they are recorded in Sierra Army Depot’s  property book for accountability.

		Army Uses Various Means to Redistribute Nontactical Nonstandard Equipment

According to guidance issued by Headquarters, Department of the Army,  Army Materiel Command is to provide Army Commands, Army Service  Component Commands, and Army Direct Reporting Units access to  the inventory of nontactical nonstandard equipment stored at depots such  as Sierra Army Depot through the Materiel Enterprise Non-Standard  Equipment database; the guidance also discusses use of the depot  property book to view available nonstandard equipment. Using these  means to view what is on hand at Sierra Army Depot, units can request  items from Army Materiel Command, which will then process the request  and coordinate for its shipment to the requesting unit. In January 2011,  Army Materiel Command introduced another means by which units can  requisition nontactical nonstandard equipment from Army Materiel  Command. Called the “virtual mall,” this tool uses the Materiel Enterprise  Non-Standard Equipment database as a means by which units can both  view items at Sierra and other Army depots and request them for their  use.
According to Sierra Army Depot records, as of April 2011 it had shipped  more than 7,600 individual pieces of nontactical nonstandard equipment  to various Army organizations. The total value for these items exceeded  $29 million. According to Sierra Army Depot officials, its single largest  customer in terms of number of items shipped is U.S. Army Installation  and Management Command (a Direct Reporting Unit), which, as of April  2011, had received almost 1,800 items of nontactical nonstandard  equipment from the depot, including computers, computer monitors,  radios, “jaws of life,” cameras, generators, metal detectors, and  binoculars. All equipment shipped from Sierra Army Depot is in “as is”  condition. Receiving units are responsible for shipping costs and for any  sustainment funding.
As shown in table 1 above, Army units are not the only organizations that  can requisition excess nontactical nonstandard equipment. If an item of  nontactical nonstandard equipment has not already been requisitioned by  Army or other federal agencies, such as the Department of State, local  and state governments may seek to acquire it through the National  Association of State Agencies for Surplus Property (NASASP), which  accesses it through the General Services Administration (GSA). United  States Forces-Iraq makes its excess nontactical nonstandard equipment  lists available to GSA and NASASP, which in turn share these lists with  state and local governments. Moreover, DOD has facilitated and partially  funded the placement of a GSA/NASASP liaison in Kuwait. This liaison  enables state and local governments to make informed decisions about  available nontactical nonstandard equipment and coordinates its  cleaning, customs clearance, movement, and movement tracking. The  only costs incurred by state and local governments for equipment they  decide to accept are transportation costs, and DOD has offered  GSA/NASASP access to the Defense Transportation System, which  provides door-to-door delivery, pricing at the DOD rate, and seamless  customs processing. Finally, periodically GSA and NASASP officials are  invited to Sierra Army Depot to screen excess nontactical nonstandard  equipment on site that they did not have an opportunity to screen in  theater.
According to Army documents, as of January 2011 local and state  governments have claimed 20 items valued at over $398,000 from Iraq,  and, as of April 2011, an additional 256 items valued at almost $6 million  from Sierra Army Depot. These items include generators, forklifts, tool  kits, bulldozers, light sets, and concrete mixers. As with Army units,  excess nontactical nonstandard equipment is shipped in “as is” condition.  Moreover, according to Army officials, some excess items, like  generators, do not meet U.S. specifications and therefore require  modification.

		Army Recently Created Policy on How Long to Retain Nontactical Nonstandard Equipment before Disposal or Redistribution

Although Sierra Army Depot has been receiving nontactical nonstandard  equipment from Iraq since November 2009, until recently the Army had  no guidance as to how long that equipment should be stored before being  either redistributed or disposed of. According to Army Materiel Command  officials, the potential usefulness of much of the equipment stored at  Sierra Army Depot will be lost if items just sit on the shelves. Moreover,  Sierra Army Depot records indicate that, as of April 2011, 59 percent of  the nontactical nonstandard equipment received at the depot since  November 2009 was still in storage there, while approximately 34 percent  was shipped to Army organizations for reuse—$18.7 million to Army  installations and bases throughout the world, $6.9 million to the Sierra  Army Depot, and $4.2 million to the U.S. Army Installation and  Management Command. Of the remaining 7 percent, approximately $6  million was donated to state and local governments and $3.2 million was  transferred to disposal.
On April 27, 2011, Headquarters, Department of the Army, disseminated  a message that updated its processes and procedures for the  requisitioning of excess nonstandard equipment stored at selected Army  Materiel Command depots. According to this message, the intent is to  extend the use of that equipment where appropriate. The message also  discusses the use of the “virtual mall” under the Materiel Enterprise Non- Standard Equipment database and Sierra Army Depot’s property book for  units to view equipment. The message also states that the intent is that  once an item is unserviceable or no longer operational, it can be disposed  of through local Defense Logistics Agency Disposition Services.  Moreover, the April 2011 message calls for the establishment of an  executive forum to review and determine the final disposition of excess  nonstandard equipment stored at Sierra Army Depot for more than 180  days that has not been identified for reuse. According to this message,  this semiannual review is intended to enable the Army’s effort to apply  due diligence in the final disposition of nonstandard equipment. In a  follow-up to its April 27 message, Headquarters, Department of the Army,  issued another message on June 2, 2011, that outlines the makeup of the  executive forum, which met for the first time on June 18, 2011. Finally,  although neither message states this explicitly, according to a senior  official, once a decision is made by the executive committee to dispose of  nontactical nonstandard equipment that has been at Sierra Army Depot  for more than 180 days, similar instructions will be included in the Materiel  Enterprise Non-Standard Equipment database to prevent items that have  been determined not to have future value or serviceability from being  shipped back to the United States. In this way unnecessary transportation  costs will be avoided.

	The Army’s Process to Assess Disposition of Tactical Nonstandard Equipment Does Not Compel Decisions about Most Equipment and Is Impaired by Lack of Oversight

		Army’s Capabilities Development for Rapid Transition (CDRT) Process Evaluates Tactical Nonstandard Equipment

According to Army documents, in 2004, the Vice Chief of Staff of the  Army directed U.S. Army Training and Doctrine Command’s Army  Capabilities and Integration Center to identify promising capabilities in  use in the CENTCOM theater that, based on their performance, should  quickly become enduring programs of record or acquisition programs.  Originally called Spiral to the Army, this effort eventually evolved into the  Army’s Capabilities Development for Rapid Transition (CDRT) process.  The CDRT process enables the Army to identify capabilities, most of  which involve tactical nonstandard equipment that has been rapidly  fielded, that are performing well in the CENTCOM theater and then to  assess whether the capability should be retained in the Army’s current  and future force. Developed by the Army Capabilities and Integration  Center and the Army G-3/5/7, the CDRT process involves the periodic  nomination and evaluation of tactical nonstandard equipment in use in the  CENTCOM theater by a CDRT community of interest. This community  includes representatives from the Office of the Secretary of Defense, the  Joint Staff, various combatant commands, Army commands, Army  service component commands, and various Army centers, such as the  Army’s armor center, infantry center, and signal center. At present, the  CDRT community of interest convenes quarterly to evaluate nominated  capabilities.
To qualify as a candidate for consideration in the CDRT process, a piece  of tactical nonstandard equipment must first be nominated for  consideration and, in addition, must have been in use for at least 120  days and have undergone an operational assessment, among other  qualifications. Once identified, a list of candidates for consideration is  compiled by the Army Capabilities and Integration Center and the Army  G-3/5/7 and then sent to the CDRT community of interest for assessment.  Assessment of each item of equipment is performed through a scoring  system based on survey responses from operational Army units. Based  on the assessment, each piece of equipment is placed in one of three  categories: Acquisition Program Candidate/Enduring, Sustain, or  Terminate. Tactical nonstandard equipment placed in the “enduring”  category is theater-proven equipment assessed as providing a capability  applicable to the entire Army and to the future force; as such, it may  become eligible to compete for funding in the Army’s base budget.  Tactical nonstandard equipment placed in the “sustain” category is  equipment assessed as filling a current operational need in the  CENTCOM theater, but which is not applicable to the entire Army, useful  to the future force, or not yet recommended as an enduring capability.  Sustain category tactical nonstandard equipment is resourced through  overseas contingency operations funding, and is not programmed into the  Army’s base budget. Finally, tactical nonstandard equipment placed in the  “terminate” category is equipment deemed to have been ineffective, or as  obsolete, or as having not fulfilled its intended function, or as having no  further utility beyond current use. Army policy states that tactical  nonstandard equipment in this category is not to be allocated Department  of the Army funding, although individual units may continue to sustain the  equipment with unit funds.
Through the CDRT process, the Army has been able to accelerate the  normal process by which requirements and needs are developed, as  outlined in the Joint Capabilities Integration and Development System.  That is because tactical nonstandard equipment placed in the enduring  category as a result of the CDRT process enters the Joint Capabilities  Integration and Development System at a more advanced developmental  stage, as opposed to entering the system from the start. Accordingly, the  Army views the CDRT process as a key means for determining the future  disposition of rapidly fielded capabilities.

		Most Army Tactical Nonstandard Equipment Is Sustained with Overseas Contingency Funds

Although one of the tenets of the CDRT process is to assess rapidly  developed capabilities equipped to deployed units and move those  proven in combat to enduring status as quickly as possible, a significant  majority of the tactical nonstandard equipment evaluated to date has  been categorized as sustain category equipment to be used only in the  CENTCOM theater and paid for with overseas contingency operations  funds. As of January 2011, the CDRT community of interest had met 10  times and considered 497 capabilities, of which 13 were nonmaterial  capabilities. As a result, 30 material and 10 nonmaterial capabilities were  selected as enduring; and an additional 13 capabilities were merged into  other programs. An example of an enduring category material capability  involving tactical nonstandard equipment is the Boomerang Gunshot  Detector, which is an antisniper detection system that detects gunfire and  alerts soldiers to the shooter’s location. A further 116 material capabilities  were terminated. An example of a capability that was terminated because  the CDRT community of interest considered it obsolete is the Cupola  Protective Ensemble, which is protective clothing worn over body armor  to protect troops from the blast effects of improvised explosive devices.  The remaining 328 capabilities, including for example the Combined  Information Data Network Exchange, were placed in the sustain category.  According to Army officials, this piece of tactical nonstandard equipment  was placed in the sustain category because, although it works well in the  CENTCOM theater, it would not be applicable elsewhere, as it is a  database with intelligence information specific to that theater. Capabilities  that are designated as sustain category items may be reviewed during  future CDRT iterations to see if that decision is still valid, and selected  excess equipment placed in this category and no longer required in  theater is being warehoused by Army Materiel Command until called  upon in the future. Army officials have also stated, however, that the  majority of capabilities considered by the CDRT community of interest are  placed in the sustain category because the Army has yet to make  definitive and difficult decisions about whether it wants to keep them and  cannot afford to sustain this equipment without overseas contingency  operations appropriations. As we have previously recommended, DOD  should shift certain contingency costs into the annual base budget to  allow for prioritization and trade-offs among DOD’s needs and to enhance  visibility in defense spending. The department concurred with this  recommendation.

		Lack of Oversight for Tactical Nonstandard Equipment Impairs Capabilities Development for Rapid Transition Process and May Inhibit Future Funding Estimates

The effectiveness of the Army’s CDRT process is also inhibited by the  lack of a system to track, monitor, and manage this equipment, which, in  turn, may be attributed to the absence of a single focal point with the  appropriate authority to oversee the fielding and disposition of tactical  nonstandard equipment. As stated above, to qualify as a candidate for  consideration in the CDRT process, a piece of tactical nonstandard  equipment must first be nominated. But without a system or entity  responsible for tracking, monitoring, and managing all items of tactical  nonstandard equipment in its inventory, some capabilities in the  CENTCOM theater may not be nominated and, therefore, never  considered by the CDRT community of interest.
According to federal best practices reported in GAO’s Standards for  Internal Control in the Federal Government, management is responsible  for developing detailed policies, procedures, and practices to help  program managers achieve desired results through effective stewardship  of public resources. To this end, in March 2011 we reported that DOD  lacks visibility over the full range of its urgent needs efforts—one of the  methods though which tactical nonstandard equipment is obtained and  fielded—including tracking the solutions developed in response to those  needs. Additionally, we found that DOD does not have a senior-level focal  point to lead the department’s efforts to fulfill validated urgent needs  requirements. Accordingly, we recommended that DOD designate a focal  point to lead the department’s urgent needs efforts and that DOD and its  components, like the Army, develop processes and requirements to  ensure tools and mechanisms are used to track, monitor, and manage the  status of urgent needs. DOD concurred with our recommendation and  stated that it would develop baseline policies that would guide the  services’ own processes in tracking urgent needs and that the Director of  the Joint Rapid Acquisition Cell would serve as the DOD focal point. In  April 2010 the Vice Chief of Staff of the Army issued a memorandum  calling for the development of a rapid acquisition/rapid equipping common  operating picture and collaboration tool, as a means to increase the  efficiency and transparency of Army urgent needs processes. As of April  2011, however, Army officials stated that the system directed by the Vice  Chief of Staff had yet to be deployed due to a lack of agreement over  information sharing and over who would be responsible for the system.  Because Army officials have repeatedly stressed that they do not have  visibility over the entire universe of tactical nonstandard equipment in the  CENTCOM theater and consider only those capabilities that have been  nominated, in the absence of a common operating picture and a single  focal point responsible for tracking, monitoring, and managing Army  tactical nonstandard equipment it is possible that a piece of nonstandard  equipment may exist in the CENTCOM theater that is either more  effective, less expensive, or both, than a comparable piece of equipment  that has been considered by the CDRT community of interest. Moreover,  without visibility over the universe of tactical nonstandard equipment, the  Army cannot project reset and sustainment costs for this equipment, and  ensure that equipment is only being funded to the extent needed to meet  a continuing requirement.

	Army Has Finalized Disposition Plans for Its MRAP Fleet, but Its Cost Estimates Are Incomplete and Do Not Follow Best Practices

		Army Has Finalized Detailed Disposition Plans for Its MRAP Fleet

The Army has recently transitioned MRAPs from nonstandard to standard  items of equipment and published detailed disposition plans outlining how  the vehicles will be integrated into the Army’s force structure. These  detailed disposition plans are outlined in the document Final Report, Army  Capabilities Integration Center, Mine Resistant Ambush Protected Study  II (final report), which was released on June 22, 2011. This final report  followed an August 2010 U.S. Army Training and Doctrine Command  study to determine the best means to integrate MRAPs into the overall  Army force structure. The August 2010 study presented Army leaders  with two courses of action. Although there were several similarities  between the two—for instance, each called for the placement of  approximately 1,700 MRAPs in training sets—there were also some  substantial differences. Specifically, the first course of action called for the  placement of the majority of the Army’s MRAPs, more than 10,600, into  prepositioned stocks. The second course of action allocated almost 4,000  fewer MRAPs to prepositioned stocks, and placed more with Army units.  The August 2010 study recommended adoption of the first course of  action because, according to Army officials, it offered the most balanced  distribution of MRAPs among prepositioned stocks, training sets, reserve  sets, and unit sets. Furthermore, the August 2010 study stated that other  benefits that would accrue from the first course of action include reduced  installation infrastructure effects and lower military construction costs,  lower operations and maintenance costs, and lower life-cycle costs. For  example, the study estimated that over a 25-year period, the first course  of action would accrue $2.093 billion in life-cycle costs, while the second  course of action would accrue $2.548 billion in life-cycle costs (these  costs do not include onetime costs, discussed below, for upgrading and  standardizing MRAPs that are returned to the United States). According  to Army officials, the savings would result from having more MRAPs in  prepositioned stocks, which, in turn, require less maintenance. Finally,  according to Army Training and Doctrine Command officials, the first  course of action provided the Army better operational flexibility, because  MRAPs would already be positioned in forward areas and would not have  to be transported from the United States, while the approach would still  maintain sufficient numbers of MRAPs for training.
On December 16, 2010, U.S. Army Training and Doctrine Command  presented the results of its August 2010 study to the Army Requirements  and Resourcing Board, for decision. On April 20, 2011, Headquarters,  Department of the Army, published an order to provide guidance to  develop an execution plan for the retrograde, reset, and restationing of  the MRAP fleet, with an end state being an MRAP fleet that is properly  allocated and globally positioned to support the full range of Army  operations. The order did not give any specifics regarding the allocation  of MRAPs across the Army ground vehicle fleet, however. According to  Army officials, these specifics would be provided by the final report, which  was released on June 22, 2011. According to the final report, MRAPs will  be allocated as shown in table 2.
Although the specific allocation of MRAPs varies slightly from that  recommended in the August 2010 study (for example, the course of  action recommended in the August 2010 study allocated 970 MRAPs to  reserve stocks instead of the 746 adopted by the final report), the reasons  given in the final report for allocating the MRAPs across the fleet were  essentially the same as proposed in the August 2010 study: to provide a  balanced distribution of MRAPs between units and prepositioned stocks,  to provide strategic depth and operational flexibility by placing the bulk of  the MRAPs in prepositioned stocks, and to provide a pool of reserve  stock MRAPs that could be used to sustain prepositioned stock sets and  maintain unit MRAP readiness. In addition, as had the August 2010 study,  the final report highlighted the expected life-cycle costs for MRAPs based  on the chosen allocation. This figure, $2.086 billion over 25 years, is  slightly lower than the figure estimated in the August 2010 study.

		Army’s Cost Analysis of MRAP Disposition Is Incomplete and Does Not Fully Follow Cost Estimating Best Practices

Though both the August 2010 study and the final report state the  estimated life-cycle costs for MRAPs over 25 years, neither estimate fully  follows recommendations in DOD’s instruction on economic analysis and  decisionmaking, Office of Management and Budget (OMB) guidance for  conducting cost-benefit analyses, and GAO’s Cost Estimating and  Assessment Guide. For example, all three sets of guidance recommend  that costs be calculated in or adjusted to present value terms, yet both the  August 2010 study and the final report present costs in constant fiscal  year 2011 dollars. While constant dollars allow for the comparison of  costs across years by controlling for inflation, present value analysis is  also recommended when aggregating costs to account for the time value  of money. As a result of not doing a present value analysis and not  recognizing the time value of money, the timing of when the costs are  expected to occur is not taken into account. According to DOD’s  instruction for economic analysis and decisionmaking, “accounting for the  time value of money is crucial to the conduct of an economic analysis.”  Moreover, the August 2010 study and the final report present life-cycle  costs in aggregate, yet OMB guidance regarding underlying assumptions  suggests that key data and results, such as year-by-year estimates of  benefits and costs, should be reported to promote independent analysis  and review. DOD guidance suggests that the results of economic  analysis, including all calculations and sources of data, should be  documented down to the most basic inputs to provide an auditable and  stand-alone document, and the GAO guide says that it is necessary to  determine when expenditures will be made. Without a year-by-year  breakout of the costs, decision makers have no insight on the pattern of  expenditures, a perspective that could be important for future asset  management and budgetary decisions. Moreover, a year-by-year  breakout of estimated costs would facilitate independent analysis and  review.
Complicating the issue surrounding life-cycle costs for MRAPs is that  neither the August 2010 study nor the final report indicates that the  “known” life-cycle costs, as they are labeled, are not, in fact, the total life- cycle costs. According to Army officials, the costs depicted in both  documents are differential costs, meaning that the only life-cycle costs  that were used in the decision-making matrix were costs that would differ  between the two courses of action. Conversely, costs associated with  elements of each course of action that were the same were not included.  For example, both courses of action delineated in the August 2010 study  allocated 2,818 MRAPs to certain types of units (truck companies for  convoy protection, for instance). According to Army officials, costs  associated with these MRAPs were not included in the decision matrices  depicted in either the August 2010 study or the final report, and nowhere  in either report is this indicated. According to Army officials, the Army  does not yet know the true total MRAP life-cycle costs, although the  Army’s MRAP program management office is leading an effort to  complete such an estimate no later than fiscal year 2015. Nevertheless,  the fact that neither document states that the life-cycle costs presented in  each are not total costs may be misleading for decision makers. It also  raises the question of to what extent the Army considered the affordability  of either alternative; the associated trade-offs in the sustainment of its  current fleet of tactical and combat equipment; or offsets in future  modernization procurement that might be necessary in its base budget to  sustain the additional 18,259 vehicles, of which 4,727 will be assigned to  units. Finally, although Army officials provided us with a copy of a  sensitivity analysis, which all three sets of guidance recommend, neither  the August 2010 study nor the final report indicates that a sensitivity or  uncertainty analysis was done.
According to DOD documents, as a joint program, MRAPs have been  allocated, through July 2011, $44.1 billion in overseas contingency  operations funding. The military departments consequently have not had  to fully account for long-term budgetary aspects and will eventually face  substantial operational support costs in their annual base budgets. Army  officials have likewise expressed concern about the loss of overseas  contingency operations funding for MRAPs once the vehicles become  part of the Army’s enduring force structure. Specifically, they are  concerned about the Army’s ability to fund operations and maintenance  costs for MRAPs within the Army base budget and the funding trade-offs  that might have to be made with other major acquisition programs.
On May 25, 2010, the Under Secretary of Defense (Comptroller) issued  budget submission guidance to the DOD components stating that costs  for non-war-related upgrades or conversions, home station training costs,  and the storage of MRAPs not active in combat operations must be  included in base budget estimates for fiscal years 2012 to 2016, thereby  compelling the services to begin planning for funding MRAPs. Specific  upgrades include increased armor protection, enhanced suspensions,  and the standardization and consolidation of the many MRAP variants. In  response, the Army has allocated $142.9 million in its fiscal year 2012  base budget submission for the upgrade of 224 MRAPs at Red River  Army Depot and, all told, has planned to budget for the upgrade of 3,616  MRAPs for fiscal years 2012 through 2016, at a cost of $1.6 billion.  However, the Army has not allocated funding for home station training or  MRAP storage over the same period.
According to the Army’s Tactical Wheeled Vehicle Strategy, one of the  references used to inform the final report, it is important that the Office of  the Secretary of Defense and the executive and legislative branches are  kept informed of the Army’s needs to support its given missions and of  any risks it foresees, so that thoughtful funding decisions can be made. In  addition, this strategy states that the availability of adequate funding  poses significant risks and that, if funding is lower than forecasted, the  Army will be required to make difficult trade-offs that would, in turn, create  increased operational risks. Moreover, in its April 20, 2011 order,  Headquarters, Department of the Army, noted that one of the objectives  of the order was to direct Planning, Programming, Budgeting, and  Execution to ensure necessary action to identify and validate  requirements used to inform future programming development. However,  given the limitations to the cost estimates of both the August 2010 MRAP  study and the final report on MRAPs, and the fact that the total cost  estimates for the Army MRAP program are not yet complete, it is difficult  to see how Planning, Programming, Budgeting, and Execution can be  accomplished.

	Conclusions

Although the Army has plans and processes for the disposition of its  nontactical and tactical nonstandard equipment, challenges remain that, if  left unresolved, could affect plans for the eventual drawdown of U.S.  forces from Iraq as well as Afghanistan. Specifically, without greater  oversight over the universe of tactical nonstandard equipment currently  being employed in Iraq and without a single focal point responsible for  maintaining oversight of this equipment, there is a potential that some  tactical nonstandard equipment that has been effective will be  overlooked, and the Army could potentially forfeit opportunities for cost- saving efficiency and for ensuring that servicemembers are provided the  most effective combat system. In addition, because the Army has  categorized the vast majority of the tactical nonstandard equipment that it  has considered as equipment that will continue to be funded with  overseas contingency operations funds, it has not had to make the hard  decisions about finding money for these programs in its base budget. Yet  the Army cannot afford to sustain this equipment without overseas  contingency operations funds, and continuing to fund these items in this  manner places a strain on the Army budget that is not transparent.  Finally, future costs associated with MRAPs will remain uncertain without  a thorough analysis of those costs based on DOD, OMB, and GAO best  practices and the completion of a true total cost estimate. Moreover,  without the disclosure of the complete set of costs associated with  MRAPs, the Army, the Office of the Secretary of Defense, and  congressional decision makers will be unable to ascertain the long-term  budgetary effects of the program, which is critical information in a time  when competing programs are vying for finite and increasingly  constrained funding.

	Recommendations for Executive Action

To facilitate the Army’s ability to efficiently evaluate, integrate, and  provide for the disposition of its nonstandard equipment being  retrograded from Iraq, and supply DOD decision makers and Congress  with accurate estimates of the future costs of these systems, we  recommend that the Secretary of Defense direct the Secretary of the  Army to take the following three actions:  finalize decisions about the future status of tactical nonstandard  equipment, fund those items deemed as enduring capabilities in the  Army base budget if applicable, and provide Congress with its plans  for and estimates on future funding for or costs associated with any  equipment the Army will continue to use in theater that will not  become enduring capabilities;    designate a senior-level focal point within the Department of the Army  with the appropriate authority and resources to manage the service’s  effort in overseeing the disposition of its tactical nonstandard  equipment to include the implementation of a servicewide means to  track, monitor, and manage this equipment; and    undertake a thorough total life-cycle cost estimate for integrating  MRAPs into its ground vehicle fleet in accordance with DOD, OMB,  and GAO guidance and include costs for training, upgrades,  standardization, and military construction and    use this estimate to assess the affordability of its current plans  and make adjustments to those plans if warranted; and    provide the total life-cycle cost for integrating MRAPs into its  ground vehicle fleet to Congress.

	Agency Comments and Our Evaluation

In written comments on a draft of this report, DOD partially concurred with  our first recommendation, did not concur with our second  recommendation, and concurred with our third recommendation. These  comments are included in appendix II. In addition, DOD provided  technical comments that were incorporated, as appropriate.
In response to our first recommendation that the Secretary of Defense  direct the Secretary of the Army to finalize decisions about the future  status of tactical nonstandard equipment, fund those items deemed as  enduring capabilities in the Army base budget if applicable, and provide  Congress with its plans for and estimates on future funding for or costs  associated with any equipment the Army will continue to use in theater  that will not become enduring capabilities, DOD partially concurred. In its  response, DOD stated that the Capabilities Development for Rapid  Transition (CDRT) process identifies enduring capabilities as Army  Program Candidates and that the CDRT meets quarterly and provides  recommendations to the DOD Joint Capabilities Development System,  the Army Requirements Oversight Council, or the Joint Requirements  Oversight Council depending on the acquisition strategy. DOD also stated  that program managers and appropriate Army personnel then compete  selected programs in the Program Operating Memoranda Joint  Capabilities Assessment to secure funding and for inclusion in the  President’s Budget Submission. Finally, DOD stated that the Army will  provide the recommended report regarding any equipment the Army will  continue to sustain in theater after Army forces return from Iraq. We  support DOD’s rendering of a report to Congress outlining the equipment  that it will continue to sustain in theater with overseas contingency  operations funds. We also recognize that the CDRT process has resulted  in a recommendation that certain equipment become programs of record  and, as such, compete for funding in the Army’s base budget. However,  as we reported, of the 484 material capabilities considered by the CDRT  process as of January 2011, only 30, including Armored Security Vehicles  and One-System Remote Video Terminals, have received such a  recommendation while 328 material capabilities considered by CDRT  were still being maintained by overseas contingency operations funds.  Army officials familiar with the CDRT process have stated that the Army  has yet to make definitive and difficult decisions about the majority of the  material capabilities considered by CDRT and it cannot afford to sustain  this equipment without overseas contingency operations funds. However,  in order for the department to plan for and Congress to be informed of the  future cost effect of sustaining new items of equipment after the end of  overseas contingency operations funding, we continue to believe that the  Army should eliminate this unknown by finalizing decisions about the  future status of its tactical nonstandard equipment.
DOD did not concur with our recommendation that the Secretary of  Defense direct the Secretary of the Army to designate a senior-level focal  point within the Department of the Army with the appropriate authority and  resources to manage the service’s effort in overseeing the disposition of  its tactical nonstandard equipment to include the implementation of a  servicewide means to track, monitor, and manage this equipment. In its  response, DOD stated that our recommendation does not account for the  complexity covering requirements determination and approval, combat  development, materiel development, management, and sustainment. In  addition, DOD’s response stated that the Army used the same processes  for managing nonstandard equipment as it does to manage standard  equipment and highlighted the responsibilities of the Army G-3/5/7, G-8,  G-4, and Assistant Secretary of the Army for Acquisition, Logistics, and  Technology with regard to nonstandard equipment. Moreover, in its  response DOD maintained that the Army has visibility of the nonstandard  equipment in theater and has undertaken extensive efforts to ensure all  nonstandard equipment is brought to record and accounted for, and that  the Army staff and the Life Cycle Management Commands review  nonstandard equipment on a recurring basis to determine its disposition.  In summation, DOD’s position is that the Army does not believe it  advisable to treat tactical nonstandard equipment different from  nontactical nonstandard equipment or standard equipment. However, as  the report points out, the Army already does treat tactical nonstandard  equipment differently than nontactical nonstandard equipment and  standard equipment, a fact underscored by the existence of the CDRT  process, which is applicable only to tactical nonstandard equipment and  not to any other types of equipment. In addition, Army officials repeatedly  stressed to us that they do not have visibility over the universe of tactical  nonstandard equipment in the CENTCOM theater. Army officials also told  us that, despite an April 2010 memorandum from the Vice Chief of Staff  of the Army calling for the development of a common operating picture  and collaboration tool as a means to increase efficiency and transparency  of Army urgent needs processes by which tactical nonstandard  equipment is acquired, as of April 2011 one had yet to be fielded due to a  lack of agreement over information sharing and over who would be  responsible for the system. Moreover, in March 2011, DOD concurred  with our recommendation that the department appoint a senior-level focal  point to lead its urgent needs efforts and that its components, like the  Army, develop processes and requirements to ensure tools and  mechanisms are used to track, monitor, and manage the status of urgent  needs. On the basis of the above, we continue to believe that like DOD,  the Army should designate a senior-level focal point with the appropriate  authority and resources to manage the service’s efforts in overseeing the  disposition of its tactical nonstandard equipment to include the  implementation of a servicewide means to track, monitor, and manage  this equipment.
DOD concurred with our third recommendation that the Secretary of  Defense direct the Secretary of the Army to undertake a thorough total  life-cycle cost estimate for integrating MRAPs into its ground vehicle fleet  in accordance with DOD, OMB, and GAO guidance and include costs for  training, upgrades, standardization, and military construction; that the  Army use this estimate to assess the affordability of its current plans and  make adjustments to those plans if warranted; and that the Army provide  the total life-cycle cost for integrating MRAPs into its ground vehicle fleet  to Congress. DOD commented that the Army staff, in conjunction with the  Joint Program Office, is now conducting a Sustainment Readiness  Review that addresses issues of total life-cycle costs for MRAPs, and that  it will continue to refine its estimates to determine total life-cycle costs,  which will inform future budget decisions as the Army continues to reset  its force. We believe that if the Army’s total life-cycle cost estimate is  conducted in accordance with DOD, OMB, and GAO guidance and used  to develop an affordable plan for integrating MRAPs into its vehicle fleet  as well as to provide Congress with a total life-cycle cost of its plan, its  actions will be responsive to our recommendations.
We are sending copies of this report to the appropriate congressional  committees, the Secretary of Defense, and the Secretary of the Army. In  addition, the report will be available at no charge on the GAO Web site at  http://www.gao.gov.
Should you or your staff have any questions on the matters discussed in  this report, please contact me at (202) 512-8365 or solisw@gao.gov.  Contact points for our Offices of Congressional relations and Public  Affairs may be found on the last page of this report. GAO staff who made  key contributions to this report are listed in appendix III.

Appendix I: Scope and Methodology

To determine the extent to which the Army has plans and processes for  the disposition of nontactical nonstandard equipment no longer needed in  Iraq, we reviewed and analyzed relevant documents, including various  Army messages that address the procedures for requisitioning  retrograded nonstandard equipment from Iraq. In addition, we interviewed  Army officials at relevant organizations throughout the chain of command  and at several different organizations. We also reviewed Army Materiel  Command briefings regarding the Materiel Enterprise Non-Standard  Equipment database and Virtual Mall demonstrations and spoke with  officials involved with the National Association of State Agencies for  Surplus Property program. Furthermore, we also conducted a site visit to  Sierra Army Depot, where the vast bulk of the Army’s nontactical  nonstandard equipment is shipped once it leaves Iraq, to view procedures  and processes there for the evaluation, disposition, storage, and  integration of nontactical nonstandard equipment. We also drew from our  body of previously issued work related to nonstandard equipment to  include various Iraq drawdown-related issues to identify areas where the  Department of Defense (DOD) could make improvements in executing  and managing the retrograde of standard and nonstandard equipment  from Iraq.
To determine the extent to which the Army has plans and processes for  the disposition of tactical nonstandard equipment no longer needed in  Iraq, we reviewed and analyzed relevant documents, including Army  plans, messages, guidance, regulations, and briefings that addressed the  subject. We also reviewed Army Audit Agency reports that specifically  address the Capabilities Development for Rapid Transition process as  well as the sustainment of tactical nonstandard equipment. In addition, we  interviewed Army officials at several relevant organizations throughout the  chain of command and made a site visit to Fort Monroe, Virginia, where  we interviewed officials from U.S. Army Training and Doctrine Command  and from the Army Capabilities and Integration Center, both of which play  leading roles in determining the ultimate disposition of tactical  nonstandard equipment. We also interviewed officials from the Joint  Improvised Explosive Device Defeat Organization to discuss the interface  between that organization and the Army’s processes for integrating  tactical nonstandard equipment into its inventory. Finally, we drew from  our body of previously issued work examining DOD’s urgent needs  processes and the need for DOD to obtain visibility over these efforts.
To determine the extent to which the Army has plans and processes for  the disposition of Mine Resistant Ambush Protected vehicles (MRAP) no  longer needed in Iraq, we reviewed and analyzed relevant documents,  including Army plans, messages, guidance, and briefings that addressed  the subject. In particular, we reviewed the Army’s MRAP disposition plans  included in the Final Report, Army Capabilities and Integration Center,  Mine Resistant Ambush Protected Study II, and also considered in our  analysis the Army’s Tactical Wheeled Vehicle Strategy. We also analyzed  Army cost estimates for integrating MRAPs into its ground vehicle fleet  and compared these estimates with DOD’s instruction for economic  analysis, the Office of Management and Budget’s guidance for conducting  cost-benefit analyses, and GAO’s Cost Estimating and Assessment  Guide. We interviewed relevant officials with direct knowledge of the  Army’s future plans for its MRAPs throughout the chain of command to  include officials from the Army’s budget office and Red River Army Depot,  where MRAPs will be shipped once they are no longer needed in Iraq or  Afghanistan. Moreover, we made a site visit to Fort Monroe, Virginia,  where we interviewed officials from U.S. Army Training and Doctrine  Command and from the Army Capabilities and Integration Center, both of  which were tasked to complete the MRAP Study II Final Report; and  since the MRAP program is currently a joint program under U.S. Marine  Corps lead, we also interviewed officials from the MRAP Joint Program  Office. Finally, we also drew from our body of previously issued work  regarding MRAPs to include the rapid acquisition of these vehicles as well  as the challenges the services have faced with incorporating MRAPs into  their organizational structures.

Appendix II: Comments from the Department of Defense

Appendix III: GAO Contact and Staff Acknowledgments

	GAO Contact

	Staff Acknowledgments

In addition to the contact named above, individuals who made key  contributions to this report include Larry Junek, Assistant Director; Nick  Benne; Stephen Donahue; Guy LoFaro; Emily Norman; Charles Perdue;  Carol Petersen; Michael Shaughnessy; Maria Storts; and Cheryl  Weissman.

Summary:
Why GAO Did This Study

As of March 2011, the Army had over $4 billion worth of nonstandard equipment in Iraq--that is equipment not included on units' standard list of authorized equipment. Concurrently, the Department of Defense (DOD) has acquired over $44 billion worth of Mine Resistant Ambush Protected vehicles (MRAP), most of which have been allocated to the Army. This equipment must be withdrawn from Iraq by December 31, 2011. GAO examined the extent to which the Army has plans and processes for the disposition of (1) nontactical nonstandard equipment; (2) tactical nonstandard equipment; and (3) MRAPs that are no longer needed in Iraq. In performing this review, GAO analyzed relevant documents, interviewed Army officials, and visited Sierra Army Depot, where most nontactical nonstandard equipment is shipped once it leaves Iraq.

What GAO Found

The Army has plans and processes for the disposition of nontactical nonstandard equipment (e.g., durable goods that are used to provide services for soldiers), and recently created a policy regarding the length of storage time. Excess nontactical nonstandard equipment is either redistributed in the U.S Central Command theater, disposed of, provided to other nations through foreign military sales or other means, or shipped to depots in the United States. In April 2011, the Army issued two messages that updated its procedures for requisitioning excess nonstandard equipment stored at Sierra Army Depot and created a forum to determine its final disposition instructions. The intent was also to extend use of this equipment by making it available to Army units; when an item is deemed not operational, to dispose of it in theater; and to enter these instructions in a disposition database so they will no longer be shipped back to the United States. The Army would then avoid unnecessary transportation costs. The Army has not made disposition decisions for most of its tactical nonstandard equipment (i.e., commercially acquired or non-developmental equipment rapidly acquired and fielded outside the normal budgeting and acquisition process), and its disposition process is impaired by a lack of visibility over this equipment and the absence of a focal point to manage this equipment. The Capabilities Development for Rapid Transition process enables the Army to assess tactical nonstandard equipment already in use in the U.S. Central Command theater and determine whether it should be retained for the Army's current and future force and subsequently funded in the Army's base budget. However, the decision about most of the equipment considered by the process is to continue to fund it with overseas contingency operations funds. In addition, the Army has no system to track, monitor, and manage its inventory of tactical nonstandard equipment and has no single focal point to oversee this equipment. Best practices as cited in GAO's Standards for Internal Control in the Federal Government call for effective stewardship of resources by developing detailed policies, procedures, and practices. Although the Army has plans for the disposition of its MRAP fleet, its cost estimates are incomplete and do not follow cost-estimating best practices. The Army conducted a study to effectively guide its integration of MRAPs into its force structure. The selected option placed the majority of MRAPs in prepositioned stocks. However, this study did not incorporate analyses of future costs based on Department of Defense, Office of Management and Budget, and GAO cost-estimating guidance providing best practices; nor did it delineate total costs for sustainment of its MRAP fleet or when those costs would be incurred. Without such information, decision makers lack the perspective necessary to make asset-management and budgetary decisions. Although Army officials stated that they are working toward providing an estimate of future MRAP costs, this has not yet been completed.

What GAO Recommends

GAO recommends that the Secretary of Defense direct Army authorities to (1) finalize decisions about the future status of tactical nonstandard equipment; (2) designate a focal point to oversee this equipment; and (3) undertake a thorough life-cycle cost estimate for its MRAPs. DOD concurred with our third recommendation, partially concurred with our first, and did not concur with the second. Given DOD's lack of visibility over tactical nonstandard equipment, GAO continues to believe a focal point is needed.