a

GAO

United States Government Accountability Office

Report to Congressional Requesters

May 2005 DOD EXCESS 

PROPERTY

Management Control 

Breakdowns Result in 

Substantial Waste and 

Inefficiency

GAO-05-277
What GAO Found

United States Government Accountability Office

Why GAO Did This Study

Highlights

Accountability Integrity Reliability

www.gao.gov/cgi-bin/getrpt?GAO-05-277.

To view the full product, including the scope 

and methodology, click on the link above. 

For more information, contact Gregory D. 

Kutz at (202) 512-9095 or kutzg@gao.gov. 

Highlights of GAO-05-277, a report to 

congressional requesters 

May 2005

DOD EXCESS PROPERTY 

Management Control Breakdowns Result 

in Substantial Waste and Inefficiency 

DOD does not have management controls in place to assure that excess 

inventory is reutilized to the maximum extent possible. Of $18.6 billion in 

excess commodity disposals in fiscal years 2002 and 2003, $2.5 billion were 

reported to be in new, unused, and excellent condition. DOD units reutilized 

only $295 million (12 percent) of these items. The remaining $2.2 billion (88 

percent) includes significant waste and inefficiency because new, unused, 

and excellent condition items were transferred and donated outside of DOD, 

sold for pennies on the dollar, or destroyed. DOD units continued to buy 

many of these same items. GAO identified at least $400 million of commodity 

purchases when identical new, unused, and excellent condition items were 

available for reutilization. GAO also identified hundreds of millions of 

dollars in reported lost, damaged, or stolen excess property, including 

sensitive military technology items, which contributed to reutilization 

program waste and inefficiency. Further, excess property improperly stored 

outdoors for several months was damaged by wind, rain, and hurricanes. 

Waste and Inefficiency Related to $2.2 Billion in Fiscal Year 2002 and 2003 Disposals of 

Excess DOD Commodities Reported To Be in New, Unused, and Excellent Condition 

12%

10%

25%

53%

$295 million

DOD reutilization

$248 million 

DOD special programs ($91 million)

Federal agency transfers ($103 million)

Donations to states ($54 million)

88% $2.2 billion

$634 million

Demilitarization, scrap, and

hazardous material disposals

$1.3 billion

Public sales

Source: GAO analysis.

DOD reutilization

Other disposals

To illustrate continuing reutilization program waste and inefficiency, GAO 

ordered and purchased at little or no cost several new and unused excess 

commodities that DOD continued to buy and utilize, including tents, boots, 

power supplies, circuit cards, and medical supplies. GAO paid a total of 

$1,471, including tax and shipping cost, for these items, which had an 

original DOD acquisition cost of $68,127. 

Root causes for reutilization program waste and inefficiency included 

(1) unreliable excess property inventory data; (2) inadequate oversight and 

physical inventory control; and (3) outdated, nonintegrated excess inventory 

and supply management systems. Procurement of inventory in excess of 

requirements also was a significant contributing factor. Improved 

management of DOD’s excess property could save taxpayers at least 

hundreds of millions of dollars annually. 

Based on limited previous GAO 

work that identified examples of 

purchases of new items at the same 

time identical items in excellent or 

good condition were excessed, 

GAO was asked to assess the 

overall economy and efficiency of 

the Department of Defense (DOD) 

program for excess property 

reutilization (reuse). Specifically, 

GAO was asked to determine 

(1) whether and to what extent the 

program included waste and 

inefficiency and (2) root causes of 

any waste and inefficiency. GAO 

was also asked to provide detailed 

examples of waste and inefficiency 

and the related causes. GAO’s 

methodology included an 

assessment of controls, analysis of 

DOD excess inventory data, 

statistical sampling at selected 

sites, and detailed case studies of 

many items. 

This report includes 13 

recommendations to improve the 

economy and efficiency of DOD’s 

reutilization program for excess 

commodities in the areas of 

(1) data reliability; (2) oversight, 

accountability, and physical 

inventory control; and (3) the 

functional design of DOD’s future 

commodity inventory systems. 

DOD concurred with 8 and partially 

concurred with 5 of our 

recommendations. Where DOD 

partially concurred, we view DOD’s 

stated actions as being generally 

responsive to the intent of our 

recommendations. 
Page i GAO-05-277 DOD Excess Property Reutilization

Contents

Letter 1

Results in Brief 4

Background 8

Analysis of Reutilization Program Identifies Billions of Dollars in 

Waste and Inefficiency 16

Management Control Breakdowns Resulted in Reutilization 

Program Waste and Inefficiency 34

Conclusions 58

Recommendations for Executive Action 58

Agency Comments and Our Evaluation 60

Appendixes

Appendix I: Objectives, Scope, and Methodology 64

Appendix II: Comments from the Department of Defense 72

Appendix III: Excess Property Condition Codes 80

Appendix IV: Programs Authorized to Receive Excess DOD Property 82

Appendix V: Results of Statistical Tests of Excess Commodity Inventory 

Accuracy 84

Appendix VI: GAO Contacts and Staff Acknowledgments 90

Tables Table 1: Defense Reutilization and Marketing Service Revenue 13

Table 2: Reported Acquisition Value of DOD Excess Commodity 

Transfers to Other Programs and Agencies during Fiscal 

Years 2002 and 2003 19

Table 3: Examples of New, Unused Commodity Items Transferred 

and Sold Outside of DOD while Still Being Purchased 

during Fiscal Years 2002 and 2003 20

Table 4: Turn-in Transactions with One or More Control Test 

Failures at Five DRMOs and Five DLA Supply Depots 36

Table 5: Estimated Turn-in Transaction Control Test Failures for 

Items Classified as Serviceable 41

Table 6: Reported DRMS Excess Property Losses and 

Adjustments 46

Table 7: DOD Excess Property Condition Codes 80

Table 8: DOD Special Programs 82

Table 9: DRMO Turn-in Transactions with One or More Control Test 

Failures 85
Contents

Page ii GAO-05-277 DOD Excess Property Reutilization

Table 10: DLA Supply Depot Turn-in Transactions with One or More 

Control Test Failures 86

Table 11: DRMO Turn-in Transactions That Failed Overall Control 

Tests for Condition Code Accuracy 87

Table 12: DRMO Turn-in Transactions Classified as Serviceable That 

Failed Control Tests for Condition Code Accuracy 87

Table 13: DRMO Turn-in Transactions Classified as Unserviceable 

That Failed Control Tests for Condition Code Accuracy 88

Table 14: DLA Supply Depot Turn-in Transactions That Failed 

Overall Control Tests for Condition Code Accuracy 89

Figures Figure 1: DLA Commodity Acquisition and Distribution Process 10

Figure 2: DRMS Excess Property Disposal Process 14

Figure 3: Fiscal Year 2002 and 2003 Disposals of Excess DOD 

Commodities in Serviceable and Unserviceable 

Condition 17

Figure 4: Waste and Inefficiency Related to $2.2 billion in Fiscal 

Year 2002 and 2003 Disposals of Excess DOD 

Commodities Reported To Be in New, Unused, and 

Excellent Condition 18

Figure 5: Examples of Fiscal Year 2002 and 2003 DLA Purchases 

When Identical New, Unused Items Were Available for 

Reutilization 24

Figure 6: Medical Instrument Chest Assembled for Maximum 

Utilization 26

Figure 7: One of the New, Unused Excess DOD Circuit Cards 

Transferred to GAO in September 2004 27

Figure 8: New, Unused DOD Power Supply Unit Requisitioned by 

GAO in September 2004 from the DLA Depot in Norfolk, 

Virginia 28

Figure 9: New, Unused Excess Cold Weather Boots Purchased in 

September 2004 30

Figure 10: New, Unused Excess Shelter Half-Tent Purchased in 

August 2004 31

Figure 11: One of the New, Unused Excess DOD Gasoline Burner 

Units Purchased in September 2004 32

Figure 12: Photograph of the New, Unused Portable Suction 

Apparatus Purchased in October 2004 34

Figure 13: New, Unused Excess Level III Biological Safety Cabinet at 

the Norfolk DRMO 40
Contents

Page iii GAO-05-277 DOD Excess Property Reutilization

Figure 14: Outside Storage of Wood Computer Furniture at the 

Huntsville, Alabama, Liquidation Sales Location in July 

2004 51

Figure 15: Example of Water-Damaged Items at the DRMS 

Liquidation Sales Contractor Location in Huntsville, 

Alabama 52

Figure 16: Example of Excess DOD Property Stored Outside at the 

DOD Liquidation Sales Contractor Location in Norfolk, 

Virginia 53

Figure 17: DOD Excess New, Unused Bandages and Medical 

Supplies Purchased over the Internet in October 2004 54

Figure 18: Existing Nonintegrated DLA Inventory Systems 

Environment 57

Abbreviations

BSM Business System Modernization

CAP Civil Aeronautics Patrol

CCLI Commerce Control List Item

C.F.R. Code of Federal Regulations

CONUS Continental United States

CPU Central processing unit

DAISY DRMS Automated Information System

DLA Defense Logistics Agency

DLIS Defense Logistics Information System

DOD Department of Defense

DODAAC DOD Activity Address Code

DODAAD DOD Activity Address Directory

DRMO Defense Reutilization and Marketing Office

DRMS Defense Reutilization and Marketing Service

DSS Defense Standard System

FEDLOG Federal Logistics System

FEDS Federal Disposal System

FSC Federal Supply Class

GSA General Services Administration

GSAXcess GSA Excess Property Web site

HAP Humanitarian Assistance Program

IDEA Interactive Data Extraction and Analysis 

JSLIST Joint Service Lightweight Integrated Suit Technology

LEA Law Enforcement Agency
Contents

Page iv GAO-05-277 DOD Excess Property Reutilization

LSN Local stock number

MIDAS Management Information Distribution and Access System

MILSTRIP Military Standard Requisitioning and Issue Procedures

MARS Military Affiliate Radio System

MLI Military List Item

MWR Morale, welfare, and recreation activities and services

NSN National stock number

OMB Office of Management and Budget

RCP Recycle control point

RIPL Receipt in place location

RMP Reutilization Modernization Program

ROTC Senior Reserve Officer Training Corps

SAMMS Standard Automated Materiel Management System

SCC Supply Condition Code

U.S.C. United States Code

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Page 1 GAO-05-277 DOD Excess Property Reutilization

United States Government Accountability Office

Washington, D.C. 20548

A

May 13, 2005 Letr

The Honorable Christopher Shays

Chairman

The Honorable Dennis J. Kucinich

Ranking Minority Member

Subcommittee on National Security, 

Emerging Threats and International Relations

Committee on Government Reform

House of Representatives

The Honorable Susan M. Collins

Chairman

Committee on Homeland Security 

and Governmental Affairs

United States Senate 

The Honorable Janice D. Schakowsky

House of Representatives

This report responds to your request that we assess the overall economy 

and efficiency of the Department of Defense (DOD) program for 

reutilization (reuse) of excess property. Your request was based on our 

limited previous work that identified several examples of problems in this 

area. Specifically, our November 2003 report1

 identified several examples 

that showed that at the same time DOD excessed biological equipment 

items in good or excellent condition and sold many of them to the public 

for pennies on the dollar, it was purchasing the same or similar items. In 

addition, at a June 2002 hearing on ineffective and inefficient DOD business 

processes before the Subcommittee on National Security, Veterans Affairs 

and International Relations, House Committee on Government Reform, we 

testified2

 that the lack of asset visibility over the Joint Service Lightweight 

1

 GAO, DOD Excess Property: Risk Assessment Needed on Public Sales of Equipment That 

Could Be Used to Make Biological Agents, GAO-04-15NI (Washington, D.C.: Nov. 19, 2003). 

2

 GAO, DOD Management: Examples of Inefficient and Ineffective Business Processes, 

GAO-02-873T (Washington, D.C.: June 25, 2002). 
Page 2 GAO-05-277 DOD Excess Property Reutilization

Integrated Suit Technology (JSLIST)3 resulted in DOD units sending JSLIST 

to Defense Reutilization and Marketing Offices (DRMO) as excess. DRMOs 

then issued coats and trousers to other federal agencies, scrapped some of 

these items, and sent other JSLIST to a government liquidation contractor, 

while at the same time procuring hundreds of thousands of new garments 

in response to the terrorist attacks of September 11, 2001. You were 

concerned that our limited examples could indicate systemic problems.

Accordingly, you asked us to assess the overall economy and efficiency of 

DOD’s excess property reutilization program. To do so, we reviewed 

applicable laws and regulations; DOD policies and procedures; and current 

systems, processes, and management controls. Where we found controls 

to be ineffective, we tested and evaluated them further. You asked us to 

report (1) whether and to what extent we found waste and inefficiency and 

(2) the root causes of any waste and inefficiency. In reporting on the 

results of our work, you asked us to provide detailed examples of any 

waste and inefficiency and the related causes. As agreed with your offices, 

our audit focused on identifying new, unused, and excellent condition 

excess commodity inventory4

 activity during fiscal years 2002 and 20035

and determining whether the Defense Logistics Agency (DLA) purchased 

identical items instead of reutilizing the available excess items in Defense 

Reutilization and Marketing Service (DRMS) inventory. 

To identify potential waste and inefficiencies, we analyzed the universe of 

recorded fiscal year 2002 and 2003 transactions on excess DOD commodity 

turn-ins and disposals and DLA commodity purchases. We compared DOD 

reutilization of excess new, unused, and excellent condition commodities 

to transfers, donations, public sales, and destruction of excess 

3

 JSLIST is a universal, lightweight, two-piece garment (coat and trousers) that when 

combined with footwear, gloves, and a protective mask and a breathing device, forms the 

warfighter’s protective ensemble. Together, the ensemble is to provide maximum protection 

to the warfighter against chemical and biological contaminants without negatively affecting 

the ability to perform mission tasks. JSLIST is the current model protective suit used by the 

military services. 

4

 DOD commodities within the scope of this report include a wide variety of equipment, 

spare parts, and supplies, such as office and laboratory equipment, aircraft parts and 

weapons system components, construction and medical supplies and equipment, and 

clothing and textile items. Ammunition and explosive weapons, fuel, subsistence items, and 

pharmaceuticals are not included in the scope of this report. 

5

 Fiscal year 2002 and 2003 data were the most recent data available at the time we initiated 

our audit.
Page 3 GAO-05-277 DOD Excess Property Reutilization

commodities. We also compared DOD commodity purchases to identical 

excess items in new, unused, and excellent condition to determine whether 

DOD made unnecessary purchases instead of reutilizing available excess 

items. To determine the causes of identified waste and inefficiency, we 

tested and evaluated controls for assuring the reliability of data and 

information used for reutilization decision making and safeguarding excess 

property. We also assessed the effectiveness of current and planned supply 

and excess inventory management systems and processes for reutilization 

of excess property. 

You also asked us to illustrate the details of our analysis of fiscal year 2002 

and 2003 waste and inefficiency by identifying specific examples and 

performing case study investigations of the details of these examples. In 

addition, you asked us to purchase and requisition, as case studies, 

selected excess items that DLA was continuing to purchase, the military 

services were continuing to utilize, or both. 

To assure ourselves that DOD data were sufficiently reliable for the 

purpose of our audit, we compared database totals to information in 

official agency reports, electronically checked control totals and the 

completeness of key data elements, and statistically tested the accuracy of 

excess inventory data that are key to the excess property reutilization 

program. We conducted our work from November 2003 through February 

2005 in accordance with U.S. generally accepted government auditing 

standards. We performed our investigative work in accordance with 

standards prescribed by the President’s Council on Integrity and Efficiency. 

A detailed discussion of our objectives, scope, and methodology is 

presented in appendix I. We requested comments on a draft of this report 

from the Secretary of Defense or his designee. Written comments from the 

Acting Under Secretary of Defense for Logistics and Materiel Readiness are 

reprinted in appendix II.
Page 4 GAO-05-277 DOD Excess Property Reutilization

Results in Brief DOD does not have effective management processes, systems, and controls 

in place to assure that it is reutilizing excess inventory to the maximum 

extent possible and safeguarding excess items from damage, loss, and 

theft, as required by federal regulations, DOD policy, and GAO internal 

control standards.6

 As a result, we found substantial waste and inefficiency 

related to DOD’s excess property reutilization program. Of the $18.6 billion 

in reported fiscal year 2002 and 2003 excess commodity disposals, $2.5 

billion related to items in new, unused, and excellent condition (A 

condition).7

 Of the $2.5 billion, we determined that $2.2 billion included 

substantial waste and inefficiency because new, unused, and excellent 

condition items were being transferred or donated outside of DOD, sold on 

the Internet for pennies on the dollar, or destroyed rather than being 

reutilized. We also found that DOD purchased at least $400 million of 

identical commodities instead of reutilizing available A-condition excess 

items. However, the extent of this problem may be greater due to 

incomplete and inaccurate data that are key to identifying excess items for 

reutilization. DRMS also reported $466 million in excess property losses 

from fiscal years 2002 through 2004, such as missing, damaged, and stolen 

property, adding to reutilization program waste. 

To illustrate continuing reutilization program waste and inefficiencies, 

during fiscal year 2004 and the first quarter of fiscal year 2005, we obtained 

several new and unused excess DOD commodity items that were being 

purchased by DLA, were in use by the military services, at the time we 

obtained them, or both, including the following. 

• We requisitioned at no charge a medical instrument chest, two power 

supplies, and two circuit cards. Although these items had an original 

DOD acquisition cost of $55,817, we paid only about $5 shipping cost to 

obtain them. 

• We also purchased at minimal cost, over the Internet at 

govliquidation.com, tents, boots, gasoline burners (stove/heating units), 

6 Federal Property Management Regulations, 41 C.F.R. ch. 101 (2004) and the Federal 

Management Regulation, 41 C.F.R. ch. 102 (2004), issued by the General Services 

Administration; DOD 4160.21-M, Defense Materiel Disposition Manual; and GAO, 

Standards for Internal Control in the Federal Government, GAO/AIMD-00-21.3.1

(Washington, D.C.: November 1999).

7

 DOD excess property condition codes are defined in appendix III.
Page 5 GAO-05-277 DOD Excess Property Reutilization

a medical suction apparatus, and bandages and other medical supply 

items. Although the total reported acquisition cost for these items was 

$12,310, we paid a total of $1,466 to obtain them, about 12 cents on the 

dollar, including buyer’s premium, tax, and shipping cost. 

The root causes for the billions of dollars in waste and inefficiency related 

to management control breakdowns across DOD, including weaknesses in 

DOD’s excess property reutilization program, stemmed from (1) unreliable 

excess property inventory data; (2) inadequate oversight, accountability, 

and physical control of excess property; and (3) inadequate processes and 

outdated, nonintegrated inventory systems that do not provide adequate 

visibility of excess property available for reutilization at the time military 

units order and purchase commodity items. In addition, as we have 

reported for many years,8

 long-standing DOD logistics management 

weaknesses that resulted in purchases in excess of actual requirements 

also resulted in the disposal of unused items due to obsolescence and 

contributed indirectly to reutilization program waste and inefficiency. 

Our statistical tests of controls for accuracy of excess commodity 

inventory and our case studies and interviews led us to conclude that 

unreliable data are a key cause of the ineffective excess property 

reutilization program. DRMS policy9

 requires DRMO personnel to verify 

turn-in information, including item descriptions, quantities, condition code, 

and demilitarization code at the time excess property is received. 

However, we found that DRMS management did not enforce these 

verification requirements. Our statistical tests at 5 of 93 DRMO locations 

estimated error rates that ranged from 8 percent at 1 DRMO to 47 percent 

at another DRMO, indicating ineffective controls for assuring the accuracy 

of excess inventory data at these locations.10 Although condition code 

accuracy is key to reutilization program effectiveness, our estimate of 

8

 GAO, Defense Inventory: Analysis of Consumption of Inventory Exceeding Current 

Operating Requirements Since September 30, 2001, GAO-04-689 (Washington, D.C.: Aug. 

2, 2004), and Major Management Challenges and Program Risks: Department of Defense, 

GAO-03-98 (Washington, D.C.: January 2003).

9

 DRMS-I 4160.14, vol. II, Instructions for Warehousing for DRMS and the Defense 

Reutilization and Marketing Offices, ch. 2, “Receipt and Storage,” § 1 (A), (B) (April 2002). 

10 DRMS fiscal year 2004 operational compliance reviews of 91 DRMOs reported 

unacceptable or inadequate ratings for 20 DRMOs and fair ratings for 23 DRMOs. The 

remaining 48 DRMOs had ratings of good or excellent, including 2 of the 5 DRMOs that we 

tested.
Page 6 GAO-05-277 DOD Excess Property Reutilization

condition code error rates for the 5 DRMOs we tested ranged from 5 

percent at 1 DRMO to 22 percent at 2 other DRMOs. Most of the condition 

coding errors related to items reported to be in unserviceable condition 

when the items were actually in serviceable condition, which could prevent 

items in new, unused, and excellent condition from being selected for 

reutilization. Estimated error rates at 5 of the 25 DLA supply depots that 

we tested ranged from 6 percent to 16 percent. However, we did not find 

condition code errors at these supply depots. 

In addition, we found weaknesses in oversight and accountability that 

resulted in lost, stolen, and damaged excess property and contributed to 

hundreds of millions of dollars in overall reutilization program waste and 

inefficiency. Regardless of whether sensitive technology items are new or 

used, DOD policy11 requires that they be restricted to use by authorized 

parties or destroyed when no longer needed by DOD. For fiscal years 2002 

through 2004, DRMS reported a total of $466 million in known excess 

property losses, including lost, stolen, and damaged property and 

unverified adjustments. Losses reported by DRMOs included nearly 150 

chemical and biological protective suits, over 70 units of body armor, and 5 

guided missile warheads.12 Losses reported by DLA supply depots included 

thousands of sensitive military items, such as weapons system components 

and aircraft parts. Because 43 percent of the reported losses involved 

military and commercial technology that required demilitarization control, 

these weaknesses also reflect security risks. Further, inadequate DRMS 

oversight and accountability for contractor and DRMO operations have 

resulted in millions of dollars in damage to excess property that had been 

improperly stored outside for several months during fiscal year 2004 and 

subjected to wind, rain, and hurricanes. 

11 DOD 4160.21-M-1, Defense Demilitarization Manual, ch. 1.

12 The missing chemical and biological protective suits are not the current JSLIST suit 

technology, and the missing body armor is not the ceramic technology currently in use by 

deployed troops.
Page 7 GAO-05-277 DOD Excess Property Reutilization

Inefficient, nonintegrated excess inventory and supply management 

systems lack controls necessary to prevent waste and inefficiency in the 

reutilization program. For example, because the DRMS excess inventory 

system and the DLA supply management system are outdated and 

nonintegrated, they do not share information necessary to (1) identify and 

alert DLA item managers of excess property that is available to fill supply 

orders and (2) prevent purchases of new items when A-condition excess 

items are available for reutilization. DLA has acknowledged serious 

deficiencies in its automated inventory management systems and has 

efforts under way to replace its supply management system, and DRMS has 

an effort under way to upgrade its excess inventory system. However, we 

found that these efforts had not been effectively coordinated, and they did 

not adequately address identified process deficiencies, such as the failure 

to record national stock numbers (NSN)13 for commodity purchases and 

inventory records and unreliable condition code data. 

This report contains 13 recommendations to help improve the overall 

economy and efficiency of DOD’s reutilization program for excess 

commodities, including recommendations for better coordination between 

DRMS, DLA, and the military services with regard to data reliability; 

strengthened DRMS management oversight, accountability, and physical 

inventory control; and improvements in the functional design for excess 

property reutilization in DLA’s future commodity inventory systems 

environment. In its April 15, 2005, letter commenting on our report, DOD 

concurred with 8 recommendations. For the 5 recommendations with 

which DOD partially concurred, we view DOD’s actions to be generally 

responsive to the intent of our recommendations. DOD’s comment letter is 

reprinted in appendix II. 

13 An NSN is a unique13-digit number that identifies standard use inventory items. 
Page 8 GAO-05-277 DOD Excess Property Reutilization

Background DLA is DOD’s combat support agency under the supervision, direction, 

authority, and control of the Under Secretary of Defense for Acquisition, 

Technology, and Logistics. DLA’s mission is to provide best-value logistics 

support to America’s armed forces, in peace and in war, around the clock, 

and around the world. In carrying out its mission, DLA manages inventory 

valued at about $83 billion, consisting of more than 5 million consumable 

(expendable) items, including commodities such as fuel, food, clothing and 

other textiles, medical supplies, industrial use items, and spare and repair 

parts supporting over 1,400 weapon systems. DLA also buys and 

distributes hardware and electronic items that are used in maintenance and 

repair of equipment and weapons systems. In fiscal years 2002 and 2003, 

DLA expenditures related to sales and services amounted to over $46.5 

billion, including about $36 billion for commodity purchases and about 

$600 million for DRMS excess property disposal services. DLA and DRMS 

operate under the Defense-wide Working Capital Fund.14 DLA is financed 

through user charges to cover costs, and DRMS is financed through user 

charges and excess property and scrap sale proceeds. DLA activities 

related to this report fall into two main areas: (1) commodity acquisition 

and management and (2) excess property disposals by DRMS and DLAmanaged supply distribution depots (referred to as DLA supply depots). 

DLA Commodity 

Acquisition and 

Management Process 

DLA commodity acquisition and management functions discussed in this 

report are carried out by three Defense supply centers, which are located in 

Columbus, Ohio; Richmond, Virginia; and Philadelphia, Pennsylvania. The 

DLA acquisition process focuses on (1) the acquisition of inventory 

requisitioned by customers for immediate use and (2) routine inventory 

replenishment. Defense Supply Center item managers initiate commodity 

procurements based on military unit requirements for materiel and 

supplies and military unit requisitions (supply orders). Supply center item 

managers consolidate the requirements and work with buyers to procure 

requested items. Items for which there are immediate needs are delivered 

directly to a military unit by the commercial vendor, and items needed to 

support anticipated operations (referred to as the requirements objective) 

are stored at DLA supply depots for later issue. The DLA Defense 

Distribution Center uses a total of 26 DLA supply depots located 

throughout the United States and Europe, as well as in Guam and Kuwait, 

14 The Defense-wide Working Capital Fund is a revolving fund that the Secretary of Defense 

has established under authority of 10 U.S.C. § 2208.
Page 9 GAO-05-277 DOD Excess Property Reutilization

to store commodities and other items that are classified by over 5 million 

different NSNs. This inventory includes commodities, such as clothing and 

other textiles; electronics; industrial, general, and construction supplies; 

subsistence items; and medical supplies and equipment. Figure 1 

illustrates the DLA commodity acquisition and distribution process. 
Page 10 GAO-05-277 DOD Excess Property Reutilization

Figure 1: DLA Commodity Acquisition and Distribution Process 

When there is an urgent customer requirement and items are on back order, 

DLA item managers or expediters may check DRMS excess property 

Source: GAO.

Distribution

Standard System

Orders items from

DLA supply depot

inventory

DSS

DLA

buyer

Purchases items

from vendor

DLA commodity

item manager

Queries DLA supply

depot for serviceable items

using SAMMS

DLA Commodity

Item Manager

Fills supply orders using new

inventory from DLA supply

depot (requested through SAMMS),

from vendor (requested through

DLA Buyer) or both, and may query

DAISY for excess property inventory data

DLA supply

depot

Provides replenishment

items from storage to

units and installations

DSS

Unit or installation

supply manager

Sends electronic order

to DLA commodity

item managers

Immediate need items

Replenishment

items

Vendor

Provides items to

units, installations,

and supply depots

DRMS Automated

Information System (DAISY)

Identifies excess items

at DRMOs

DAISY

DLA commodity

item manager

Requests excess items

from each DRMO

separately

Defense Reutilization and

Marketing Offices (DRMO)

DRMOs provide excess items

to units and installations

Unit or

installation

Receives

items

Standard Automated Materiel

Management System (SAMMS) 

Provides DLA supply depot

inventory (new items) data

SAMMS

0100101

1001001

0101010

1001001

0100101

Inventory

data

1

3

2
Page 11 GAO-05-277 DOD Excess Property Reutilization

inventory and service-level inventory to locate available items to fill an 

order. 

Excess Property Disposal 

Process 

The Federal Property and Administrative Services Act of 1949, as 

amended,15 places responsibility for the disposition of surplus government 

real and personal property with the General Services Administration 

(GSA), which has delegated responsibility for disposal of DOD property to 

the Secretary of Defense. In accordance with federal regulations governing 

property management16 and department policy in DOD 4160.21-M, Defense 

Materiel Disposition Manual, DOD agencies and military services are 

responsible for determining whether property they hold is considered 

excess. Federal regulations17 also require executive agencies to ensure that 

personal property not needed by their activity is offered for use elsewhere 

within the agency. In accordance with federal regulations, DOD 4160.21-M, 

chapter 5, calls for reutilization of excess property to the extent feasible to 

fill existing needs and to satisfy additional needs before initiating new 

procurement or repair. All DOD activities are required to screen available 

excess assets to identify items that could satisfy valid needs, and the 

military services have programs for reutilizing property by redistributing 

excess property across their units to meet ongoing operational needs. DLA 

has overall responsibility for property that is excess to military and DOD 

units. DLA has placed responsibility for excess property disposals with 

DRMS. 

15 40 U.S.C. § 541.

16 Federal Property Management Regulations, 41 C.F.R. ch. 101 (2004) and the Federal 

Management Regulation, 41 C.F.R. ch. 102 (2004), issued by GSA. 

17 Federal Management Regulation, 41 C.F.R. ch. 102 (2004). 
Page 12 GAO-05-277 DOD Excess Property Reutilization

When a military service or DOD agency has property that it no longer 

needs, it turns the property over to a DRMS field warehouse location—or 

reutilization facility—referred to as a DRMO. During fiscal year 2004, 

DRMS managed 93 DRMOs, including 39 central DRMOs, 54 satellite 

DRMOs, and 35 receipt in place locations referred to as RIPLs. Reported 

excess property turn-ins are entered into the DRMS Automated 

Information System (DAISY). DRMS then posts descriptive information 

about the excess property to a Web page that lists property that is available 

for reutilization by DOD units and specially designated programs, transfer 

to federal agencies, and donation to states. DRMS has two organizational 

elements that manage and oversee excess property disposals. DRMS 

National is responsible for daily operations inside the continental United 

States. DRMS International is responsible for daily DRMS activities located 

outside the continental United States. DRMS International has field offices 

in Belgium, Germany, Guam, Hawaii, Italy, Japan, Korea, Portugal, Spain, 

Thailand, Turkey, the United Arab Emirates, and the United Kingdom, and 

it supports the task force in the Balkans. 

During fiscal years 2002 and 2003, the military services, DLA supply depots, 

and DOD agencies turned in18 excess commodities with a reported 

acquisition value of approximately $31 billion and disposed of excess 

property valued at $18.6 billion. This property included everything from 

office equipment, medical supplies, and clothing to scrap from naval ships, 

military equipment, and hazardous materials. The condition of the 

property ranges from being well-used or damaged property that has little 

value to new, unused items that sometimes are still in the original 

manufacturer’s packaging. 

DRMS bills DOD units and other federal agencies for disposal services 

based on turn-in volume. DRMS bills the military services and other DOD 

agencies a prorated amount for disposal costs net of scrap and liquidation 

sale proceeds. Table 1 shows DRMS’s reported revenue for excess 

property disposal services, including billings to the military services.19

18 A turn-in consists of an item or group of items recorded on the same disposal turn-in 

document. Each disposal turn-in document represents one DRMS receipt. 

19 Disposal costs net of scrap and liquidation sale proceeds are prorated to the military 

services and other DOD units. 
Page 13 GAO-05-277 DOD Excess Property Reutilization

Table 1: Defense Reutilization and Marketing Service Revenue

Source: President’s Fiscal Year 2005 Budget Submission. 

Turn-ins of excess property are reported on DOD Form 1348, Disposal 

Turn-in Document, using a hard copy form that accompanies physical turnins of property at DRMOs or electronic reporting. In accordance with DOD 

4160.21-M, Materiel Disposition Manual, upon arrival at a DRMO, excess 

items are to be inspected and the item descriptions, quantities, condition 

codes, and demilitarization codes are to be verified. Based on the item type 

and condition, a decision is made as to whether the item should be made 

available for reutilization. For excess property in new, usable, or 

repairable condition, redistribution from one DOD unit to another allows 

the government to make full use of its resources, avoids unnecessary 

procurement of property, and results in economy and efficiency of 

operations. Transfers and donations of excess DOD property to special 

programs, federal agencies, and states help to conserve their budgetary 

resources. Unusable items are generally sold as scrap. 

Department policy in DOD 4160.21-M-1, Defense Demilitarization 

Manual, calls for identifying and controlling items that have a significant 

military or commercial technology application to prevent improper use or 

release of these items outside of DOD. DOD’s Demilitarization Manual

establishes specific codes that are designed to indicate whether DOD 

property is available for reuse without restriction or whether specific 

restrictions apply, such as removal of classified components, destruction of 

sensitive military technology, or trade security control. Any residual 

Dollars in millions

Source

Fiscal year

2002

Fiscal year

2003

Fiscal year

2004

DOD unit billings for turn-in transactions $250.5 $223.2 $208.7

DOD unit billings for hazardous waste 

disposal 54.7 56.1 54.0

Billings for other fund activities 7.6 7.7 4.0

Total DOD $312.8 $287.0 $266.7

Other billings:

 Other federal agencies

 Foreign military sales

$0.7

3.0

$0.7

3.0

$0.7

3.0

Total other $3.7 $3.7 $3.7

Scrap and liquidation sales proceeds, net $39.7 $51.7 $38.1

Total DRMS revenue $356.2 $342.4 $308.5
Page 14 GAO-05-277 DOD Excess Property Reutilization

excess property that is not reused, transferred, or donated may be sold as 

scrap or sent to a landfill or other appropriate site for final disposal. Figure 

2 illustrates the excess property turn-in and disposal process. 

Figure 2: DRMS Excess Property Disposal Process 

Excess DOD property is available for reutilization, transfer, and donation 

during a 49-day screening period following turn-in to DRMS. It may take up 

to a week to record excess property receipts into DRMO inventory. Once 

excess property receipts are recorded, DOD units and specially designated 

programs may screen for and select items for reutilization. Special 

DRMS

DLA supply

depots

Military

services

Defense

agencies

Reutilization,

transfer, and 

donation

Public

sales

Other

disposal

actions

Other

Excess commodities are turned in

Receives and enters 

excess items on screening 

Web page

Issues items for reutilization, 

transfer, and donation

Sells or disposes of 

remaining items

Source: GAO.

Demilitarization Hazardous

materials Scrap DOD

units

Special

programs

Federal

agencies States
Page 15 GAO-05-277 DOD Excess Property Reutilization

programs consist of entities that directly support DOD’s mission, 

customers that have statutory authorization to receive excess DOD 

property, and customers that have been specially designated by DOD to 

receive excess property items. Special programs share screening priority 

with DOD, and DRMS accounts for special program requisitions of DOD 

excess property as DOD reutilization. A description of the special 

programs is included in appendix IV.

If excess property is still available after the DOD and special program 

screening period (the end of the first 21 days), the property is made 

available for transfer to other federal agencies through the GSA Federal 

Disposal System (FEDS) Web site known as GSAXcess for a 21-day period. 

Excess DOD property is available to DOD agencies during the GSA federal 

agency screening phase. DOD entities and others can specify their excess 

property needs on a “want list” and DAISY and GSA FEDS will send notices 

when such property becomes available. Property that is not reutilized by 

DOD or transferred to federal agencies after 42 days is considered surplus 

to the federal government and can be donated to state and local 

governments and other qualified organizations, or if not donated, it can be 

sold to the public after the 49-day screening period has expired. 

Government Liquidation, LLC is the DRMS commercial venture partner 

(contractor) for liquidation sales of excess property. Excess property at 

DRMOs is transferred to a liquidation contract sales site co-located with a 

DRMO. DLA supply depot excess property to be sold to the public is sent 

to one of two national liquidation sales locations. DLA supply depots 

located west of the Mississippi ship their excess property to the Huntsville, 

Alabama, liquidation sales location, and DLA supply depots located east of 

the Mississippi ship their excess property to the Norfolk, Virginia, 

liquidation sales location. Overseas, DRMOs sell excess property directly 

to the public.
Page 16 GAO-05-277 DOD Excess Property Reutilization

Analysis of 

Reutilization Program 

Identifies Billions of 

Dollars in Waste and 

Inefficiency

Our analysis of $18.6 billion20 in fiscal year 2002 and 2003 excess 

commodity disposal activity identified $2.5 billion in excess items that 

were reported to be in new, unused, and excellent condition (A condition). 

Although federal regulations and DOD policy require reutilization of excess 

property in good condition, to the extent possible, our analysis showed that 

DOD units only reutilized $295 million (12 percent) of these items. The 

remaining $2.2 billion (88 percent) of the $2.5 billion in disposals of Acondition excess commodities were not reutilized, but instead were 

transferred, donated, sold, or destroyed. About $1.6 billion of the $2.2 

billion was transferred to other federal agencies and special programs, 

donated to states, or sold to the public for pennies on the dollar. DRMS 

sent the remaining $634 million to scrap and other contractors for disposal. 

We also found that DOD purchased at least $400 million of identical items 

during fiscal years 2002 and 2003, instead of reutilizing available excess 

items in A condition. However, our analysis of transaction data and our 

tests of controls for inventory accuracy indicate that the magnitude of 

waste and inefficiency could be much greater due to military units 

improperly downgrading condition codes of excess items that are in new, 

unused, and excellent condition to unserviceable and the failure to 

consistently record NSNs21 needed to identify like items. To illustrate 

continuing reutilization program inefficiencies and wasteful purchases, 

during fiscal year 2004 and the first quarter of fiscal year 2005, we obtained 

several new and unused excess DOD commodity items that were being 

purchased by DLA, were currently in use by the military services, or both.

Excess Commodity Items 

Reported To Be in 

Unserviceable Condition 

Accounted for Most of the 

Disposal Activity 

DRMS is responsible for disposing of unusable items, often referred to as 

“junk,” as well as facilitating the reutilization of usable items. As shown in 

figure 3, our analysis of DRMS data showed that $15.6 billion of the $18.6 

billion in fiscal year 2002 and 2003 excess DOD commodity disposals 

consisted of items reported to be in unserviceable condition, including 

items needing repair, items that were obsolete, and items that were 

downgraded to scrap. The remaining $3 billion in excess commodity 

disposals consisted of items reported to be in serviceable condition, 

20 The reported acquisition value at the time the items were turned in as excess. 

21 An NSN is a 13-digit number that identifies standard use inventory items. The first 4 digits 

of the NSN represent the Federal Supply Classification, such as 8430 for men’s footwear, 

followed by a 2-digit NATO code and a 7-digit designation for a specific item, such as a cold 

weather boot.
Page 17 GAO-05-277 DOD Excess Property Reutilization

including $2.5 billion in excess commodities reported to be in A condition 

(new, unused, and excellent condition). 

Figure 3: Fiscal Year 2002 and 2003 Disposals of Excess DOD Commodities in 

Serviceable and Unserviceable Condition

Although DOD units reported that $15.6 billion (84 percent) of the excess 

commodities disposed of during fiscal years 2002 and 2003 were in 

unserviceable condition, DRMS data showed that DOD units had reutilized 

over $1.4 billion of these items—an indication that the items were, in fact, 

serviceable. Erroneous reporting of serviceable excess items as 

unserviceable hinders efforts at effective reutilization and can result in 

lower sales proceeds for items sold to the public. Although we do not 

know the extent of this problem, as discussed later, our statistical tests of 

DRMO inventory at five locations identified significant errors related to 

excess items that were coded as unserviceable when they were in fact in 

new, unused, and excellent condition. 

Source: GAO analysis.

13% $2.5 billion

A-condition commodities

3% $544 million

Other serviceable commodities

84% $15.6 billion

Unserviceable condition

16% $3 billion

A-condition serviceable

Other serviceable

Unserviceable
Page 18 GAO-05-277 DOD Excess Property Reutilization

DRMS Gave Away, 

Destroyed, or Sold Excess 

Commodities Reported To 

Be in New and Excellent 

Condition 

Our analysis of a reported $2.5 billion22 in fiscal years 2002 and 2003 

disposal activity related to excess commodities reported to be in A 

condition showed that DOD units reutilized only $295 million of these 

items. As shown in figure 4, the remaining $2.2 billion (88 percent) were 

not reutilized, but instead were transferred to special programs and other 

federal agencies, donated to states, sold to the public, or destroyed through 

demilitarization and scrap contracts. As noted previously, DOD policy calls 

for the reutilization of excess property to the extent feasible and permits 

the disposal of unneeded items.23 However, the disposal of $2.2 billion in 

excess new, unused, and excellent condition items indicates that DOD 

bought more items than it needed.

Figure 4: Waste and Inefficiency Related to $2.2 billion in Fiscal Year 2002 and 2003 

Disposals of Excess DOD Commodities Reported To Be in New, Unused, and 

Excellent Condition

22 Reported acquisition value. 

23 DOD 4160.21-M, Defense Materiel Disposition Manual, ch. 5, “Reutilization/Transfer 

Screening and Issue,” § A.

12%

10%

25%

53%

$295 million

DOD reutilization

$248 million 

DOD special programs ($91 million)

Federal agency transfers ($103 million)

Donations to states ($54 million)

88% $2.2 billion

$634 million

Demilitarization, scrap, and

hazardous material disposals

$1.3 billion

Public sales

Source: GAO analysis.

DOD reutilization

Other disposals
Page 19 GAO-05-277 DOD Excess Property Reutilization

Transfers and Donations Outside 

of DOD

As shown in table 2, during fiscal years 2002 and 2003, DOD transfers of Acondition excess property valued at about $248 million benefited 

international governments; state and local governments; other federal 

agency programs; and specially designated programs such as DOD’s 

Humanitarian Assistance Program, foreign military assistance programs, 

and law enforcement agencies.

Table 2: Reported Acquisition Value of DOD Excess Commodity Transfers to Other 

Programs and Agencies during Fiscal Years 2002 and 2003

Source: GAO analysis of DOD data. 

Our overall analysis identified disposals of over 22 million new, unused, 

and excellent condition excess commodity items that were identical to 

items that DLA continued to purchase, stock, or both, resulting in waste of 

DOD resources. We investigated the details of more than a dozen of these 

disposal transactions. Table 3 highlights three examples from our case 

studies that illustrate waste related to excess commodities in new, unused, 

and excellent condition that were transferred or donated outside DOD at 

the same time DLA purchased identical items. 

Dollars in millions

Program/agency 

Acquisition value of excess DOD

commodities provided to others

International

U.S. Agency for International Development and 

sponsored foreign assistance programs $5

Department of State and sponsored foreign 

assistance programs 49

DOD-sponsored Humanitarian Assistance 

Program 34

Foreign military assistance programs 33

Total, international $121

State and local

State offices $54

Law enforcement agencies 24

Total, state and local $78

Total, federal $49

Total $248
Page 20 GAO-05-277 DOD Excess Property Reutilization

Table 3: Examples of New, Unused Commodity Items Transferred and Sold Outside of DOD while Still Being Purchased during 

Fiscal Years 2002 and 2003

Source: GAO analysis.

a

Waste includes surcharges, which are the additional amount added to the price of an item to recover 

DLA’s cost of purchasing and selling supplies to DOD customers as well as the cost of accounting, 

cataloging, storage, handling, and shipping. Surcharges are based on a weighted average cost for 

warehousing and shipping supply items. The average cost recovery rate for all items was 21.5 percent 

in fiscal year 2002 and 20.7 percent in fiscal year 2003.

DRMS Destroyed Hundreds of 

Millions of Dollars of Excess 

Commodities in New and 

Excellent Condition 

In addition to instances where DOD units failed to reutilize excess 

commodities in A condition that were instead given away to other entities, 

we identified instances where DRMS destroyed these items. DRMS 

destroys or scraps items that are not reutilized or sold. As illustrated in 

figure 4, during fiscal years 2002 and 2003, DRMS destroyed, scrapped, or 

used hazardous materials contractors to dispose of excess commodities 

valued at about $634 million—about 25 percent of the $2.5 billion reported 

acquisition value for disposals of excess commodities in new, unused, and 

excellent condition. The majority of these items—items valued at $473 

million—were military technology items, such as circuit cards, power 

Action

Example #1 – Extreme cold 

weather boots 

Example #2 – Medical instrument 

chests Example #3 – Large tents 

Turn-in unit Army’s 35th Supply and Services 

Battalion in Sagami, Japan.

U.S. Army Medical Material Agency in

Sagami, Japan.

Army National Guard unit at Camp 

Beauregard, Louisiana.

Turn-in date 4/23/03 02/05/02 2/06/02

Excess item 172 pairs of new, unused extreme 

cold weather boots valued at 

$23,220 ($135 per pair). 

132 new, unused medical instrument 

chests in original boxes valued at 

$67,647.

7 large excess tents (18 X 52 ft.) 

valued at $15,963.

Disposition of 

excess items

7/30/03 – 172 pairs of boots were 

sold to the Robinson Trading 

Company for $69 (about 40 cents 

per pair).

02/08/02 – all 132 medical chests 

were requisitioned by the 

Humanitarian Assistance Program.

2/14/02 – one tent transferred to 

Federal Bureau of Prisons and used to 

cover recyclables.

2/20/2002 – 6 tents transferred to 

Maricopa Sheriff’s Department, 

Arizona, for use as field command 

posts.

Subsequent 

purchase

From 5/15 through 7/30/03 – 8 

military units purchased 214 pairs of 

identical boots from DLA. DLA 

continued to purchase these boots.

From 2/08 through 5/03/02 – 15 

military units purchased 97 identical 

medical instrument chests from DLA. 

DLA continued to purchase these 

items. 

From 2/15 through 5/18/02 – 4 

military units purchased 34 identical 

tents from DLA. DLA continued to 

purchase these tents. 

Wastea Reutilization of 172 pairs of boots 

would have saved military units 

$27,678.

Reutilization of the 132 medical 

chests would have saved military 

units $88,415.

Reutilization of the 7 tents would have 

saved military units $18,613. 
Page 21 GAO-05-277 DOD Excess Property Reutilization

supplies, and aircraft parts, that are required to be destroyed or 

demilitarized pursuant to national security guidelines when they are no 

longer needed by DOD. Some of the destroyed items had remained in 

supply inventory for many years and had become obsolete. However, we 

found several instances where items that were destroyed were still being 

purchased, used, or both by military units. The following examples 

illustrate the types of A-condition excess items that were destroyed.

Destruction of excess items that required demilitarization. 

Examples of excess A-condition items that were destroyed pursuant to 

demilitarization requirements included

• 2,390 aircraft parts valued at $9,119,876, such as rotary wing blades, 

rotary rudders, windshield panels, fuel tanks, and pilot protection 

armor;

• 34,070 circuit cards valued at $73,666,720, including 88 circuit cards 

related to one NSN valued at $265,565;

• 1,604 radio sets valued at $10,247,110;

• 477 power supply units valued at $3,385,580; and 

• 3 plasma display units valued at $263,151. 

Our case study investigations showed instances where power supplies and 

circuit cards that were still being purchased by DLA, stocked and issued to 

military units, or both were sent to a DRMO rather than being returned to 

supply inventory. For example, we found that the Army’s Tank-Automotive 

and Armament Command turned in 14 excess circuit card assemblies 

valued at $7,806 on May 29, 2003, because the Army had directed the 

retirement of its AH-1 Cobra and UH-1 Huey helicopters. However, the 

Navy and some foreign countries have continued to use these helicopters. 

The circuit cards are used in the M136 Helmet Sight, a heads-up display, on 

the Cobra Helicopter. The heads-up display permits a pilot to aim the 

helicopter’s rockets and the fixed forward firing gun. The circuit cards 

were advertised for reutilization to DOD and foreign military sales 

customers. Because they were not selected for reutilization within the 49-

day screening period, they were sent to a demilitarization contractor on 

June 8, 2004, for destruction by thermal reduction. 
Page 22 GAO-05-277 DOD Excess Property Reutilization

Destruction of excess A-condition commodity items as scrap. DRMS 

also scrapped excess A-condition commodities valued at about $144 

million during fiscal years 2002 and 2003 that did not require 

demilitarization. Normally, these items are transferred, donated, or sold if 

they are not selected for reutilization within DOD. However, items that are 

not selected for reutilization or transferred, donated, or sold are scrapped. 

For example, DRMS scrapped excess new and unused items, such as the 

following:

• 340 computers with a reported acquisition value of $2,929,539,

• 2,440 bunk beds valued at $341,600,

• 29 simulators valued at $1,995,500, 

• 567 power supplies valued at $1,683,211, and

• 29 teleprinters valued at $901,099. 

Public Sales of New and Unused 

Excess DOD Commodity Items 

As noted in figure 4, 53 percent, or $1.3 billion of the total $2.5 billion in 

fiscal year 2002 and 2003 A-condition excess commodity turn-ins, was sold 

to the public. Although liquidation sales of excess commodities are an 

appropriate method of disposal when items cannot be reutilized, 

liquidation sales of items that are in new, unused, and excellent condition 

that could have been reutilized represent significant waste and inefficiency. 

Our case study investigations of fiscal year 2002 and 2003 disposals of 

excess A-condition commodities found that DRMS sold numerous excess 

items at the same time DLA purchased identical items. Our analysis 

showed that DRMS received a total of about $48 million in fiscal year 2002 

and 2003 liquidation sales revenue for property valued at $1.3 billion—an 

average of about 4 cents on the dollar. Liquidation contractor officials told 

us that about 80 percent of their revenue relates to the sale of items in good 

condition.

Unnecessary Commodity 

Purchases 

Our analysis of fiscal year 2002 and 2003 DLA commodity purchases and 

DRMS excess property inventory data identified numerous instances in 

which the military services ordered and purchased items from DLA at the 

same time identical items—items with the same NSN—that were reported 

to be in new, unused, and excellent condition were available for 

reutilization. We found that DOD purchased at least $400 million of 

identical items during fiscal years 2002 and 2003 instead of using available 
Page 23 GAO-05-277 DOD Excess Property Reutilization

excess A-condition items. The magnitude of unnecessary purchases could 

be much greater because NSNs needed to identify identical items were not 

recorded for all purchase and turn-in transactions. For example, we 

determined that DLA buyers and item managers did not record NSNs for 87 

percent (about $4.9 billion) of the nearly $5.7 billion in medical commodity 

purchases by military units during fiscal years 2002 and 2003. Further, as 

discussed later in this report, improper downgrading of condition codes to 

unserviceable could also result in an understatement of the magnitude of 

unnecessary purchases. While our statistical tests found a few instances of 

inaccurate serviceable condition codes, most condition code errors related 

to the improper downgrading of condition to unserviceable. Figure 5 

shows examples from our analysis of A-condition excess items that were 

available for reutilization at the time DLA purchased identical items. 
Page 24 GAO-05-277 DOD Excess Property Reutilization

Figure 5: Examples of Fiscal Year 2002 and 2003 DLA Purchases When Identical 

New, Unused Items Were Available for Reutilization 

a

Although DLA continues to use the term “construction,” this commodity group consists primarily of 

land and maritime weapons system components. According to a DLA official, the category label will 

be updated when data are eventually migrated to the new Business Systems Modernization.

Commodity group:

New, unused case study

items available for reutilization

Number of unneccessary

items purchased

Cost of unneccessary

items

Electrical:

Circuit cards 7,477 $5,440,293

Electron tubes 17,887 $1,351,156

General:

Wire rope 27,717 $549,706

Power supply(s) 1,532 $1,883,737

Industrial:

Space heaters 2,204 $1,401,856

Padlocks and

combination locks

793 $592,703

Medical:

Medical instrument

chests

2,407 $1,790,127

Bandages, dressings,

and gauze

197,999 $2,786,276

Textiles:

Tents 588 $1,081,802

Boots 69,998 $6,023,462

Construction/land

and maritime weaponsa

Crane booms 10 $100,763

Metal doors for

combat vehicles

910 $119,550

Source: GAO analysis.
Page 25 GAO-05-277 DOD Excess Property Reutilization

Fiscal Year 2004 and 2005 

Requisitions and Purchases 

Demonstrate Continuing 

Waste and Inefficiency

To determine whether the problems identified in our analysis of fiscal year 

2002 and 2003 data were a continuing problem, we monitored DRMS 

commodity disposal activity in fiscal year 2004 and the first quarter of fiscal 

year 2005. We found that DOD continued to transfer, donate, and sell 

excess A-condition items instead of reutilizing them. To illustrate these 

problems we requisitioned several excess new and unused items at no cost 

and purchased other new and unused commodities at minimal cost. We 

based our case study selections on new, unused items that DOD continued 

to purchase. We inspected excess items or called warehouse personnel to 

confirm they were new and unused. We used FEDLOG24 data and 

interviewed supply inventory item managers to confirm that the items were 

still being purchased, used, or both by the military services.

Case Study Requisitions of New 

and Unused DOD Commodities

To illustrate waste and inefficiency associated with transfers and donations 

of excess A-condition commodities to entities outside of DOD, we used the 

GSA Federal Disposal System, available to all federal agencies, to 

requisition several new and unused excess DOD commodity items, 

including a medical instrument chest, two power supply units, and two 

circuit cards, at no charge. These items had an original DOD acquisition 

cost of $55,817, and we paid only $5 shipping cost to obtain all of them. We 

obtained these items from two DRMOs and a DLA supply depot. The 

following discussion presents the details of our case study requisitions. 

Medical instrument chest. We requisitioned at no cost a new, unused 

medical instrument chest with a reported acquisition cost of $784 from the 

Lewis DRMO in Fort Lewis, Washington. When we visited the Lewis DRMO 

to screen for and tag new, unused items, a DRMO official told us that about 

20 percent of the Lewis DRMO receipts are new, unused items. The 

medical instrument chest that we obtained was one of 16 excess medical 

chests turned in by the Fort Lewis Army Medical Hospital on May 6, 2004. 

At the time of our requisition on June 2, 2004, the Army, Navy, and Air 

Force medical logistics commands were continuing to purchase these 

medical chests from DLA. 

The excess DOD medical instrument chest that we requisitioned is 

designed for maximum support of deployed medical personnel. For 

24 FEDLOG is a logistics information system managed by the Defense Logistics Information 

Service within DLA. This system contains detailed information on specifications, use, 

acquisition cost, and sources of supply for NSN items, including more than 7 million stock 

numbers and more than 12 million part numbers. 
Page 26 GAO-05-277 DOD Excess Property Reutilization

example, the chest is designed to store medical instruments and protect 

them during shipment as well as to provide shelves and tables for use 

during surgery and other medical procedures in the battlefield. Figure 6 is 

a photograph of the excess DOD medical instrument chest assembled for 

maximum use.

Figure 6: Medical Instrument Chest Assembled for Maximum Utilization 

Circuit cards. On September 7, 2004, we requisitioned two circuit cards 

with a total original acquisition cost of $8,684, from the Hill DRMO. We 

paid $5 shipping cost and received the circuit cards on September 27, 2004. 

Circuit cards are circuit boards consisting of a series of flat plastic or 

fiberglass layers (usually 2 to 10) that are glued together after a circuit has 

been etched in them. In a computer, a circuit card holds the integrated 

circuits and other electronic components that provide power to perform 

certain designated functions, such as computerized program functions or 

electronic communications functions. According to the Navy inventory 

item manager and the National Security Agency technical support team 

leader, the circuit cards that we obtained are used in secure satellite 

communications gear. 

Source: GAO.
Page 27 GAO-05-277 DOD Excess Property Reutilization

The circuit cards that we obtained were turned in by the DLA supply depot 

in Ogden, Utah, as excess to Air Force needs in February 2004. The Navy 

item manager told us that although the circuit cards were no longer being 

purchased, they were still in active inventory and were still being used by 

some Navy units and foreign military sales customers at the time we 

obtained them. Our Chief Technologist inspected the circuit cards and 

confirmed that they included communications circuitry and were in new, 

unused condition. Figure 7 is a photograph of one of the circuit cards we 

requisitioned.

Figure 7: One of the New, Unused Excess DOD Circuit Cards Transferred to GAO in 

September 2004

Power supply units. We requisitioned, at no cost, two high-cost power 

supply units from the DLA supply depot in Norfolk, Virginia—one with a 

reported acquisition cost of $24,797 and another with a reported 

acquisition cost of $21,552—a total of $46,349. We received one power 

supply unit on September 30, 2004, and the other power supply unit on 

October 6, 2004. According to the manufacturer, these power supply units 

are part of a super-high-frequency electronics surveillance system, which is 

designed to listen and identify radio frequencies. The power supply units 

convert AC power to DC voltage to provide power to the assemblies inside 

the surveillance system.

We contacted the Navy inventory control point program manager to inquire 

about the use of the power supply units that we had identified. The 

program manager explained that both of the power supply units are 

Source: GAO.
Page 28 GAO-05-277 DOD Excess Property Reutilization

currently used in the electronic warfare system of the Seawolf fast attack 

nuclear submarine.25 The Navy official stated that although DLA is not 

currently purchasing these items due to a planned upgrade in technology, 

the Navy has a very small number of these power supply units in inventory 

and the items remaining at the DLA supply depot should not have been 

excessed because they may be needed before the technology upgrade is 

completed. Our Chief Technologist inspected the excess DOD power 

supply units we obtained and confirmed that they had never been used. 

Figure 8 is a photograph of one of the power supply units that we obtained. 

Figure 8: New, Unused DOD Power Supply Unit Requisitioned by GAO in September 

2004 from the DLA Depot in Norfolk, Virginia

Case Study Purchases of New, 

Unused DOD Commodities

In addition to using the GSA process available to federal agencies to obtain 

excess DOD property at no cost, we also purchased, at minimal cost, 

25 The Seawolf supports missions such as surveillance, intelligence collection, special 

warfare, covert cruise missile strike, mine warfare, and antisubmarine and antisurface ship 

warfare.

Source: GAO.
Page 29 GAO-05-277 DOD Excess Property Reutilization

several excess DOD commodity items in new and unused condition over 

the Internet at govliquidation.com—the DRMS liquidation contractor’s Web 

site.26 The items we purchased included tents, boots, three gasoline 

burners (stove/heating unit), a medical suction apparatus, and bandages 

and other medical supply items with a total reported acquisition cost of 

$12,310. We paid a total of $1,466 for these items, about 12 cents on the 

dollar, including buyer’s premium, tax, and shipping cost. The following 

examples illustrate the results of our case study investigations and 

purchases. 

New, unused extreme cold weather boots. On September 30, 2004, we 

purchased several pairs of excess new, unused extreme cold weather boots 

over the Internet at govliquidation.com. The sales advertisement listed an 

acquisition cost of $3,900 for approximately 30 pairs of the boots. We paid 

a total of $483, including buyer’s premium, tax, and transportation cost, to 

acquire the extreme cold weather boots. According to a Stockton DRMO 

official, the boots were found at the DRMO without identifying paperwork, 

and DRMO personnel entered them in excess property inventory in April 

2004. The boots were advertised as being in H condition (unserviceable, 

condemned condition). However, the photograph on the 

govliquidation.com Web page showed that the manufacturer’s product label 

was still tied to the laces of the boots and that the soles of the boots had no 

wear, indicating that they had not been worn. When we received the boots 

on October 12, 2004, we determined that we had, in fact, purchased a total 

of 42 pairs of cold weather boots of which 37 pairs were in new, unused 

condition. We paid about $12 per pair for the 42 pairs of boots, which have 

a listed acquisition cost of $135 per pair. 

Shortly after we purchased the excess cold weather boots, the DLA item 

manager told us that she recently placed an order with the vendor to 

purchase 31,420 pairs of these same boots, including 1,360 of the sizes of 

boots that we purchased. Further, the DLA technician responsible for 

these boots told us that the boots have a shelf life of up to 15 years. 

According to the DLA technician, the boots should be inspected after the 

first 5 years and then inspected every 2 years after that for a total of six 

inspections in 15 years. After 15 years from date of manufacture these 

boots would have surpassed their useful life. All of the boots we purchased 

were less than 5 years old. The DLA technician told us that none of these 

26 Government Liquidation, LLC is the DRMS commercial venture partner (contractor) for 

public sales of excess DOD property. 
Page 30 GAO-05-277 DOD Excess Property Reutilization

boots have been recalled, and they are considered excellent boots that are 

rated to 60 degrees below zero. Figure 9 is a photograph of the new, 

unused excess DOD boots that we purchased.

Figure 9: New, Unused Excess Cold Weather Boots Purchased in September 2004

Shelter Half-tents. We purchased several new, unused shelter half-tents 

over the Internet from govliquidation.com on August 26, 2004. We paid 

$548, including buyer’s premium, tax, and shipping cost, to acquire the 

excess DOD shelter half-tents, which had a listed acquisition value of 

$2,122. Shelter half-tents can be carried by individual soldiers and must be 

joined together to form a tent that will house two soldiers. The tents were 

listed in H condition (unserviceable, condemned condition). However, the 

advertisement on the liquidation contractor’s Web page stated that some of 

the tents were new and in original boxes, and the photograph on the sales 

Web page showed that most of the tents were in the original manufacturer’s 

packages. Upon receipt of the tents, we determined that we had, in fact, 

Source: GAO.
Page 31 GAO-05-277 DOD Excess Property Reutilization

purchased 21 new, unused tents and 6 additional tents that were used, but 

appeared to be in good condition. At the time we purchased the shelter 

half-tents, the DLA item manager told us that none remained in stock. DLA 

data showed that the Defense Supply Center, Philadelphia, placed an order 

for 35,000 of these tents at a cost of about $2.5 million. Figure 10 is a 

photograph of one of the new, unused excess DOD shelter half-tents that 

we purchased over the Internet at govliquidation.com. 

Figure 10: New, Unused Excess Shelter Half-Tent Purchased in August 2004

Gasoline burner units. On September 30, 2004, we purchased three new, 

unused excess DOD gasoline burner units over the Internet from 

govliquidation.com. We paid $164, including buyer’s premium, tax, and 

shipping cost, to acquire the gasoline burners, which had a listed 

acquisition value of $1,857. The gasoline burners, which were turned in as 

excess by the California Army National Guard in San Luis Obispo, 

California, were advertised as “still in box, have never been used.” 

According to the DLA item manager, a gasoline burner unit can be used on 

Source: GAO.
Page 32 GAO-05-277 DOD Excess Property Reutilization

the battlefield as either a heat source or as a stove for cooking. The item 

manager told us that the units also could be used as stand-alone 

field/camping stoves, but would need a grate, or cooking surface over the 

burner. The item manager explained that DLA purchased thousands of 

these units several years ago, and they are continuing to be issued from 

supply inventory and used by deployed troops. According to item manager 

data, DOD units purchased 471 of these same gasoline burner units from 

DLA in fiscal year 2004. The item manager told us that there are currently 

9,500 of these units in inventory and provided data that showed DLA has 

continued to issue gasoline burners to military units. Figure 11 is a 

photograph of one of the new, unused excess DOD gasoline burner units 

that we purchased over the Internet from govliquidation.com in September 

2004. At the end of our audit in February 2005, we noted continuing 

liquidation sales of excess DOD gasoline burner units.

Figure 11: One of the New, Unused Excess DOD Gasoline Burner Units Purchased in 

September 2004

Source: GAO.
Page 33 GAO-05-277 DOD Excess Property Reutilization

Portable oropharyngeal suction apparatus. On October 7, 2004, we 

purchased a new, unused portable suction apparatus for the minimum bid 

of $35. We paid a total of $105 for the suction apparatus, including buyer’s 

premium, tax, and shipping, compared to the acquisition cost of $1,141. 

The suction apparatus runs on electrical or battery power and is designed 

for use in aspirating blood and other fluids in emergency treatment of 

unconscious or injured personnel in desert, tropic, or artic environments. 

The suction apparatus, which was turned in as excess by a U.S. Air Force 

Reserve unit at the March Air Reserve Base in Riverside, California, was 

coded as being in F condition (unserviceable, repairable condition). 

However, the photograph of the suction apparatus showed the tubing to be 

sealed in the original package—indicating that the suction apparatus had 

not been used. Documentation we obtained from the DLA item manager 

showed that during fiscal year 2004, DLA purchased 627 of these same 

suction apparatuses, with a total acquisition cost of $490,439, for issue to 

military units. Our in-house medical expert inspected the suction 

apparatus and confirmed that it had not been used. He said that the design 

has not changed for many years, and the only issue with regard to 

serviceability would be whether the battery needed to be replaced. We 

determined that the batteries in the unit that we purchased still had a 

charge, and the unit was operational. Figure 12 is a photograph of the new, 

unused excess DOD portable suction apparatus that we purchased. 
Page 34 GAO-05-277 DOD Excess Property Reutilization

Figure 12: Photograph of the New, Unused Portable Suction Apparatus Purchased 

in October 2004 

Management Control 

Breakdowns Resulted 

in Reutilization 

Program Waste and 

Inefficiency 

The $2.2 billion in DOD waste and inefficiency that we identified stemmed 

from management control breakdowns across DOD. We found key factors 

in the overall DRMS management control environment that contributed to 

waste and inefficiency in the reutilization program, including (1) unreliable 

excess property inventory data; (2) inadequate DRMS oversight, 

accountability, physical control, and safeguarding of property; and 

(3) outdated, nonintegrated excess inventory and supply systems. In 

addition, for many years, our audits of DOD inventory management27 have 

Source: GAO.

27 GAO-04-689 and GAO-03-98. 
Page 35 GAO-05-277 DOD Excess Property Reutilization

reported that continuing unresolved logistics management weaknesses 

have resulted in DOD purchasing more inventory than it needed. Our 

analysis of fiscal year 2002 and 2003 excess commodity turn-ins showed 

that $1.4 billion (40 percent) of the $3.5 billion of A-condition excess items 

consisted of new, unused DLA supply depot inventory.

Unreliable Data Impair the 

Economy and Efficiency of 

the Reutilization Program 

Our statistical tests of excess commodity inventory and our case studies, 

screening visits, and interviews lead us to conclude that unreliable data are 

a key cause of the ineffective excess property reutilization program. GAO’s 

internal control standards28 require assets to be periodically verified to 

control records. In addition, DRMS policy29 requires DRMO personnel to 

verify turn-in information, including item description, quantity, condition 

code, and demilitarization code, at the time excess property is received and 

entered into DRMO inventory. However, we found that DRMS management 

has not enforced this requirement. Further, Army, Navy, and Air Force 

officials told us that unreliable data are a disincentive to reutilization 

because of the negative impact on their operations. DLA item managers 

told us that because military units have lost confidence in the reliability of 

data on excess property reported by DRMS, for the most part, they have 

requested purchases of new items instead of reutilizing excess items. 

Military users also cited examples of damage to excess items during 

shipment that rendered the items unusable. In addition, other reutilization 

users advised us of problems related to differences in quantities and the 

types of items ordered and received that could have a negative impact on 

their operations. 

Types of Inventory Errors Our statistical tests found significant problems with controls for assuring 

the accuracy of excess property inventory. Overall error rates for the five 

DRMOs we tested ranged from 8 percent at one DRMO to 47 percent at 

another, and error rates for the five DLA supply depots we tested ranged 

from 6 percent to 16 percent, including errors related to physical existence 

of turn-ins and condition code. Our physical existence tests included 

whether a turn-in recorded in inventory could be physically located, timely 

recording of transactions, and verification of item description and quantity. 

28 GAO, Standards for Internal Control in the Federal Government, GAO/AIMD-00-21.3.1

(Washington, D.C.: November 1999).

29 DRMS-I 4160.14, vol. II, Instructions for Warehousing for DRMS and the Defense 

Reutilization and Marketing Offices, ch. 2, “Receipt and Storage,” § 1 (A) (9). 
Page 36 GAO-05-277 DOD Excess Property Reutilization

Table 4 shows the overall results of our statistical sampling tests at five 

DRMOs and five DLA supply depots. The specific criteria we used to 

conclude on the effectiveness of DRMO and DLA depot inventory controls 

at the tested locations are included in appendix V. 

Table 4: Turn-in Transactions with One or More Control Test Failures at Five DRMOs 

and Five DLA Supply Depots 

Source: GAO.

Note: Although some transactions included more than one type of error, we only counted one failure 

for a transaction. 

Key types of data reliability errors that we found include the following.

• Existence errors. Missing turn-ins30 in our statistical sample included 

entire turn-ins of excess commodity items, such as sleeping bags, cold 

weather clothing, wet weather parkas, chemical and biological 

protective suits, a computer, and monitors. DRMO officials could not 

locate documentation to show whether the missing turn-ins had been 

reutilized, transferred, sold, or destroyed. Because many items from our 

statistical sample could not be found, the issue of lost, missing, and 

stolen property is significant, as discussed later.

• Quantity errors. Separate from missing turn-ins, quantity errors 

involved items that exceeded or fell short of quantities recorded on a 

turn-in transaction. Shortages represent items that appeared to be 

available but were missing. Because DRMO personnel do not always 

verify quantities at the time excess items are received and recorded into 

excess inventory, they cannot determine whether missing quantities are 

DRMO tested

Estimated errors

(percent)

DLA supply depot 

tested

Estimated errors

(percent)

Richmond 25 Richmond 8

Stockton 12 San Joaquin 16

Hill 8 Hill 6

Norfolk 18 Norfolk 14

Columbus 47 Columbus 12

30 A turn-in transaction consists of one or more items, such as a computer or 2,000 helmets, 

on a turn-in document.
Page 37 GAO-05-277 DOD Excess Property Reutilization

errors or if they represent items that are lost, missing, or stolen. 

Quantity shortages included cold weather, wet weather, and camouflage 

clothing; field packs; chemical and biological protective suits and 

gloves; and computer keyboards. 

• Lack of timely transaction recording. DRMO personnel did not always 

record transactions to reflect events, such as changes in warehouse 

location and shipments to customers or disposal contractors within 7 

days. Based on our screening and inventory testing experience, when 

time is wasted looking for such items, customers can become frustrated, 

leading to possible loss of future orders. Excess property users told us 

that they spend a lot of time visiting DRMO warehouses to locate and 

inspect excess items before they submit requisitions for them.

• Inaccurate item descriptions. Our statistical sample identified several 

turn-in transactions involving items that were different from the types of 

items recorded in the inventory records. Item description errors 

included erroneous item names and stock numbers. For example, we 

found three instances at one DRMO where turn-ins of computer 

keyboards were listed in excess inventory records as speakers and one 

instance at another DRMO where speakers were recorded as keyboards. 

Our sample also identified one women’s coat and one men’s coat that 

were recorded in excess inventory as two women’s coats and items that 

were recorded as wet weather trousers and camouflage trousers when 

the turn-in boxes contained multiple items, including wet weather 

trousers and parkas, camouflage pants, shirts, and coats, and flyer’s 

coveralls. When batched items are recorded as one type of item, only 

the NSN for those items is listed in inventory. As a result, a customer 

could order what he or she believed to be the listed quantity of the 

named item but instead receive various quantities of multiple types of 

items. 

• Inaccurate condition coding. Our statistical sample found condition 

code error rates that ranged from 5 percent at one DRMO to 22 percent 

at two other DRMOs that we tested. We based our determinations of 

condition coding accuracy on physical observation of condition with 

regard to the broad categories of serviceable and unserviceable rather 

than testing specific coding within these categories, which could have 

resulted in an even higher error rate. Our sample identified numerous 

examples of new, unused excess inventory items that were incorrectly 

coded as being in unserviceable condition, including cold weather 

boots, cold weather undershirts, military trousers, women’s blue dress 
Page 38 GAO-05-277 DOD Excess Property Reutilization

uniforms, compressor parts kits, wet weather parkas, and fragment 

body armor. In addition to items in our statistical sample, we observed 

numerous other new, unused items in DRMO warehouses and at 

liquidation sales locations that were coded as unserviceable, including 

desert combat boots, camouflage clothing, computer equipment, and 

aircraft parts. Accurate condition codes are key to an effective excess 

property reutilization program because DOD units generally look for 

new, unused excess items for reutilization. 

Causes of Inventory Errors We found that unreliable excess property inventory data are the result of 

breakdowns in controls for proper recording and verification of inventory 

transaction data. The control breakdowns we identified related to four 

major areas: (1) the failure of DRMO personnel to verify excess property 

turn-ins at the time they are received and entered into excess inventory 

records; (2) improper downgrading of condition codes by DOD units; 

(3) the inconsistent use of NSNs; and (4) human capital issues related to 

DRMO staffing and workload and military service procedures, training, and 

oversight of excess property reporting.

Failure to verify turn-ins and correct errors. The errors in excess 

inventory identified in our statistical samples, screening observations, and 

case studies were caused by inaccurate turn-in documentation submitted 

by military unit turn-in generators and the failure of DRMO personnel to 

inspect excess items, verify turn-in documents, and correct identified 

errors. DRMS policy31 requires DRMO personnel to inspect excess items 

upon receipt and challenge or change incorrect data. However, DRMO 

personnel told us that they were not able to verify excess property receipts 

when faced with large turn-in volumes and processing backlogs. Further, a 

provision in this same policy32 allows DRMO managers who are faced with 

heavy turn-in volume to waive the requirement to verify quantity counts, if 

the time required to count the property is not justified, and instead use 

turn-in generator counts. The policy limits exceptions to (1) batched turnins of multiple types of items, (2) large quantities of small items in other 

than the original package, and (3) large quantities of items in the original 

package where box counts can be used. However, officials at two of the 

five DRMOs we tested—the DRMOs with the highest data reliability error 

31 DRMS-I 4160.14, vol. II, ch. 2., § 1 (A)(9).

32 DRMS-I 4160.14, vol. II, ch. 2, § 1 (B)(6)(c).
Page 39 GAO-05-277 DOD Excess Property Reutilization

rates—cited this policy and told us that they accept turn-in generator 

information and do not verify excess property turn-in data. 

In addition, our statistical sample identified one instance where DRMS 

headquarters officials did not provide guidance on how to correct 

erroneous turn-in documentation related to a June 30, 2004, Navy turn-in of 

six new, unused Level III biological safety cabinets33 with a total acquisition 

cost of $120,000. 34 The Navy unit improperly used a local stock number 

(LSN) 35 to describe the safety cabinets on the turn-in document and a 

demilitarization code that indicated there were no restrictions on the 

disposal of these items. However, Level III safety cabinets are subject to 

trade security controls,36 and therefore, they are required to be identified by 

an NSN or other information which accurately describes the item, the end 

item application, and the applicable demilitarization code.37 Although 

Norfolk DRMO personnel advised DRMS officials of the need to correct the 

turn-in document errors in July 2004, at the time we finalized our draft 

report in early February 2005, DRMS had not taken action to authorize the 

DRMO to correct these errors so that the safety cabinets could be identified 

for reutilization within DOD. Further, we found that as of the end of our 

audit in February 2005, the safety cabinets had not been posted to the 

DRMS reutilization Web page as excess property available for reutilization. 

Figure 13 shows a photograph of one of the Level III cabinets.

33 The technical name for these safety cabinets is closed loop containment isolators.

34 The Navy’s Environmental Health Center in Portsmouth, Virginia, turned in the Level III 

cabinets as excess because of erroneous specifications that resulted in ordering cabinets 

that were too large and cumbersome to meet deployment needs. 

35 An LSN consists of the four-digit federal supply classification number, a two-digit NATO 

code, and up to a seven-character description, such as “monitor” for a computer monitor 

and “boots” for cold weather boots. 

36 Commerce Control List, 15 C.F.R. pt. 774, supp. 1, category 2, Materials Processing, para. 

f (2), Protective and Containment Equipment (2005). 

37 DOD 4160.21-M-1, Defense Demilitarization Manual, ch.1, § D (6), and app. 5 (B), and 

DRMS-I 4160.14, vol. VII, ch. 3, “MLI/CCLI – Disposal Processing and Demilitarization,” para. 

A (2)(d).
Page 40 GAO-05-277 DOD Excess Property Reutilization

Figure 13: New, Unused Excess Level III Biological Safety Cabinet at the Norfolk 

DRMO 

Improper downgrading of condition codes. The incorrect recording of 

unserviceable condition codes for items that are in serviceable condition, 

particularly items in new, unused condition, makes it unlikely that they will 

be selected for reutilization. For example, all of the new, unused excess 

DOD commodity items that we purchased over the Internet were 

incorrectly coded as unserviceable. As noted previously in our case study 

discussions, all of the items that we purchased were items that military 

units continued to purchase, use, or both. As shown in table 5, our DRMO 

tests found that most errors related to items that were incorrectly reported 

to be in unserviceable condition. 

Source: GAO.
Page 41 GAO-05-277 DOD Excess Property Reutilization

Table 5: Estimated Turn-in Transaction Control Test Failures for Items Classified as 

Serviceable 

Source: GAO.

As shown in table 5, we found numerous instances where DOD units 

improperly downgraded the condition codes of items that were no longer 

serviceable to them, either because they did not want these items or 

because the items were being replaced by new technology, even though in 

many cases these items were new and unused. Our statistical tests and our 

case studies showed that many times the items that military units coded as 

unserviceable were serviceable and very adequate for use by others.

Inconsistent recording of NSNs. The failure to consistently record 

NSNs to commodity purchase and excess inventory records prevents the 

identification of like items for reutilization and, therefore, may result in 

unnecessary purchases. Although DLA records NSNs for most purchases 

that are stored in DLA supply depot inventory,38 it does not record NSNs for 

items purchased from prime vendors39 for direct delivery to DOD 

customers. For example, as noted previously, we determined that DLA 

buyers and item managers did not record NSNs for 87 percent of the nearly 

$5.7 billion in medical commodity purchases by military units during fiscal 

years 2002 and 2003. According to DLA officials, prime vendor catalogs 

identify products by part number or model number rather than NSN. This 

issue will become more significant as DLA expands its use of prime 

vendors to other commodity groups. 

DRMO tested

Percentage of turn-ins 

Improperly coded in

serviceable condition

Improperly coded in

unserviceable condition

Richmond 0 26

Stockton 1 10

Hill 2 6

Norfolk 5 17

Columbus 1 23

38 DLA records part numbers instead of NSNs for some supply inventory items.

39 DOD prime vendors are contractors that buy inventory from a variety of suppliers and 

store it in commercial warehouses. Most prime vendors ship items to customers the next 

day. 
Page 42 GAO-05-277 DOD Excess Property Reutilization

The failure to record NSNs to turn-in transactions prevents item managers 

from identifying these items for reutilization at the time purchase decisions 

are made. For example, our in-house scientists who often meet with DOD 

scientists at the U.S. Army Biological Warfare Research Center at the 

Dugway Proving Ground learned that the DOD scientists were planning to 

purchase a Level III safety cabinet and informed them of the availability of 

the six Level III safety cabinets at the Norfolk DRMO. The DOD scientists 

told us that they were unaware the Navy had excessed the safety cabinets 

and said that they could use all six of them. We subsequently confirmed 

that the DOD scientists at Dugway had requisitioned the six Level III safety 

cabinets for reutilization.

Our analysis showed that LSNs were recorded for about 41 percent of fiscal 

year 2002 and 2003 excess property turn-ins. LSNs are appropriate 

identifiers for local purchases and one-of-a kind items. However, our 

statistical samples and case studies showed that military unit turn-in 

generators had recorded LSNs to items that should have been identified 

with NSNs to avoid the time and effort necessary to identify and record 

NSNs. For example, LSNs were recorded for excess military clothing in 

our Columbus DRMO sample and the cold weather boots that we 

purchased over the Internet even though these items have labels that 

showed the assigned NSNs. 

DOD has efforts under way to promote the use of unique product 

identifiers other than NSNs by commercial vendors and small business 

firms. Regardless of the mechanism used to identify standard items, to 

assure an effective excess property reutilization program, DOD will need to 

consistently record NSNs, product numbers, or other unique item 

identification in its purchase, supply, and excess inventory records. 
Page 43 GAO-05-277 DOD Excess Property Reutilization

Human capital weaknesses. We found that human capital issues related 

to imbalances between staffing and workload at DRMOs40 and inadequate 

training of military turn-in generators41 contributed to unreliable data and 

associated waste and inefficiency. Based on our interviews of DRMO 

officials, our statistical tests of DRMO inventory, and our review of 

available DRMS workload data for the five DRMOs we tested, we 

concluded that data reliability was directly affected by the availability of 

DRMO staff qualified to process excess property receipts.42 For example, 

DRMS data for the last 8 months of fiscal year 2004 showed the three 

DRMOs we visited that attempted to verify turn-in documentation—

Norfolk, Hill, and Stockton—experienced backlogs in receipt processing 

and significant use of overtime hours. In contrast, we found that the two 

DRMOs that did not verify receipts worked few, if any, overtime hours and 

had significantly fewer backlogs than the other three DRMOs. As noted 

previously, these two DRMOs also had high excess property inventory error 

rates. 

We also found a lack of detailed guidance on the proper assignment of 

condition codes. DRMS condition code guidance consists of a list of supply 

and disposal condition codes and brief definitions of each condition code. 

DRMS has not developed detailed narrative guidance with explanations 

and examples of how to apply these codes. However, we also found that 

the military services are not correctly using the listed supply and disposal 

condition codes on their excess property turn-in documents. For example, 

when military units assigned supply condition codes indicating that new, 

unused items were unserviceable or condemned, they also used the 

disposal condition code for repairable, rather than the code for new, 

unused. Military units had differing views about whether unserviceable 

condition meant that items were unserviceable for their purposes or 

unserviceable to anyone. As a result, we found that items in the same 

condition would be coded serviceable by one military unit and 

unserviceable by another. In addition, our analysis of turn-ins of 

40 According to DRMO officials, since the inception of a DRMS warehouse services contract 

in June 2000, DRMO staffs have been downsized pending outsourcing. 

41 Turn-in generator refers to DOD units and others that report or physically turn in excess 

items to DRMS.

42 According to DRMO officials, only experienced property management specialists are 

qualified to inspect excess property receipts and make appropriate decisions for handling 

various types of property, including hazardous materials, flight-safety critical items, items 

with safety and latent defects, and items with demilitarization requirements. 
Page 44 GAO-05-277 DOD Excess Property Reutilization

unserviceable items found a lack of training, guidance, and supervision at 

one Navy unit. For example, Navy officials at the North Island Naval 

Aviation Depot told us that the employee responsible for sending their 

excess property to the DRMO had never received formal training on 

disposal policies and procedures. Further, the officials told us that they did 

not have any manuals or written procedures that explained excess property 

turn-in procedures. As a result, the employee assigned condition codes H 

(unserviceable, condemned) or S (scrap) to all excess property turn-ins. 

We contacted GSA’s Director of Personal Property Management Policy to 

discuss the proper assignment of federal agency condition codes. The GSA 

Policy Director explained that DOD uses unique supply condition codes 

that are a combination of federal agency codes established by GSA and its 

own codes for identifying serviceable and unserviceable property. (App. III 

lists and defines the GSA and DOD condition codes.) The GSA Director 

told us that unreliable federal agency condition codes, including DOD 

condition codes, have presented a problem in GSA’s program for utilization 

of excess federal agency property within the federal government. For 

example, he noted that federal agency officials have told GSA that they 

cannot rely on condition codes assigned to excess property, and this had an 

impact on the effectiveness of GSA’s efforts to promote the use of excess 

DOD property within the federal government. 

We also found that the condition codes established by GSA do not provide 

for the identification of items that are nearly new, with little or no evidence 

of use. Because such items are not new and unused, they would be coded 

the same as items that may be well used and need minor repair. Further, 

the GSA codes do not provide for identification of items that are new and 

unused but technically obsolete to the current owner. The GSA Policy 

Director noted that because of the federal government’s increased reliance 

on technology, the need to identify obsolete items is becoming a 

governmentwide excess property disposal issue. He said that GSA would 

be willing to work with DOD and other federal agencies to develop a 

solution to these problems. 

Weaknesses in Reutilization 

Program Oversight and 

Physical Inventory Control 

We found hundreds of millions of dollars in potential waste and inefficiency 

associated with the failure to safeguard excess property inventory from 

loss, theft, and damage. As previously discussed, our statistical tests of 

excess commodity inventory at five DRMOs and five DLA supply depots 

identified significant numbers of missing items. Because the DRMOs and 

DLA supply depots had no documentation to show that these items had 
Page 45 GAO-05-277 DOD Excess Property Reutilization

been requisitioned or sent to disposal contractors, they cannot assure that 

these items have not been stolen. According to DRMS data, DRMOs and 

DLA supply depots reported a total of $466 million in excess property 

losses related to damage, missing items, theft, and unverified adjustments 

over a period of 3 years. However, as discussed below, we have indications 

that this number is not complete. Also, because nearly half of the missing 

items reported involved military and commercial technology that required 

control to prevent release to unauthorized parties, the types of missing 

items were often more significant than the number of missing items.

Excess Property Losses Weaknesses in accountability that resulted in lost and stolen property 

contributed to waste and inefficiency in the excess property reutilization 

program. As shown in table 6, our analysis of reported information on 

excess property losses at DRMOs and DLA supply depots found that 

reported losses for fiscal years 2002 through 2004 totaled $466 million. 

Because 43 percent of the reported losses related to military technology 

items that required demilitarization controls,43 these weaknesses also 

reflect security risks. GAO Standards for Internal Control in the Federal 

Government 44 requires agencies to establish physical control to secure and 

safeguard assets, including inventories and equipment, which might be 

vulnerable to risk of loss or unauthorized use. However, our statistical 

tests of excess commodity inventory at five DRMOs and five DLA supply 

depots during fiscal year 2004 identified missing items involving entire 

turn-ins of some excess items as well as fewer items than reported in 

inventory (missing quantities) for other turn-ins. We referred locations 

with high occurrences of reported losses to our Office of Special 

Investigations for further investigation. Table 6 shows reported losses for 

fiscal years 2002 through 2004.

43 DOD 4160.21-M-1, Defense Demilitarization Manual, ch. 1. 

44 GAO/AIMD-00-21.3.1.
Page 46 GAO-05-277 DOD Excess Property Reutilization

Table 6: Reported DRMS Excess Property Losses and Adjustments 

Source: Unaudited DRMS data.

DRMO losses. Our statistical samples identified missing turn-ins at two of 

the five DRMOs we tested and missing quantities at all five DRMOs tested, 

including many items that were in new, unused, and excellent condition. 

Because DRMO officials did not have documentation to show whether 

these items had been reutilized, transferred, sold, or destroyed, there is no 

assurance of whether the missing items reflected bookkeeping errors or if 

they related to theft. Missing items in our Columbus DRMO sample 

included turn-ins of 72 chemical and biological protective suits and 47 wet 

weather parkas that were subject to demilitarization controls and 7 

sleeping bags, a cold weather coat, 4 pairs of cold weather trousers, 4 

canteens, a central processing unit (CPU), and various other items. Most of 

the quantity errors we found at the Columbus DRMO related to military 

clothing items. Missing items in our Richmond DRMO sample included a 

computer; 10 CPUs; 13 computer monitors; 2 scanners; and 2 items that 

require trade security control, including an arm assembly for a helicopter 

blade and a computer data signal coder/decoder. 

Based on these losses, we requested DRMS summary reports on losses for 

all DRMOS during fiscal years 2002, 2003, and 2004 for further analysis. 

Reported losses include lost, damaged, and stolen items and adjustments 

for recordkeeping errors. We determined that the loss summary reports do 

not include all known losses. For example, only one of the nine turn-ins in 

our statistical sample that included missing items that were subject to 

demilitarization controls was included in the fiscal year 2004 loss summary 

reports. Further, missing quantities are generally reported as adjustments 

rather than lost or stolen items. 

Dollars in millions

Location

Fiscal year

2002

Fiscal year

2003

Fiscal year

2004 Total

DRMOs $81 $47 $62 $190

DLA supply depots 67 95 114 276

Total $148 $142 $176 $466
Page 47 GAO-05-277 DOD Excess Property Reutilization

According to DRMS data, of the total $62 million in reported fiscal year 

2004 losses, the Warner Robins DRMO reported $22 million and the four 

DRMS demilitarization centers reported over $17 million. In addition, 

reported fiscal year 2004 losses at the contractor-operated Meade DRMO 

included over 1,000 turn-ins with a reported acquisition value of over $3 

million dollars. Although the DRMO contract provides for fines of $2,500 

per incident of loss if negligence is proven, we learned that contractor 

negligence could not be proven due to documented security weaknesses at 

the Meade DRMO.45 Uncorrected security weaknesses leave the Meade 

DRMO vulnerable to theft. 

Further, while DRMO loss reports require that a reason code be specified, 

we found that the reasons for nearly all (99.8 percent) of the reported 

DRMO losses for fiscal years 2002 through 2004 related to unknown 

reasons (76.6 percent) and unverified adjustments for bookkeeping and 

data-entry errors (23.2 percent). As a result, DRMS has no assurance of the 

extent to which theft may have occurred and gone undetected. In January 

2005, DRMS officials told us that they had not yet performed a review of the 

excess property loss reports as a basis for identifying and correcting 

systemic weaknesses.

Reported DRMO losses for the 3-year period included 76 units of body 

armor, 75 chemical and biological protective suits (in addition to those 

identified in our Columbus DRMO sample),46 5 guided missile warheads,47

and hundreds of military cold weather parkas and trousers and camouflage 

coats and trousers. Three DRMOs—Kaiserslautern, Meade, and 

Tobyhanna—accounted for $840,147, or about 45 percent, of the nearly $1.9 

million in reported fiscal year 2004 losses of military equipment items 

requiring demilitarization. 

45 DRMS and contractor documentation we obtained noted that the contractor had taken 

issue on numerous occasions with the lack of security over accountable inventories at all 

locations it manages, including 11 DRMOs in fiscal year 2003 and 9 DRMOs in fiscal year 

2004.

46 The missing chemical and biological protective suits are not the current JSLIST, and the 

missing body armor is not the ceramic technology currently in use by deployed troops.

47 In accordance with DOD 4160.21-M, ch. 4, “Property Requiring Special Processing,” § B, 

and DRMS-I 4160.14, vol. VII, “Instructions for Demilitarization for DRMS and the Defense 

Reutilization and Marketing Offices,” ch. 1, para. G, such items are required to be inert 

before turn-in to a DRMO.
Page 48 GAO-05-277 DOD Excess Property Reutilization

DLA supply depot losses. Our statistical samples also showed missing 

items at four of the five DLA supply depots that we tested. Because depot 

officials did not have documentation showing that these items had been 

reutilized or sold, there is no assurance of whether the missing items 

related to theft. Missing items in our DLA depot statistical samples 

included the following: 

• Two classified radio frequency amplifiers, a printed circuit board that is 

subject to trade security controls, and a circuit card assembly that 

required demilitarization (destruction) when no longer needed by DOD 

at DLA’s Norfolk supply depot. 

• Trade security-controlled aircraft parts, including 17 aircraft landing 

gear drag link assemblies, 6 landing gear upper manifolds, and 3 cylinder 

and piston units used in aircraft landing gear at DLA’s Hill supply depot. 

• Six computer controllers and a circuit card used in Army, Navy, and Air 

Force communications at DLA’s San Joaquin supply depot. 

We also obtained DRMS data on DLA supply depot reports of excess 

property losses, including missing and damaged property and unverified 

adjustments. As shown in table 6, reported DLA supply depot losses 

totaled $276 million for fiscal years 2002 through 2004. Of this amount, 

nearly $192 million related to excess property items that were subject to 

demilitarization and trade security controls. The summary reports that we 

obtained did not identify the reasons for most of the reported DLA supply 

depot losses. According to DRMS data, 18 DLA supply depots reported a 

total of $114 million in fiscal year 2004 excess property losses. Two supply 

depots reported 72 percent of these losses, including the DLA Oklahoma 

City supply depot with reported losses of 213,950 items totaling $41 million 

and DLA’s Warner Robins supply depot with reported losses of 4,911 items 

totaling $40 million. In addition, the San Diego and Tobyhanna DLA supply 

depots each reported about $6 million in fiscal year 2004 excess property 

losses. Types of items reported as lost, damaged, or possibly stolen 

included aircraft frames and parts, engines, laboratory equipment, and 

computers.

Property Damage In addition to reported losses, we found significant instances of property 

damage at DRMS liquidation contractor sales locations. Because all 

liquidation sales are final, buyers have no recourse when property is 

damaged subsequent to sale or is not in the advertised condition. As a 

result, customers who have lost money on bids related to damaged and 
Page 49 GAO-05-277 DOD Excess Property Reutilization

unusable items might not bid again, or they may scale back on the amount 

of their bids in the future, affecting both the volume of excess DOD items 

liquidated and sales proceeds. The property damage that we observed at 

liquidation contractor sales locations is primarily the result of DRMS 

management decisions to send excess DLA supply depot property to two 

national liquidation sales locations without assuring that its contractor had 

sufficient human capital resources and warehouse capacity to process, 

properly store, and sell the volume of property received. 

Although DRMS headquarters officials were aware of this problem and 

made numerous visits to the Huntsville sales location beginning in January 

2004, actions taken to address this problem have been inadequate. In 

addition, poorly maintained contractor warehouse facilities at one 

liquidation sales location resulted in severe water damage to excess DOD 

bandages and medical supply items that we purchased over the Internet at 

govliquidation.com. The DRMS liquidation sales contract and Web page 

conditions of sale state that DRMS is responsible for providing and 

maintaining the warehouse facilities used by the contractor. 

Property damage at the Huntsville, Alabama, liquidation sales 

location. In November 2004, we investigated reports of damage related to 

improper outside storage of excess items at the Huntsville, Alabama, 

liquidation sales location. In June 2003, DRMS initiated a recycle control 

point process, referred to as RCP, for DLA supply depots, whereby excess 

property remains in the depot warehouses during the reutilization 

screening process. At the end of the screening phase, property that does 

not require demilitarization by destruction or mutilation is to be shipped to 

one of two liquidation contractor national sales locations—Huntsville, 

Alabama, for DLA depots west of the Mississippi River and Norfolk, 

Virginia, for DLA depots east of the Mississippi. We determined that DRMS 

continued to send excess DLA supply depot property to the Huntsville sales 

location even though it was apparent after the first 6 months of shipments 

that the Huntsville location lacked the capacity to handle the large volume 

of property received from the DLA depots. For example, in early June 

2004, the Area Manager for the Huntsville DRMO inspected the liquidation 

contractor’s warehouses and found that excess property had filled at least 

one contractor warehouse building entirely, blocking doors and fire 

extinguishers. The Area Manager advised contractor officials that this 

situation would not be viewed favorably during the joint safety, fire, and 

environmental inspection anticipated within the near future. In response, 

contractor officials removed sufficient property from the building to meet 

fire and safety regulations. As a result, numerous excess DOD property 
Page 50 GAO-05-277 DOD Excess Property Reutilization

items were relocated outside to an unpaved lot about the size of a football 

field and covered with a number of blue plastic tarps. Most of these items 

were new and unused spare parts and electronic items received from DLA 

supply depots. In addition, wood furniture and metal file cabinets that 

were transferred to the contractor for liquidation sale by the co-located 

Huntsville DRMO were stored outside without any protection from the 

weather. 

According to DRMO officials, DRMS headquarters officials had visited the 

Huntsville sales location in March 2004; a second time in June 2004, when 

the property was placed on the outside lot; and again in September 2004, to 

observe the extent of the overflow. Despite the known risk48 of damaged 

and lost property, the volume of excess DLA depot property continued until 

September 2004, when DRMS headquarters made a decision to divert 

shipments from three western DLA supply depots to the Norfolk, Virginia, 

liquidation sales location. However, property continued to be stored 

outside until the week of October 18, 2004, when DRMS officials visited the 

Huntsville sales location. By that time, numerous property items had 

received extensive damage due to sun, wind, rain, and storms, including 

four hurricanes—Charlie, Frances, Ivan, and Jeanne—and tropical storms 

Bonnie and Matthew. DRMS officials disposed of some items and placed 

other items inside the warehouse. In addition, the Huntsville DRMO 

manager told us that wood computer furniture and filing cabinets that were 

in good condition at the time the DRMO turned them over to the liquidation 

contractor had been stored outside unprotected from weather. Because 

most of the furniture was ruined and the filing cabinets were rusted, they 

were sent to the landfill or sold as scrap. Figure 14 shows the outside 

location of the wood computer cabinets and other items in July 2004 when 

they were advertised for sale.

48 The DRMS liquidation sales contract stipulates that DRMS is to provide property storage, 

maintain liquidation contractor facilities, and bear financial risk of loss and damage of 

property in the contractor’s possession.
Page 51 GAO-05-277 DOD Excess Property Reutilization

Figure 14: Outside Storage of Wood Computer Furniture at the Huntsville, Alabama, 

Liquidation Sales Location in July 2004

Source: DRMS.

Our inspection of the remaining damaged property identified numerous 

boxes that were missing property labels or had labels and shipping 

documentation that were illegible due to exposure to sun, wind, and rain. 

The missing documentation presents a significant problem because the 

sales contractor does not record receipts of excess DOD property in its 

sales inventory until items are processed for sale, which may not occur 

until several months after the items are received. DRMS officials told us 

that they are attempting to reconcile excess property shipments to 

liquidation contractor inventory. However, because excess property 

receipts were not recorded in sales inventory and property labels are 

missing or illegible, it will be very difficult, if not impossible, to fully 

reconcile sales inventory to excess property receipts. The photograph in 

figure 15 shows wooden boxes that have lost their property labels and are 

turning black due to rot.
Page 52 GAO-05-277 DOD Excess Property Reutilization

Figure 15: Example of Water-Damaged Items at the DRMS Liquidation Sales 

Contractor Location in Huntsville, Alabama 

Property subject to damage at the Norfolk, Virginia, liquidation 

sales location. On December 2, 2004, we visited the Norfolk liquidation 

contractor sales location to determine whether DRMS action to resolve the 

capacity problems at the Huntsville sales location by diverting property to 

Norfolk, Virginia, had resulted in capacity problems at that location. We 

observed hundreds of cardboard and wooden boxes containing excess 

DOD property that were stored outside under blue plastic tarps and in 

shrink-wrapped stacks on pallets. Upon inspection, we noted that many of 

the boxes were already water-damaged. The photograph in figure 16 shows 

cardboard boxes stored outside at the Norfolk, Virginia, sales location that 

evidence weather damage in terms of peeling property labels and water 

marks.

Source: GAO.
Page 53 GAO-05-277 DOD Excess Property Reutilization

Figure 16: Example of Excess DOD Property Stored Outside at the DOD Liquidation 

Sales Contractor Location in Norfolk, Virginia 

Damage to GAO purchase of bandages and medical supplies. Our 

October 7, 2004, Internet purchase of bandages and medical supplies from 

govliquidation.com suffered water damage because DRMS failed to 

adequately maintain the liquidation contractor’s Norfolk facilities. Our 

purchase included numerous usable items in original manufacturer 

packaging, including 35 boxes of bandages, 31 boxes of gauze sponges and 

surgical sponges, 12 boxes of latex gloves, and 2 boxes of tracheostomy 

care sets. We paid a total of $167, including buyer’s premium, tax, and 

transportation cost, for these items, which had a reported total acquisition 

cost of $3,290. However, the following week, when we arrived at the 

liquidation contractor’s Norfolk, Virginia, sales location to pick up our 

purchase, it was raining and the roof on the contractor’s warehouse 

building was leaking. The boxes containing the items we had purchased 

had become wet, and water dripped from some of the boxes when 

contractor personnel loaded them into our rental truck. The photograph in 

figure 17 illustrates the damaged condition of the items we purchased. 

Most of the cardboard storage boxes were deteriorating as a result of water 

damage, and items inside the boxes were wet.

Source: GAO.
Page 54 GAO-05-277 DOD Excess Property Reutilization

Figure 17: DOD Excess New, Unused Bandages and Medical Supplies Purchased 

over the Internet in October 2004

Although the sales lot containing the bandages and medical supplies that 

we purchased was advertised as 4 pallets of items, it actually consisted of 

13 pallets. The truck we rented would not accommodate all 13 pallets of 

items. The liquidation contractor sales representative told us that we could 

take as much as we could accommodate, and the contractor would resell 

the remaining items, even though the boxes on the remaining 8 pallets of 

bandages and medical supplies were also wet. 

We found that customers who find that the property they purchased is 

damaged have no recourse. Further, the liquidation contractor’s terms of 

sale provide no incentive for safeguarding property held for sale. For 

example, under the contractor’s terms of sale, all sales are final and items 

are sold in “as is” condition. The liquidation sales contractor disclaims all 

warranties, express and implied, without limitation, including loss or 

liability resulting from negligence. Credit card account numbers must be 

provided at the time a bid is made, and the sales cost, buyer premium, and 

sales tax, if applicable, are immediately charged to the winning bidder. 

Source: GAO.
Page 55 GAO-05-277 DOD Excess Property Reutilization

Outdated, Nonintegrated 

Systems Impair Economy 

and Efficiency

Inefficient, nonintegrated excess inventory and supply management 

systems lack controls necessary to prevent waste and inefficiency in the 

reutilization program. For example, because the DRMS Automated 

Inventory System (DAISY) and DLA’s Standard Automated Materiel 

Management System (SAMMS) are outdated and nonintegrated, they do not 

share information necessary to (1) identify and alert DLA item managers of 

excess property that is available to fill supply orders and (2) prevent 

purchases of new items when A-condition excess items are available for 

reutilization. We have continued to report49 that long-standing weaknesses 

with DLA’s inventory systems related to outdated, nonintegrated legacy 

systems and processes result in DOD and military units not knowing how 

many items they have and where these items are located. DLA has 

acknowledged serious deficiencies in its automated inventory management 

systems. Although DLA has an effort under way to replace SAMMS with the 

Business Systems Modernization (BSM) and DRMS has a Reutilization 

Modernization Program (RMP) under way to upgrade DAISY, so far these 

have been separate, uncoordinated efforts and they do not adequately 

address identified process deficiencies. Also, while the systems 

improvement efforts are intended to integrate supply and excess inventory 

systems to support the reutilization program, they are not focused on 

resolving long-standing problems related to unreliable condition code data 

and incomplete data on NSNs. The accuracy of these two data elements is 

critical to the ability to identify like items that are available for reutilization 

at the time purchases are made.

Current Inventory Systems 

Environment

We found that existing systems and processes do not adequately reflect the 

DRMS twofold mission to (1) facilitate reutilization of property in good 

condition and (2) dispose of property that DOD cannot use. For example, 

DRMS moves all excess property through the same 49-day screening and 

disposal process rather than identifying A-condition items that are 

currently being purchased, stocked and issued, or both to military units and 

designating these items for reutilization. Instead, as previously discussed, 

DRMS transferred, donated, sold, and destroyed hundreds of millions of 

49 GAO, DOD Business Systems Modernization: Billions Continue to Be Invested with 

Inadequate Management Oversight and Accountability, GAO-04-615 (Washington, D.C.: 

May 27, 2004); DOD Business Systems Modernization: Longstanding Management and 

Oversight Weaknesses Continue to Put Investments at Risk, GAO-03-553T (Washington, 

D.C.: Mar. 31, 2003); and DOD Management: Examples of Inefficient and Ineffective 

Business Processes, GAO-02-873T (Washington, D.C.: June 25, 2002).
Page 56 GAO-05-277 DOD Excess Property Reutilization

dollars of A-condition excess items that the military services continued to 

purchase and utilize. 

In addition, we found that the current process for identifying excess 

property that is available to fill supply orders is cumbersome, timeconsuming, and involves significant human intervention. For example, 

under the current process, if an item manager wants to use excess items to 

fill a supply order, the item manager must query DAISY to determine 

whether excess items are available to fill the supply order. If excess items 

are available, the item manager would then need to contact one or more 

DRMOs where the excess property is located and ask DRMO personnel to 

physically verify the item description, quantity, and condition. If the excess 

items meet the customer’s requirements, the item manager prepares a 

requisition form and submits it to the DRMO(s). If the item does not 

require technical inspection or testing, the DRMO processes the order and 

ships the excess items to the customer. However, if the item is electronic 

and requires technical inspection and testing, or both, it must be sent to a 

DLA supply depot where these functions can be performed before the item 

is shipped to the customer. 

Military unit officials told us that due to inefficiencies in this process, 

including shipment delays of up to several weeks and unreliable DRMS 

data on quantities and condition codes, they prefer to order new items 

rather than attempting to reutilize excess property available at DRMOs. 

Figure 18 illustrates the current nonintegrated DLA inventory systems 

environment. 
Page 57 GAO-05-277 DOD Excess Property Reutilization

Figure 18: Existing Nonintegrated DLA Inventory Systems Environment 

Planned Systems Environment According to DLA officials, the planned BSM and RMP excess property 

reutilization systems are intended to be integrated when fully implemented 

in 2009. The objective of the integrated design is to provide DLA buyer and 

item manager visibility over excess property available for reutilization and 

permit the buyer to fill a supply order with these items instead of 

purchasing new items. However, we are concerned that these efforts may 

not resolve the long-standing data reliability problems inherent in the 

current systems and processes. Our November and December 2004 

discussions with DLA and DRMS systems officials revealed that they were 

unaware of the magnitude of errors in condition coding that incorrectly 

recorded new and unused items as unserviceable and the extent of 

inconsistent recording of NSNs in commodity purchases and excess 

inventory records. Further, the officials had not yet coordinated to identify 

key data elements for identifying excess property that should be reutilized.

We also found that DLA and DRMS systems officials had not yet fully 

considered building controls into the new business systems that would 

help enforce the policy to reutilize available excess property in new, 

unused, and excellent condition before purchasing new items. For 

example, under the current systems environment, item managers and 

Item manager at Defense supply center

DLA depot DRMO

Provides items

to units and

installations

DAISY/DRMS-HQ

Provides excess

property data

Processes requisition

and sends excess

property to units and

installations

SAMMS

DAISY

Unit or

installation

Orders

supplies

electronically

Processes order

through SAMMS

Queries

DAISY

Verbally verifies

property data with

DRMO personnel, advises

customer, and prepares

requisition for

transfer of property

SAMMS process

(automated)

DRMS process

(multistep)

Source: GAO.

Items are

provided to

unit/installation

DSS
Page 58 GAO-05-277 DOD Excess Property Reutilization

military units can choose to purchase new items rather than reutilizing 

available new, unused, and excellent condition excess items. In order to 

avoid this problem in the planned systems environment, DLA would need 

to include edit controls that would reject a purchase transaction or 

generate an exception report for review and approval when such items are 

available for reutilization but are not selected.

We discussed our concerns with DLA officials. In early February 2005, DLA 

officials told us that they were extending the March 2005 target date for 

completing the functional design for excess property reutilization in BSM 

and RMP in order to address our concerns about the impact of unreliable 

data on the successful integration of the planned systems. 

Conclusions DLA and DRMS have not demonstrated the leadership and accountability 

necessary to achieve the economy and efficiency of excess property 

reutilization contemplated in federal regulations or DOD policy. To 

effectively address problems with reutilization program waste and 

inefficiency, DRMS and DLA will need to exercise strong leadership and 

accountability to improve the reliability of excess property data; establish 

effective oversight and physical inventory control, including both 

accountability and safeguarding of excess property; and develop effective 

integrated systems for identifying and reutilizing excess property. In 

addition, the military services will need to provide accurate information on 

excess property turn-in documentation, particularly data on condition 

codes, and item descriptions, including NSNs. Improved management of 

DOD’s excess property and a strong reutilization program could help save 

taxpayers hundreds of millions of dollars annually. 

Recommendations for 

Executive Action 

We recommend that the Secretary of Defense direct the Director of the 

Defense Logistics Agency; the Commander of the Defense Reutilization and 

Marketing Service; and the Secretaries of the Army, the Navy, and the Air 

Force, as appropriate, to take the following 13 actions to improve DOD’s 

excess property reutilization program.

Data Reliability • Direct DRMS to clarify and enforce the policy that permits DRMO 

management to waive the requirement to verify quantities on turn-ins 

under exempted conditions, and consider additional criteria for 

maintaining accountability of military equipment items.
Page 59 GAO-05-277 DOD Excess Property Reutilization

• Require DRMS to identify DRMOs with insufficient human capital 

resources and take appropriate action to assure that excess property 

receipts are verified and processed in an accurate and timely manner. In 

implementing this recommendation, DRMS should require DRMOs to 

provide adequate supervision and monitoring to assure that excess 

property receipts are verified when received and entered in DRMO 

inventory.

• Require DLA to develop a mechanism for linking prime vendor purchase 

transactions to NSNs or other unique product identification.

• Direct DRMS to develop written guidance and formal training to assist 

DRMO personnel and military service turn-in generators in the proper 

assignment of condition codes to excess property turn-ins.

• Direct the military services to provide accurate excess property turn-in 

documentation to DRMS, including proper assignment of condition 

codes and NSNs based on available guidance.

• Require the military services to establish appropriate accountability 

mechanisms, including supervision and monitoring, for assuring the 

reliability of turn-in documents.

Physical Control of Property • Direct DLA and DRMS to review DLA supply depot and DRMO excess 

property loss reports to identify systemic weaknesses and take 

immediate and appropriate corrective actions to resolve them.

• Direct DRMS to take immediate, appropriate action to resolve identified 

uncorrected DRMO security weaknesses.

• Require DRMS to determine the monthly sales volume of excess 

property at the DLA supply depots and work with its liquidation sales 

contractor to identify the appropriate number and liquidation sales 

locations needed to handle the sales of excess DLA depot property. In 

making these determinations, DRMS and its contractor should consider 

whether contractor staffing and warehouse capacity at each location are 

adequate to handle the volume of property shipped to those locations 

for sale. 

• Require DRMS to periodically inspect liquidation contractor facilities 

and take immediate action to correct structural impairments and other 
Page 60 GAO-05-277 DOD Excess Property Reutilization

deficiencies, such as outside storage due to inadequate warehouse 

capacity that could result in damage of excess DOD property held for 

sale.

Commodity Inventory 

Systems 

• Direct DLA and DRMS to consider available options and implement an 

interim process for identifying turn-ins of excess new, unused, and 

excellent condition items that could be reutilized to avoid unnecessary 

purchases in the existing systems environment.

• Direct DLA BSM and DRMS RMP systems officials to coordinate on the 

identification of key data elements for identifying excess property that 

should be reutilized before completing the design of functional 

requirements for reutilization of excess commodities for BSM and RMP.

• Require that DLA’s BSM system design include edit controls that would 

reject a purchase transaction or generate an exception report when Acondition excess items are available but are not selected for 

reutilization at the time that purchases are made.

Agency Comments and 

Our Evaluation

On April 15, 2005, DOD provided written comments on a draft of this 

report. DOD officials concurred with 8 of our 13 recommendations and 

partially concurred with the other 5 recommendations. With regard to the 5 

recommendations on which DOD partially concurred, DOD’s stated actions 

address all 5 of them. We view these actions as being generally responsive 

to the intent of our recommendations. The partial concurrences relate to 

plans for alternative actions, actions already initiated in response to our 

audit, and increased attention to existing processes. DOD’s explanation for 

the partial concurrences and our response follows.

DOD stated that DRMS will use an alternative action to address our 

recommendation that it assess the adequacy of human capital resources 

and take appropriate action to assure that excess property receipts are 

verified and processed accurately and timely. DOD stated that DRMS will 

use its staffing model to determine the staffing needs by receipt workload 

and adequately staff its DRMOs. DOD also stated that DRMS is using 

contract hires to supplement DRMO staff, as needed. We view these 

actions as responsive to our recommendation. However, as a part of its 

actions on our recommendation, DRMS also should provide adequate 

supervision and monitoring to assure that excess property receipts are 
Page 61 GAO-05-277 DOD Excess Property Reutilization

verified when received and entered into DRMO inventory. We have 

modified our recommendation to emphasize this point. These actions will 

help to provide accountability for excess property and avoid the need for 

subsequent adjustments, including an excessive number of write-offs for 

inventory shortages.

DOD noted the merits of existing processes related to our recommendation 

to develop a mechanism for linking prime vendor purchase transactions to 

NSNs or other unique product identification. DOD stated that DOD 

directives require turn-in generators to provide a description of item(s) on 

a turn-in document for which local stock numbers are listed. DOD also 

noted that bringing unused items back into DLA supply stock would negate 

warehousing and distribution savings achieved through using prime vendor 

direct shipments to DOD customers. In addition, DOD stated that assigning 

NSNs to nonstocked commercial items would significantly increase item 

costs and run counter to the Federal Acquisition Streamlining Act of 199450

preference for commercial purchases. As discussed in our report, DOD 

already has efforts underway to promote the use of unique product 

identifiers other than NSNs by commercial vendors and small business 

firms. DOD’s efforts include cost benefit considerations. Consistent with 

DOD’s efforts, it is important that DLA prime vendor purchase transactions 

are identified to NSNs or other unique product identification to facilitate 

economies through (1) volume purchasing and (2) reutilization of excess 

items.

With regard to our recommendation that DRMS develop written guidance 

and formal training on the proper assignment of condition codes to excess 

property turn-ins, DOD stated that the military services currently receive 

formal blocks of training and are in the better position to assign the 

condition codes. DOD also referred to current DOD and DRMS guidance 

on condition codes. In addition, DOD stated that DRMS will review current 

guidance to ensure the appropriate assignment of responsibilities regarding 

the establishment and use of condition codes. As discussed in our report, 

our statistical tests, DRMO screening visits, case study acquisitions of 

excess DOD commodity items, and interviews of DRMO, military service, 

and GSA officials all indicate that significant problems exist with the 

reliability of excess property condition codes. We determined that 

unreliable condition codes were caused by a lack of detailed guidance and 

a failure to follow existing guidance. For example, as noted in our report, 

50 Pub. L. No. 103-355, § 8104, 108 Stat. 3243, 3390 (Oct. 13, 1994) (codified at 10 U.S.C. 2377).
Page 62 GAO-05-277 DOD Excess Property Reutilization

military services often coded items as unserviceable when they no longer 

had a need for them, even though the items were in new, unused, and 

excellent condition. Therefore, written guidance and training on the 

proper assignment of condition codes also is important to correcting this 

problem to assure that existing misconceptions are corrected and would be 

responsive to our recommendation.

With regard to our recommendation that DRMS periodically inspect 

liquidation contractor facilities and take immediate action to correct 

structural impairments and other deficiencies, such as storage capacity, 

DOD stated that an inspection of all liquidation contractor facilities has 

been completed and periodic inspections will continue. DOD also stated 

that the only facility requiring immediate structural repair is the Norfolk, 

Virginia, facility and that DRMS has issued a work order for the necessary 

repairs. DOD also stated that additional storage options are being regularly 

evaluated by the contractor and DRMS. As stated in our report, the 

overflow of excess property at the Huntsville liquidation sales location was 

a long-term, uncorrected problem, which resulted in a significant 

breakdown in accountability and physical inventory control over excess 

property. It is important that timely and appropriate solutions be identified 

and implemented to prevent this problem in the future. The actions that 

DOD highlighted in its letter are responsive to our recommendation.

Finally, DOD stated that actions have already been taken to respond to our 

recommendation that DRMS consider available options and implement an 

interim process for identifying turn-ins of excess new, unused, and 

excellent condition items that could be reutilized to avoid unnecessary 

purchases in the existing systems environment. DOD enumerated 

initiatives implemented during 2004 and early 2005 that improve the 

visibility of excess property listed on DRMS’s Web page. In addition, DOD 

stated that DRMS will work with DLA item managers on the best 

methodology to provide visibility of A-condition excess property. 

Notwithstanding the improvements in DRMS’s Web page, the overall 

commodity purchasing process has not changed, and DLA continues to 

make commodity purchases without considering the availability of 

identical A-condition excess commodities. Achieving the economy and 

efficiency contemplated by federal regulations and DOD policy is 

dependent upon identifying continuing commodity purchases and having 

the ability to match these items to A-condition excess property and hold it 

for reutilization. DOD should not dispose of excess A-condition excess 

items that it continues to purchase.
Page 63 GAO-05-277 DOD Excess Property Reutilization

DOD’s comment letter is reprinted in appendix II. 

As agreed with your offices, unless you announce its contents earlier, we 

will not distribute this report until 30 days from its date. At that time, we 

will send copies to interested congressional committees; the Secretary of 

Defense; the Deputy Under Secretary of Defense for Logistics and Materiel 

Readiness; the Secretary of the Army; the Secretary of the Navy; the 

Secretary of the Air Force; the Director of the Defense Logistics Agency; 

the Commander of the Defense Reutilization and Marketing Service; and 

the Director of the Office of Management and Budget. We will make copies 

available to others upon request. In addition, this report will be available at 

no charge on the GAO Web site at http://www.gao.gov.

Please contact Gregory D. Kutz at (202) 512-9505 or kutzg@gao.gov, John 

Ryan at (202) 512-9587 or ryanj@gao.gov, or Gayle L. Fischer at (202) 512-

9577 or fischerg@gao.gov if you or your staff have any questions 

concerning this report. Additional contacts and major contributors to this 

report are provided in appendix VI. 

Gregory D. Kutz

Managing Director

Forensic Audits and Special Investigations 
Page 64 GAO-05-277 DOD Excess Property Reutilization

Appendix I

Objectives, Scope, and Methodology ApApenednxidexiIs

The purpose of our audit was to assess the economy and efficiency of the 

Department of Defense (DOD) excess property program. In doing so, we 

assessed the effectiveness of systems, processes, and controls for assuring 

a strong reutilization program. Where we found controls to be ineffective, 

we tested them further to determine (1) the magnitude and (2) root causes 

of associated waste and inefficiency. Our audit and investigation focused 

on Defense Logistics Agency (DLA) purchases of consumable items and 

Defense Reutilization and Marketing Service (DRMS)1

 excess property 

inventory activity during fiscal years 2002 and 2003, the most current fiscal 

years for which data were available at the time we initiated our audit. To 

illustrate continuing problems, we obtained excess DOD commodity items 

in new, unused, and excellent condition (A condition) during fiscal year 

2004 and the first quarter of fiscal year 2005 that were in use by the military 

services, were being purchased by DLA, or both at the time they were 

available for reutilization. 

We obtained access to the following systems and databases to support our 

audit and investigation.

• The DRMS Automated Information System (DAISY), which is an 

automated inventory accounting management data system designed to 

process excess DOD property from receipt to final disposal. 

• The DRMS Management Information Distribution and Access System 

(MIDAS), which contains historical (archive) DAISY information. 

• DLA’s DOD Activity Address Directory (DODAAD), which contains 

information to identify agency names and addresses for activity codes 

that are associated with excess property requisitions.

• The Government Liquidation, LLC2

 database, which contains 

transactions on public sales of excess DOD property items. 

• DLA’s Standard Automated Materiel Management System (SAMMS), 

which contains transaction data on purchases by commodity group. 

1

 DRMS is responsible for the disposal of excess property received from the military 

services and other DOD agencies.

2

 Government Liquidation, LLC is the DRMS commercial venture partner (contractor) for 

public sales of excess DOD property. 
Appendix I

Objectives, Scope, and Methodology

Page 65 GAO-05-277 DOD Excess Property Reutilization

• The Federal Logistics Information System (FEDLOG), which is a 

logistics information system managed by the Defense Logistics 

Information Service (DLIS)3

 within DLA. This system contains detailed 

information on specifications, use, acquisition cost, and sources of 

supply for national stock numbered items, including more than 7 million 

stock numbers and more than 12 million part numbers.

We obtained online access to DAISY, MIDAS, DODAAD, and FEDLOG, and 

we obtained copies of the SAMMS databases for fiscal years 2002 and 2003 

and Government Liquidation, LLC databases for June 2001 through 

December 2004. For each of the DOD systems and databases used in our 

work, we (1) obtained information from the system owner/manager on 

their data reliability procedures; (2) reviewed systems documentation; 

(3) reviewed related DOD Inspector General reports, DLA Comptroller 

budget data, and independent public accounting firm reports related to 

these data; and (4) performed electronic testing of commodity purchase 

and excess inventory databases to identify obvious errors in accuracy and 

completeness. We verified database control totals, where appropriate. We 

also received FEDLOG training from the DLIS service provider. When we 

found obvious discrepancies, such as omitted national stock number 

(NSN)4

 data in the DLA commodity purchases databases and transaction 

condition coding errors in the DRMS excess property systems data, we 

brought them to the attention of agency management for corrective action. 

We made appropriate adjustments to transaction data used in our analysis, 

and we disclosed data limitations with respect to condition coding errors 

and the omission of NSN data that affected our analysis. Our data analysis 

covered commodity purchases and excess commodity turn-ins and 

disposal activity during fiscal years 2002 and 2003. In addition, we 

statistically tested the accuracy of excess inventory transactions at five 

Defense Reutilization and Marketing Offices (DRMO) and five DLA supply 

depots. We also reviewed summary data and selected reports on DRMS 

compliance reviews of 91 DRMOs during fiscal year 2004 to determine the 

extent to which DRMS had identified problems with adherence to DOD and 

3

 DLIS manages the Federal Catalog System, which includes nearly 7 million active supply 

items and operates the Federal Logistics Information System, which contains information 

on national stock numbers, part numbers, prices, packaging and shipping, and disposal 

instructions.

4

 An NSN is a 13-digit number that identifies standard use inventory items. The first 4 digits 

of the NSN represent the Federal Supply Classification, such as 8430 for men’s footwear, 

followed by a 2-digit NATO code and a 7-digit designation for a specific type of boot, such as 

cold weather boot. 
Appendix I

Objectives, Scope, and Methodology

Page 66 GAO-05-277 DOD Excess Property Reutilization

DRMS policies, made recommendations for corrective actions, and 

monitored DRMO actions to address its recommendations. Based on these 

procedures, we are confident that that the DOD data were sufficiently 

reliable for the purposes of our analysis and findings. 

Magnitude of Excess 

Property Reutilization 

Program Waste and 

Inefficiency

To determine the overall magnitude of waste and inefficiency related to the 

DOD excess property reutilization program, we identified fiscal year 2002 

and 2003 excess commodity disposal activity by property condition code 

and examined the extent of DOD reutilization of excess items in new, 

unused, and excellent condition (A-condition) versus transfers, donations, 

public sales, and other disposals outside of DOD through scrap, 

demilitarization, and hazardous materials contractors. We also compared 

DLA commodity purchase transactions to identical excess new, unused, 

and excellent condition items to identify instances where DLA purchased 

commodity items rather than reutilizing these excess items. We used NSN 

data as the basis for identifying identical items. In addition, we analyzed 

DLA supply depot excess commodity turn-ins to determine the extent to 

which new, unused DLA supply depot inventory accounted for turn-ins of 

excess of A-condition items. We used IDEA audit software5

 to facilitate our 

analysis.

Analysis of the Extent of DOD 

Reutilization 

To determine the extent to which DOD reutilized excess commodities in A 

condition during fiscal years 2002 and 2003, we used online access to the 

DRMS MIDAS database of historical transactions and performed data 

mining6

 and analysis of the universe of excess commodity turn-in and 

disposal transactions. We identified key data elements, such as disposal 

transaction types, the excess property recipient DOD Activity Address 

Code (DODAAC), and condition codes. We used these data elements to 

identify the extent of DOD reutilization of excess A-condition commodities 

compared to transfers; donations; public sales; and disposals of scrap, 

hazardous materials, and demilitarized items. We determined the type of 

disposal transaction through analysis of the DODAAC that identifies the 

5

 Interactive Data Extraction and Analysis software developed by CaseWare International, 

Inc., and distributed by Audimation, Inc., Houston, Texas, CaseWare’s U.S. business partner.

6

 Data mining involved queries of DLA’s commodity purchase databases and DRMS excess 

inventory system to identify patterns of activity, such as turn-ins and disposals of Acondition excess commodities; reutilization, transfers, donations, sales, and destruction of 

excess items; and items that were being purchased when identical new, unused, and 

excellent condition items were available for reutilization. 
Appendix I

Objectives, Scope, and Methodology

Page 67 GAO-05-277 DOD Excess Property Reutilization

name and address of the agency or program that received (or requisitioned) 

the property. Because DOD considers special program7

 reutilization the 

same as DOD reutilization, we used DODAACs to separately identify 

reutilization transactions for special programs that were not directly 

associated with DOD activities. We also used DODAAC information to 

determine the identity of turn-in generators and requisitioners of excess 

DOD commodities for subsequent interviews of generators regarding why 

new, unused items were excessed and excess property users about their 

experience. 

Analysis of Other Types of 

Excess Property Disposals 

We also worked with DRMS officials to obtain information on transaction 

codes for identifying disposals of hazardous materials, scrap, and 

demilitarized items. We independently performed data mining and 

analysis, and we verified the results of our queries with DRMS officials in 

order to provide reasonable assurance that our data-mining approach and 

results were accurate. We used the Government Liquidation, LLC database 

to determine the acquisition value of commodity items sold and sale 

revenues during fiscal years 2002 and 2003. 

Analysis of Commodity 

Purchases Transactions

We used the six SAMMS commodity purchases databases we obtained to 

identify key information on commodity items that military units purchased 

from DLA, including the item description or name, NSN, purchase date, 

unit price, unit acquisition cost, and full cost including the DLA user fee. 

The six commodity groups we audited included (1) construction and land 

and maritime weapons, (2) electrical, (3) general, (4) industrial, 

(5) medical, and (6) textile. We worked with DLA officials to identify items 

to a commodity group based on the supply class number included in the 

NSN or local stock number (LSN).8

 

To determine the extent to which DLA made unnecessary purchases of new 

items when identical items that were reported to be in A condition were 

available for reutilization, we compared commodity purchase transactions 

in SAMMS to excess property turn-in transactions in MIDAS. We used 

NSNs to identify instances where the military services ordered and 

7

 Special programs, such as the Humanitarian Assistance Program and law enforcement 

agencies, are listed and described in app. IV. 

8

 An LSN consists of the four-digit federal supply classification number, a two-digit NATO 

code, and up to a seven-character description, such as “monitor” for a computer monitor 

and “boots” for cold weather boots.
Appendix I

Objectives, Scope, and Methodology

Page 68 GAO-05-277 DOD Excess Property Reutilization

purchased items from DLA at the same time identical items that were 

reported to be in new or excellent condition were available for 

reutilization. Although we identified at least $400 million in fiscal year 2002 

and 2003 wasteful purchases related to A-condition excess items that were 

available for reutilization, we were unable to determine the full magnitude 

of this problem due to inconsistent recording of NSNs and improper 

downgrading of condition codes.

Case Study Examples We performed case study investigations of excess commodity turn-ins and 

disposals during fiscal years 2002 through 2003. In addition, to illustrate 

that DRMS reutilization program waste and inefficiency are continuing 

problems, during fiscal year 2004 and the first quarter of fiscal year 2005, 

we obtained several excess DOD commodity items that were currently in 

use, were being purchased at the time we acquired them, or both. We used 

data mining and analysis to identify commodity items for our case study 

acquisitions. To identify new and unused excess DOD commodity items 

that were available for requisition at no cost, we accessed the DRMS 

Reutilization, Transfer, and Donation Web page and identified excess DOD 

commodity items available to federal agencies. We confirmed that these 

items were available to federal agencies by also accessing the General 

Services Administration’s (GSA) GSAXcess Web page. We used GAO’s 

federal agency DODAAC to requisition new and unused excess DOD 

commodity items in A condition. We submitted our requisitions for 

transfer of these excess DOD items through GSA. To identify new and 

unused items that we could purchase at minimal cost, we accessed 

govliquidation.com. We also accessed govliquidation.com to identify 

continuing sales of our case study items. 

We based our case study selections on commodities used by military units 

and the quantity and dollar amount of purchases and excess property turnins associated with these items. After we identified each new and unused 

case study item that we wanted to purchase, we queried FEDLOG to 

confirm the acquisition cost and current use of the item—that is, whether 

an item was still being purchased or currently in use but being phased out 

or was obsolete. For further assurance on the status of the excess 

commodities that we targeted for acquisition, we contacted the DLA item 

managers responsible for these items to confirm that they were currently 

being purchased, were in use by the military services, or both. We also 

contacted item managers to obtain information on how certain items, such 

as circuit cards and power supply units, were used. 
Appendix I

Objectives, Scope, and Methodology

Page 69 GAO-05-277 DOD Excess Property Reutilization

Causes of Reutilization 

Program Waste and 

Inefficiency 

To determine the root causes of identified inefficiencies, we first gained an 

understanding of the processes for acquisition and disposal of DOD 

commodities. We reviewed applicable laws and regulations and DOD, 

military service, DLA, and DRMS policies and procedures. We also 

reviewed the DRMS contracts for DRMO property warehouse services and 

liquidation sales for consistency with DOD policies. In addition, we 

reviewed SAMMS and MIDAS system manuals. We met with and contacted 

numerous DLA and DRMS officials and obtained documentation to assess 

how the property reutilization program is monitored for effectiveness. We 

also met with or contacted DOD and Army, Navy, and Air Force officials 

about their experience with commodity acquisitions, reutilization, and 

disposals. We interviewed DLA item managers and buyers to obtain 

information on their roles and responsibilities and key systems and 

controls involved in the commodity acquisition and management process. 

We also obtained information on how decisions are made about whether to 

purchase new items or to reutilize excess items through DOD’s reutilization 

program. We made visits to 12 DRMOs to observe excess property 

processing, screen for excess case study items, investigate the disposition 

of excess property turn-ins, or test the accuracy of excess property 

inventory. We also visited five DLA-managed Defense depots to test 

inventory accuracy and observe excess property disposal processes. In 

addition, we visited 10 Government Liquidation, LLC sales locations. 

We focused our assessment of the causes of reutilization program waste 

and inefficiency on key aspects of the overall management control 

environment, including (1) data reliability, (2) physical inventory control, 

and (3) the current systems environment. We used GAO’s Standards for 

Internal Control in the Federal Government9 as criteria for identifying 

internal control breakdowns that contributed to waste and inefficiency.

9

 GAO, Standards for Internal Control in the Federal Government, GAO/AIMD-00-21.3.1

(Washington, D.C.: November 1999). This document was prepared to fulfill GAO’s statutory 

requirement under 31 U.S.C. § 3512 (c), (d), commonly known as the Federal Managers’ 

Financial Integrity Act of 1982, to issue standards that provide the overall framework for 

establishing and maintaining internal control and for identifying and addressing major 

performance and management challenges and areas at greatest risk of fraud, waste, abuse, 

and mismanagement. 
Appendix I

Objectives, Scope, and Methodology

Page 70 GAO-05-277 DOD Excess Property Reutilization

Data Reliability We statistically tested10 the accuracy of current excess commodity 

inventory transaction data at five DRMO warehouse locations and five DLA 

supply depot locations. Each location was a separate population of 

randomly selected transactions. We randomly selected transactions from 

the population of current inventory transactions at each of the test 

locations. The five DRMO locations we tested were the Columbus DRMO 

in Ohio; the Stockton DRMO in French Camp, California; the Hill DRMO at 

Hill Air Force Base in Ogden, Utah; and the Norfolk DRMO and the 

Richmond DRMO in Virginia. Our selection of the five DRMOs was based 

on geographic location, turn-in volume, types of excess items handled, and 

military units generating the most turn-ins. We tested inventory at Defense 

depots that were co-located or located within proximity of the above 

DRMOs, including Defense depots at Columbus, Ohio; San Joaquin, 

California; Hill Air Force Base, Utah; Norfolk, Virginia; and Richmond, 

Virginia. Each location was a separate population, and we evaluated the 

results of each sample location separately.

The purpose of our testing was to evaluate the effectiveness of controls 

over existence—including timely recording of transactions, item 

description (item name and NSN), and quantity—and condition coding. 

Appendix V describes the specific criteria we used to conclude on the 

effectiveness of DRMO and DLA supply depot controls for inventory 

accuracy. 

Physical Inventory Control Our assessment of physical inventory control focused on the results of our 

statistical tests discussed above and our review of DRMS summary data on 

reported DRMO and DLA supply depot losses due to lost, stolen, and 

damaged property. We investigated problems associated with liquidation 

contractor controls for safeguarding excess DOD property held for sale at 

the Huntsville, Alabama, and the Norfolk, Virginia, sales locations. We also 

assessed the extent of damage to our case study purchase of bandages and 

medical supply items from the Norfolk sales location. In addition, we 

obtained DRMS summary reports on losses of excess property at DRMOs 

and DLA supply depots for fiscal years 2002 through 2004. We referred 

locations with the largest reported losses to our Office of Special 

Investigations for further investigation.

10 Our statistical tests were based on a random sample of the population of excess inventory 

transactions at each test location, which permitted us to estimate, or project, the errors in 

the population at each location.
Appendix I

Objectives, Scope, and Methodology

Page 71 GAO-05-277 DOD Excess Property Reutilization

Commodity Inventory Systems 

Environment

To gain an understanding of DLA commodity purchase and DRMS 

commodity inventory systems and processes with regard to DOD’s excess 

property reutilization program, we reviewed DLA and DRMS policies and 

procedures, and interviewed DLA, DRMS, and DRMO program and systems 

officials. We also used observations and information obtained during our 

statistical tests, excess property screening visits, and case study 

investigations. In addition, we relied on the body of work GAO has 

performed in this area.11 

To determine the scope and status of DLA and DRMS systems efforts to 

improve the reutilization process in the future, we interviewed DLA and 

DRMS systems officials who are responsible for DLA’s Business Systems 

Modernization (BSM) and Integrated Data Environment (IDE) and the 

DRMS Reutilization Modernization Program (RMP).12 We also reviewed 

business systems modernization plans and related documents to determine 

the current status, implementation time frames, and scope of planned 

improvements. In addition, we obtained and reviewed the Reutilization 

Management Program Functional Requirements Document, the RMP 

Decision Matrix, and implementation timelines. We focused our 

assessment on whether the systems modernization efforts, as currently 

documented, would adequately address needed improvements in excess 

property reutilization program economy and efficiency. 

We conducted our work from November 2003 through February 2005 in 

accordance with U.S. generally accepted government auditing standards. 

We performed our investigative work in accordance with standards 

prescribed by the President’s Council on Integrity and Efficiency. 

11 GAO, DOD Management: Examples of Inefficient and Ineffective Business Processes,

GAO-02-873T (Washington, D.C.: June 25, 2002), and DOD Business Systems 

Modernization: Billions Continue to Be Invested with Inadequate Management Oversight 

and Accountability, GAO-04-615 (Washington, D.C.: May 27, 2004). 

12 BSM is intended to replace DLA’s SAMMS, and IDE may be selected to provide a means of 

interfacing with, or sharing information between, DLA systems. RMP is the planned 

upgrade for DRMS’s DAISY and MIDAS. 
Page 72 GAO-05-277 DOD Excess Property Reutilization

Appendix II

Comments from the Department of Defense ApendxiI
Appendix II

Comments from the Department of Defense

Page 73 GAO-05-277 DOD Excess Property Reutilization
Appendix II

Comments from the Department of Defense

Page 74 GAO-05-277 DOD Excess Property Reutilization
Appendix II

Comments from the Department of Defense

Page 75 GAO-05-277 DOD Excess Property Reutilization
Appendix II

Comments from the Department of Defense

Page 76 GAO-05-277 DOD Excess Property Reutilization
Appendix II

Comments from the Department of Defense

Page 77 GAO-05-277 DOD Excess Property Reutilization
Appendix II

Comments from the Department of Defense

Page 78 GAO-05-277 DOD Excess Property Reutilization
Appendix II

Comments from the Department of Defense

Page 79 GAO-05-277 DOD Excess Property Reutilization
Page 80 GAO-05-277 DOD Excess Property Reutilization

Appendix III

Excess Property Condition Codes ApendxiI

DOD’s condition code is a two-digit alphanumeric code used to denote the 

condition of excess property from the supply and the disposal perspective. 

The DOD supply condition code is the alpha character in the first position 

and shows the condition of property in the DLA depot inventory, or is 

assigned by the unit turning in the excess property. The GSA disposal 

condition code, in the second position, shows whether the property is in 

new, used, or repairable condition, salvageable, or should be scrapped. 

(See table 7.)

Table 7: DOD Excess Property Condition Codes

DOD codes DOD supply condition code GSA disposal condition code

A1, A4

B1, B4

C1, C4

D1, D4, D7

Serviceable property

A – Issuable without qualification – New, used, repaired or 

reconditioned property that is issuable without restriction, including 

material with a shelf life of more than 6 months.

B - Issuable with qualification – New, used, repaired, or reconditioned 

property that is issuable, but is restricted from issue to specific units, 

activities, or geographical areas by reason of its limited usefulness or 

short service life expectancy, including materials with a shelf life of 3 

through 6 months.

C - Priority issue – Property is issuable to selected customers but must 

be issued before Condition A and B material to avoid loss as a usable 

asset, including materials with less than 3-months’ shelf life.

D - Test/Modification required – Property is in serviceable condition but 

requires test, alteration, modification, or conversion or disassembly.

1 – Excellent – Property is in new or 

unused condition and can be used 

immediately without repairs.

4 – Usable – Property shows some wear, 

but can be used without significant repair.

7 – Repairable – Property is unusable in 

its current condition, but can be 

economically repaired. 

E7

F7

G7

H7

Unserviceable property

E - Limited restoration required – Property requires only a limited 

expense or effort to restore to serviceable condition.

F – Reparable – Property is economically reparable but requires repairs, 

overhaul, or reconditioning to make it serviceable property.

G – Incomplete – Property requires additional parts or materials to 

complete the item prior to issue.

H - Condemned – Property has been determined to be unserviceable 

and does not meet repair criteria, including items whose shelf life has 

expired and cannot be extended.

7 – Repairable – Property is unusable in 

its current condition, but can be 

economically repaired.
Appendix III

Excess Property Condition Codes

Page 81 GAO-05-277 DOD Excess Property Reutilization

Source: DAISY C-A-T (Codes and Terms) reference guide (11th ed. 2003) and DRMS-I 4160.14, vol. IV, Supp. 1, “Codes Index” 

(November 2004).

FX, GX, HX

(VX- Salvaged 

military 

munitions)

Salvage property

F – Reparable; G – Incomplete; H – Condemned

X - Salvage – Property has value in 

excess of its basic material content, but 

repair is impractical and/or uneconomical. 

FS, GS, HS 

Scrap property

F – Reparable; G – Incomplete; H – Condemned S - Scrap – Property has no value except 

for its basic material content.

(Continued From Previous Page)

DOD codes DOD supply condition code GSA disposal condition code
Page 82 GAO-05-277 DOD Excess Property Reutilization

Appendix IV

Programs Authorized to Receive Excess DOD 

Property ApendxiIV

Table 8 lists the DOD special programs that are authorized to receive 

excess property. In addition to DOD special programs, under the 

Stevenson-Wydler Technology Innovation Act of 1980, as amended,1

 DOD 

makes computer equipment available to schools under the federal 

government’s Computers for Learning Program following the DOD and 

special program screening period and prior to the federal agency screening 

period. In accordance with 15 U.S.C. § 3710(i), the director of a laboratory 

or the head of any federal agency or department may loan, lease, or give 

research equipment that is excess to the needs of the laboratory, agency, or 

department to an educational institution or nonprofit organization for the 

conduct of technical and scientific education and research activities. 

Table 8: DOD Special Programs 

1

 Pub. L. No. 96-480, 94 Stat. 2311 (Oct. 21, 1980), as amended (15 U.S.C. § 3701, et seq.); 

Computers for Learning Program established under the act’s authority; and Exec. Order No. 

12,999, 61 Fed. Reg. 17,227 (Apr. 19, 1996).

Humanitarian Assistance 

Program (HAP)

10 U.S.C. § 2557 authorizes the Secretary of Defense to make available nonlethal excess DOD supply 

items for humanitarian relief purposes, and 10 U.S.C. § 2561 authorizes the Secretary of Defense to use 

DOD’s Humanitarian Assistance appropriations to transport supply items to needy countries. 

Law enforcement agencies 

(LEA)

10 U.S.C. § 2576a authorizes the Secretary of Defense to transfer excess DOD property that is suitable for 

use by LEAs to federal and state agencies, including counter-drug and counter-terrorism activities. 

Recipients pay for transporting the property. 

Museums 10 U.S.C. § 2572 authorizes the Secretary of Defense to loan, gift, or exchange documents, historical 

artifacts, and condemned or obsolete combat materiel to a municipal corporation, county, or other political 

subdivision of a state; a servicemen’s monument association; a museum, historical society, or historical 

institution of a state or foreign nation or nonprofit military aviation heritage foundation or association; or a 

post of the Veterans of Foreign Wars of the United States, the American Legion, or other recognized war 

veterans’ association.

National Guard units National Guard units are designated by DOD to receive excess DOD property with the approval of the 

National Guard Bureau or the U.S. Property and Fiscal Officer, or their authorized representative, for the 

state in which the National Guard unit is located.

Senior Reserve Officer 

Training Corps units 

(ROTC)

ROTC units are designated by DOD to receive excess DOD property to support supplemental proficiency 

training programs with approval of the cognizant installation commander or designee. Junior ROTC units 

are not covered.

Morale, welfare, and 

recreation activities and 

services (MWR)

MWR activities are authorized by DOD to receive excess DOD property through their servicing accountable 

officer.

Military Affiliate Radio 

System (MARS) 

MARS operates under the command jurisdiction of the military services and is an integral part of the DOD 

communications system. DOD has authorized the military services to requisition excess DOD property 

from DRMOs. 
Appendix IV

Programs Authorized to Receive Excess DOD 

Property

Page 83 GAO-05-277 DOD Excess Property Reutilization

Source: GAO analysis. 

Civil Air Patrol (CAP) As the official auxiliary of the U.S. Air Force, CAP is eligible to receive excess DOD property. Title to the 

property is transferred to CAP upon the condition that it be used to support valid Air Force mission 

requirements.

DOD contractors Military Standard Requisitioning and Issue Procedures (MILSTRIP) in DOD 4000.25-1M, MILSTRIP Manual

(April 2004), provide for the military service or Defense agency management control activity to withdraw or 

authorize the withdrawal of specified excess property from a DRMO for use as government-furnished 

equipment to support officially stated contractual requirements.

Foreign governments and 

international organizations

Under the International Security Assistance and Arms Export Control Act of 1976 (Pub. L. No. 94-329, as 

amended, codified at 22 U.S.C. § 2751, et seq.), certain excess defense articles may be made available to 

eligible foreign countries and international organizations designated by the Department of State and DOD. 

Excess DOD property may also be available to eligible foreign countries and international organizations as 

foreign military sales under authority of the Foreign Assistance Act of 1961, as amended, codified at 22 

U.S.C. § 2151, et seq.

(Continued From Previous Page)
Page 84 GAO-05-277 DOD Excess Property Reutilization

Appendix V

Results of Statistical Tests of Excess 

Commodity Inventory Accuracy ApendxiV

To evaluate the effectiveness of controls for assuring the accuracy of 

excess commodity inventory data, we tested current inventory transactions 

at five DRMO locations and five DLA supply depot locations. Our tests 

covered controls over physical existence, item description (item name and 

NSN), quantity, and condition code.1

 DRMO inventory locations tested 

were the Columbus DRMO in Columbus, Ohio; the Stockton DRMO in 

French Camp, California; the Hill DRMO at Hill Air Force Base, in Ogden, 

Utah; the Norfolk DRMO in Norfolk, Virginia; and the Richmond DRMO in 

Richmond, Virginia. For efficiency, we tested inventory at five DLA supply 

depots that were co-located or located within proximity of the above 

DRMOs, including the depots in Columbus, Ohio; San Joaquin County, 

California; Hill Air Force Base, Utah; Norfolk, Virginia; and Richmond, 

Virginia. Each location was a separate population, and we evaluated the 

results of each sample location separately.

We drew our statistical samples from the universe of excess property 

transactions in current DRMS DAISY inventory, which includes excess 

property warehoused at DRMOs and DLA supply depots. We stratified our 

samples by the two major categories of condition code—serviceable and 

unserviceable—in order to determine whether errors were more prevalent 

in one category. From the population of current excess DOD inventory at 

the time of our testing visit, we selected stratified random probability 

samples of excess property turn-in transactions for each of the five DRMO 

and each of the five DLA supply depot case study locations. With these 

statistically valid samples, each transaction in the population for the 10 

case study locations had a nonzero probability of being included, and that 

probability could be computed for any transaction. Each sample 

transaction for a test location was subsequently weighted in our analysis to 

account statistically for all the transactions in the population for that 

location, including those that were not selected. Our test results relate to 

the populations of transactions at the respective DRMO and DLA supply 

depot locations, and the results cannot be projected to the population of 

excess property transactions or the DRMOs or DLA supply depots as a 

whole. 

We present the results of our statistical samples for each population as 

(1) our projection of the estimated error overall and for each control 

attribute as point estimates and the two-sided 95 percent confidence 

intervals for the failure rates and (2) our assessments of the effectiveness 

1

 A list of condition codes and definitions is included in app. III.
Appendix V

Results of Statistical Tests of Excess 

Commodity Inventory Accuracy

Page 85 GAO-05-277 DOD Excess Property Reutilization

of the controls and the relevant lower and upper bounds of a one-sided 95 

percent confidence interval for the failure rate. If the one-sided upper 

bound is 5 percent or less, then the control is considered effective. If the 

one-sided lower bound is greater than 5 percent, then the control is 

considered ineffective. Otherwise, we say that there is not enough 

evidence to assert either effectiveness or ineffectiveness. All percentages 

are rounded to the nearest percentage point. 

Overall Results of Inventory 

Reliability Tests

Tables 9 and 10 present the overall results of our statistical tests of 

inventory accuracy at the five DRMOs and the five DLA supply depots that 

we tested. The overall results show that controls for assuring the accuracy 

of excess property inventory were ineffective at four of the five DRMOs 

and three of the five DLA supply depots that we tested. We tested physical 

existence, including whether turn-ins recorded in inventory could be 

physically located and whether inventory changes were recorded within 7 

days. We also tested the accuracy of item descriptions (item name(s) and 

NSN(s)), recorded quantities, and condition code categories.

Table 9: DRMO Turn-in Transactions with One or More Control Test Failures 

Source: GAO.

Note: Although some transactions included more than one type of error, we only counted one failure 

for a transaction. 

DRMO tested

Estimated failure rate

(95 percent two-sided

confidence interval)

Assessment of

effectiveness of controls

(and relevant bounds of

95 percent one-sided

confidence intervals)

Richmond 25%

(17% to 33%)

Ineffective

Lower bound = 18%

Stockton 12%

(7% to 18%)

Ineffective

Lower bound = 8%

Hill 8%

(4% to 14%)

Not enough evidence

Lower bound = 5%

or upper bound = 13%

Norfolk 18%

(12% to 25%)

Ineffective

Lower bound = 13%

Columbus 47%

(37% to 56%)

Ineffective

Lower bound = 39%
Appendix V

Results of Statistical Tests of Excess 

Commodity Inventory Accuracy

Page 86 GAO-05-277 DOD Excess Property Reutilization

Table 10: DLA Supply Depot Turn-in Transactions with One or More Control Test 

Failures

Source: GAO.

a

Most of the errors in our Columbus supply depot sample related to quantity errors for items such as 

machine screws, washers, and other small hardware items. Therefore, we did not consider these 

problems to be significant. 

Because most of the errors we found related to the accuracy of condition 

codes, we separately estimated the error rates for this control attribute. A 

turn-in transaction was considered a failure if the serviceable or 

unserviceable condition code assigned to the item(s) was not accurate 

based on our physical observation and judgment. DLA and DRMO officials 

who accompanied us during our testing provided their perspectives, which 

we considered in our conclusions. We based our conclusions on obvious 

differences between the condition code assigned to the item and the 

appearance of the item. For example, some items were in the original 

manufacturer packaging and other items were obviously used, dirty, or 

worn. If we were unsure of the condition of an item, we accepted the 

condition code assigned by the military unit turn-in generator or the DLA 

supply depot. In addition, we did not question the assigned condition 

codes of technical equipment items such as electronic parts and scientific 

equipment. Tables 11 through 13 show the results of our condition code 

reliability tests for turn-in transactions at the five DRMOs that were coded 

as being in serviceable and unserviceable condition. 

DLA depot tested

Estimated failure rate

(95 percent two-sided

confidence interval)

Assessment of

effectiveness of controls

(and relevant bounds of

95 percent one-sided

confidence intervals)

Richmond 8%

(4% to 13%)

Not enough evidence

Lower bound = 5%

or upper bound = 12%

San Joaquin 16%

(11% to 23%)

Ineffective

Lower bound = 12%

Hill 6%

(3% to 10%)

Not enough evidence

Lower bound = 3%

or upper bound = 9%

Norfolk 14%

(9% to 19%)

Ineffective

Lower bound = 10%

Columbusa

 12%

(8% to 18%)

Ineffective

Lower bound = 9%
Appendix V

Results of Statistical Tests of Excess 

Commodity Inventory Accuracy

Page 87 GAO-05-277 DOD Excess Property Reutilization

Table 11: DRMO Turn-in Transactions That Failed Overall Control Tests for Condition 

Code Accuracy

Source: GAO.

Table 12: DRMO Turn-in Transactions Classified as Serviceable That Failed Control 

Tests for Condition Code Accuracy

Source: GAO. 

DRMO tested

Estimated failure rate

(95 percent two-sided

confidence interval)

Assessment of

effectiveness of controls

(and relevant bounds of

95 percent one-sided

confidence intervals)

Richmond 22%

(15% to 31%)

Ineffective

Lower bound = 16%

Stockton 8%

(4% to 13%)

Not enough evidence

Lower bound = 5%

or upper bound = 12%

Hill 5%

(2% to 11%)

Not enough evidence

Lower bound = 3%

or upper bound = 10%

Norfolk 13%

(8% to 19%)

Ineffective

Lower bound = 9%

Columbus 22%

(14% to 33%)

Ineffective

Lower bound = 15%

DRMO tested

Estimated failure rate

(95 percent two-sided

confidence interval)

Assessment of

effectiveness of controls

(and relevant bounds of

95 percent one-sided

confidence intervals)

Richmond 0%

(0% to 3%)

Effective

 Upper bound = 3%

Stockton 1%

(0% to 6%)

Not enough evidence

Lower bound = 0%

or upper bound = 5%

Hill 2%

(0% to 7%)

Not enough evidence

Lower bound = 0% 

or upper bound = 6%

Norfolk 5%

(2% to 12%)

Not enough evidence

Lower bound = 2% 

or upper bound = 11%

Columbus 1%

(0% to 6%)

Effective

Upper bound = 5%
Appendix V

Results of Statistical Tests of Excess 

Commodity Inventory Accuracy

Page 88 GAO-05-277 DOD Excess Property Reutilization

As shown in table 13, we found significant problems with the accuracy of 

unserviceable condition codes for excess commodities at four of the five 

DRMOs we tested. 

Table 13: DRMO Turn-in Transactions Classified as Unserviceable That Failed 

Control Tests for Condition Code Accuracy

Source: GAO. 

As shown in table 14, we found condition codes to be reliable at the five 

DLA supply depots that we tested.

DRMO tested

Estimated failure rate

(95 percent two-sided

confidence interval)

Assessment of

effectiveness of controls

(and relevant bounds of

95 percent one-sided

confidence intervals)

Richmond 26%

(18% to 36%)

Ineffective

Lower bound = 19%

Stockton 10%

(5% to 17%)

Ineffective

Lower bound = 5%

Hill 6%

(2% to 13%)

Not enough evidence

Lower bound = 3%

or upper bound = 12%

Norfolk 17%

(10% to 26%)

Ineffective

Lower bound = 11%

Columbus 23%

(14% to 34%)

Ineffective

Lower bound = 15%
Appendix V

Results of Statistical Tests of Excess 

Commodity Inventory Accuracy

Page 89 GAO-05-277 DOD Excess Property Reutilization

Table 14: DLA Supply Depot Turn-in Transactions That Failed Overall Control Tests 

for Condition Code Accuracy

Source: GAO.

DLA depot tested

Estimated failure rate

(95 percent two-sided

confidence interval)

Assessment of

effectiveness of controls

(and relevant bounds of

95 percent one-sided

confidence intervals)

Richmond 

0%

(0% to 2%)

Effective

Lower bound = 0%

Upper bound = 2%

San Joaquin 0%

(0% to 2%)

Effective

Lower bound = 0%

Upper bound = 2%

Hill 0%

(0% to 3%)

Effective

Lower bound = 0%

or upper bound = 2%

Norfolk 1%

(0% to 3%)

Effective

Lower bound = 0%

or upper bound = 2%

Columbus 0%

(0% to 2%)

Effective

Lower bound = 0%

or upper bound = 2%
Page 90 GAO-05-277 DOD Excess Property Reutilization

Appendix VI

GAO Contacts and Staff Acknowledgments ApendxiVI

GAO Contacts Stephen P. Donahue, (202) 512-2772

Richard C. Newbold, (202) 512-7437

Acknowledgments Staff making key contributions to this report include Beatrice Alff, Mario 

Artesiano, James D. Ashley, Cindy Barnes, Gary Bianchi, Erik Braun, 

Matthew S. Brown, Randall J. Cole, Tracey L. Collins, Francine DelVecchio, 

Lauren S. Fassler, Michele Fejfar, Gloria Hernandezsaunders, Wilfred B. 

Holloway, Jason Kelly, Barbara C. Lewis, Kristen Plungas, and Ramon 

Rodriguez.

Technical expertise was provided by Sushil K. Sharma, PhD, DrPH, and 

Keith A. Rhodes, Chief Technologist.

(192105)
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