Report to Congressional Requesters

United States General Accounting Office

GAO

August 2001 DEFENSE

INVENTORY

Navy Spare Parts

Quality Deficiency

Reporting Program

Needs Improvement

GAO-01-923
Page 1 GAO-01-923 Defense Inventory

August 16, 2001

The Honorable C. W. Bill Young

Chairman, Committee on Appropriations

House of Representatives

The Honorable Jerry Lewis

Chairman, Subcommittee on Defense

Committee on Appropriations

House of Representatives

The Department of Defense budgets billions of dollars each year to

purchase and repair the spare parts needed to maintain its weapon

systems and support equipment. To the extent these parts contain product

quality deficiencies,1

 safety, readiness, and mission performance

capabilities can be greatly reduced and support costs can increase. Thus,

the quality of spare parts is an important indicator of whether the

Department’s investment of funds is effective, efficient, and economical.

Since 1990, we have reported that the Department’s inventory, including

spare parts, is a high-risk area because it is vulnerable to fraud, waste, and

abuse.

You requested that we review issues related to the quality and availability

of spare parts for aircraft, ships, vehicles, and weapon systems within the

Air Force, the Army, and the Navy. In response to your request, we have

completed several studies related to these issues.2

 Because of your

concerns about the quality of spare parts being provided to military field

 1

 A product quality deficiency, as defined in the joint-service Product Quality Deficiency

Report Program Directive (DLAD 4155.24/AR 702-7/SECNAVINST 4855.5B/AFI 21-115,

dated May 1997), is a defect or nonconforming condition detected on new or newly

reworked government-owned products, premature equipment failures, and products in use

that do not fulfill their expected purpose, operation, or service due to deficiencies in

design, specification, material, manufacturing, and workmanship.

2

Related GAO reviews of spare parts shortages have been completed on the Air Force, the

Army, and the Navy (see Related GAO Products).

United States General Accounting Office

Washington, DC 20548
Page 2 GAO-01-923 Defense Inventory

units, we focused this report on the Navy’s3 Product Quality Deficiency

Reporting Program. Navy and Defense Logistics Agency quality assurance

officials identified this program as the key Navy-wide method of gathering

data on the deficient spare parts that are sent to field units and other

locations for use in weapon systems maintenance. Specifically, we

determined the extent to which the program, which is being implemented

under a joint-service directive,4

 gathered the data needed for analyses,

correction, and prevention of deficiencies in spare parts.

Under the joint-service directive, Navy maintenance activities, including

field units, depots, contractors, and others, are required to report spare

parts quality deficiencies detected on (1) new or newly reworked

government-owned products; (2) equipment that fails prematurely, that is,

before the end of its design life; and (3) products in use that do not fulfill

their expected purpose, operation, or service. The Navy is to use data from

the program to, among other things, document and report on deficient

spare parts, initiate corrective action to fix or replace deficient items, and

take preventive action to preclude a recurrence of known problems with

parts and/or suppliers.

The Navy’s Product Quality Deficiency Reporting Program has been

largely ineffective in gathering the data needed for analyses so that Navy

managers can determine the full extent of spare parts quality deficiencies

affecting maintenance activities. Without these data, managers lose

opportunities to initiate important corrective and preventive action with

parts and suppliers. Specifically, we found the following problems in the

program:

 3

The Air Force Audit Agency issued one report entitled Quality Deficiency Reporting

(99062011, July 7, 2000) and began a follow-on audit (project 01062009) in December 2000

to determine whether the Air Force is effectively managing its Product Quality Deficiency

Reporting Program. The Department’s Inspector General began an audit (D2001CF0090.000) in March 2001 on the Navy and Marine Corps’ quality deficiency reporting

procedures for naval repair parts. The Army Audit Agency plans to begin a study (Code A1-

109C) in November 2001 to evaluate the effectiveness of the Army’s Product Quality

Deficiency Reporting Program.

4

 The joint-service Product Quality Deficiency Report Program Directive (DLAD 4155.24/AR

702-7/SECNAVINST 4855.5B/AFI 21-115, dated May 1997) states that it is applicable to and

has been coordinated with the Defense Logistics Agency, the Army, the Navy, the Air

Force, the Marine Corps, and the General Services Administration, which are referred to as

components. The directive is mandatory for use when reporting product quality deficiency

conditions across component lines and is encouraged for use within the services.

Results in Brief
Page 3 GAO-01-923 Defense Inventory

• Data on parts deficiencies identified at the time of installation were

underreported, leaving Navy managers without sufficiently reliable data to

determine trends in the frequency of parts failing because of quality

problems.

• Data on parts that failed after some operation but before their expected

design life were not collected as part of this program, as was agreed to by

the Army, the Air Force, and the Marine Corps under the joint-service

directive. These data are important for complete reporting of spare parts

deficiencies to determine if there are problems with particular parts or

suppliers of parts. While the Navy has attempted to gather these data

under a separate program, a limited analysis has been done to determine

the causes of problems, and data have not been reported upward or

combined with other quality deficiency data to provide a Navy-wide view

of spare parts quality problems.

• Of the 19,124 quality deficiency reports we reviewed for a 3-year time

period, about 72 percent omitted key information on the cause of the parts

failures, and 70 percent did not identify who was responsible for the

deficiencies. This information is needed to consider corrective and

preventive actions with suppliers to resolve problems.

To a large extent, the program’s ineffectiveness can be attributed to a lack

of management emphasis, limited training and incentives to report

deficiencies, and competing priorities for the staff resources needed to

carry out the program. Another contributing cause to the program’s

ineffectiveness is the lack of Navy-wide visibility into program results,

such as the extent to which design and manufacturing changes were made

to prevent future spare parts deficiencies or the amount of refunds

obtained from contractors for deficient material. These kinds of results are

not reported or measured on a Navy-wide basis.

To address program weaknesses, we are making recommendations that

the Navy take steps to increase the level of training, incentives,

management emphasis, and results reporting as necessary to improve

program effectiveness. In commenting on a draft of this report, the

Department of Defense concurred with our recommendations and stated

that the Navy would initiate program enhancements and provide a status

report to the Office of the Secretary of Defense on accomplishments and

remaining challenges.
Page 4 GAO-01-923 Defense Inventory

The Department budgets billions5 of dollars each year to purchase and

repair spare parts6

 and has established various programs to help ensure

product quality throughout the acquisition and repair processes.

According to Navy and Defense Logistics Agency quality assurance

officials, although it is normal in manufacturing processes that some

deficient parts will be delivered to the end users, the rate of deficiencies is

to be managed and controlled to acceptable levels. In fact, according to

these officials, spare parts quality is of greater importance in today’s

environment of increased deployments, extended preventive maintenance

cycles, and just-in-time deliveries of parts.

A Defense Logistics Agency joint-service directive for quality deficiency

reporting regulates Department activities.7

 The directive establishes a

Department-wide system for the military services and other activities to

report, investigate, and correct the causes of individual problems and

identify trends and recurring deficiencies. The system is to be used to

document the quality of spare parts delivered for use in the maintenance

and repair processes and is the key program for documenting quality

deficiency data Navy-wide. When deficient parts are delivered and are

detected by end users, such as military supply or maintenance personnel,

these users are required to report the details of the deficiencies under a

uniform set of guidelines. Each military service and agency manages its

own quality deficiency reporting program.

The Navy’s Product Quality Deficiency Reporting Program is designed to

document and report unsatisfactory material, initiate corrective action to

fix or replace deficient items, grant credit or compensation for items, and

take actions to prevent recurrence. The program applies to all Navy

activities.8

 Navy activities report quality deficiency data both internally and

 5

 Summary data was not available on total amounts budgeted or spent on spares each year.

However, the Navy manages spare parts inventory valued at about $17.5 billion and

recorded depot-level obligation authority for repairable spare parts of between $2.0 and

$2.8 billion annually from 1997 through 2000. Obligations are financial amounts associated

with orders placed, contracts awarded, services rendered, and other transactions occurring

during a given period that would require payments during the same period or in the future.

6

 Spare parts are repair parts and components, including kits, assemblies, and

subassemblies required for the maintenance of all equipment.

7

 Joint-service Product Quality Deficiency Report Program Directive (DLAD 4155.24/AR

702-7/SECNAVINST 4855.5B/AFI 21-115, dated May 1997).

8

 The Marine Corps operates a separate Product Quality Deficiency Reporting Program for

ground equipment, which was not included as part of this review.

Background
Page 5 GAO-01-923 Defense Inventory

to a broader program, known as the Product Data Reporting and

Evaluation Program, where it is managed as one of several databases. This

broader program is a Navy-wide automated system for collecting data on

the quality of material and products furnished by contractors.9

 The quality

deficiency report is also one of several records used in the Navy’s

Red/Yellow/Green Program,10 another Product Data Reporting and

Evaluation Program application used to reduce the risk of receiving

nonconforming products and late shipments.

The Assistant Secretary of the Navy for Research, Development, and

Acquisition has program authority and sets policy, and the Naval Sea

Systems Command administers the Product Quality Deficiency Reporting

Program. Navy program executive officers, program managers, and

commanders of the naval systems commands are to process quality

deficiency reports for their systems and equipment in accordance with

instructions and to ensure people are properly trained in reporting

deficiencies. Quality deficiency reporting data are generally sent to a

screening point, such as the Navy’s Inventory Control Point,11 for review

and forwarding to an appropriate item12 manager or action point to

determine the causes and who is responsible for the deficiencies. Once a

determination is made and final disposition occurs, the quality deficiency

reporting database is to be updated to reflect the results.

 9

 Navy and Marine Corps Product Data Reporting and Evaluation Program (PDREP)

Manual, NAVSO P-3683A, Feb. 9, 2000.

10 The Red/Yellow/Green Program classifies the risk degree by assigning a color to a

contractor’s historical quality and delivery performance for specific items: Red is high risk,

yellow is moderate, and green is low. A neutral label is used if sufficient data is not

available.

11 The Inventory Control Point is an organizational activity within the Department’s supply

system that is assigned the primary responsibility for material management of a group of

items, such as computing requirements and providing procurement, distribution, disposal,

and rebuild direction.

12 An item is any level of hardware assembly, for example, a segment of a system,

subsystem, equipment, or component part.
Page 6 GAO-01-923 Defense Inventory

The Navy’s Product Quality Deficiency Reporting Program has been

largely ineffective in gathering the data needed for analyses so that Navy

managers can accurately report on and correct deficiencies in the quality

of spare parts being provided to end users, including maintenance

personnel in field activities. Specifically, the program data were

incomplete and of limited value because they were underreported, did not

include information on parts that failed prematurely, and omitted key data

on the causes of failures. To a large extent, the program’s ineffectiveness

can be attributed to limited training and incentives to report deficiencies,

lack of management emphasis, and competing priorities for the staff

resources needed to carry out the program. In addition, a contributing

cause of the program’s ineffectiveness may be a lack of Navy-wide

visibility into program results.

Many deficiencies in the quality of new and rebuilt parts occur that have

not been reported to the program. As a result, program data are unreliable

and can be misleading in determining the significance of deficient parts

and conducting trend analyses.

Using information gathered under the program, the Navy produces an

annual report summarizing quality deficiency data, such as the number of

deficiency reports, the value of deficient material, and related information

on new and reworked material, including rebuilt parts. Data system

managers said this report is the most comprehensive attempt to collect

and analyze Navy-wide quality deficiency data. The May 2000 report

showed that during calendar years 1997-99 the number of deficiency

reports averaged about 6,500 per year, representing all parts that were

reported as deficient at the time of installation by the Naval Sea Systems

Command, the Naval Air Systems Command, and the Naval Supply

Systems Command. Each report identified one or more deficient parts to

be evaluated for possible quality problems.

During our visits to a number of ship and aircraft maintenance and

operating units, we were told that not all deficiencies on parts that failed

at the time of installation were reported, and we found that the estimated

extent of underreporting varied. For example, one ship maintenance unit

that handled munitions systems reported most deficiencies. However, an

aircraft squadron commander said his unit documented quality deficiency

problems and knew of the reporting requirements, but the unit rarely

reported these problems to the quality deficiency program because there

was no incentive to do so. In addition, Navy supervisor of shipbuilding

officials at one facility told us that the full-time position dedicated to

The Navy’s Deficiency

Reporting Program Is

Largely Ineffective in

Gathering Needed

Data

Quality Deficiencies Are

Underreported
Page 7 GAO-01-923 Defense Inventory

quality deficiency reporting had been eliminated and the work was

reassigned to another staff member as a collateral duty. As a result, the

number of quality deficiency reports dropped from about 200 each year in

calendar years 1997 and 1998 to 34 in calendar year 2000. Also, Navy

officials said several major Navy program offices have their own internal

systems for handling parts quality deficiencies and do not share this

information with the Navy’s quality deficiency reporting program. While

these examples are not intended to reflect the experience of all Navy units,

they indicate how the data gathered by the program can vary among units

based on factors other than the actual numbers of quality deficiencies

encountered by maintenance personnel. Various unit commanders

indicated that their efforts to report spare parts quality deficiencies were

limited because accurate and complete data needed for the reporting

process were not available on the failed parts and increased resources

would be needed to make meaningful improvements in the availability of

these data.

Due to the underreporting, the interpretation of program data can be

misleading. For example, in a March 2001 two-page report to the

Congress13 on how the Department planned to improve its quality

assurance program, the Principal Deputy Under Secretary of Defense,

Acquisition, Technology, and Logistics stated that the Department used

product quality deficiency reports as a key method to measure the quality

of the products it purchased. The Department stated that it had no

evidence of a systemic quality problem and that a decreasing number of

investigated quality deficiency reports recorded in recent years may

indicate that product quality is getting better. However, after we discussed

our findings with the Department about the underreporting of quality

deficiencies in the Navy, the Department stated in its report that if user

feedback is not input into the system and investigated, due to reduced

staffing, this metric fails to be a valid measure. According to Navy and

Defense Logistics Agency quality assurance officials, the trend in the

number of deficiencies reported may reflect the level of resources

dedicated to filling out and analyzing deficiency reports rather than the

actual number of deficiencies found by maintenance personnel.

 13 S. Rept. 106-292, p. 331, on the National Defense Authorization Act for Fiscal Year 2001,

directed the Secretary of Defense to submit a report to the Congress on how the

Department planned to improve its quality assurance program.
Page 8 GAO-01-923 Defense Inventory

The Navy does not attempt to use the Product Quality Deficiency

Reporting Program to collect a major category of quality deficiencies—

those involving parts that failed prematurely, that is, after some operation

but before the end of their expected design life. Premature failure data are

important to determine if there are problems with particular parts or

suppliers of parts. Consequently, not knowing the full extent of

deficiencies can prevent meaningful analyses of quality problems on a

systemwide basis.

Under the May 1997 joint-service directive on quality deficiency reporting,

the Navy could capture data on premature equipment failures, including

parts, as part of its program, as the Army, the Air Force, and the Marine

Corps agreed to do. Although the joint-service directive states that it is

applicable to a broad range of deficiencies, including premature failures,

the Navy did not agree to this application. It has instead used deficiency

reporting to identify mainly new or newly reworked parts that fail, as

specified in a 1993 version of the joint-service directive. Navy quality

assurance officials said the program was limited to capturing data on

those parts because some type of warranty might be involved or they

might obtain replacement parts or reimbursements from the suppliers.

However, after we discussed this issue with Assistant Secretary of the

Navy, Research, Development, and Acquisition officials, they said that

premature failures should be included in the Navy program. They said that

in April 2001 they approved the Navy’s use of a new draft version of the

joint-service directive that includes the requirement to report premature

failures as quality deficiencies.

While the Navy has not captured data on premature parts failures under

the Product Quality Deficiency Reporting Program, Naval Air Systems

Command officials said they have attempted to identify these deficiencies

through their Engineering Investigation Request Program. However, they

said that resource shortages have limited this program mainly to the

analysis of mission-critical and safety-of-life requests for engineering

investigations, and that as a result, many premature parts failure requests

were not analyzed. Without validation and analysis of the causes of these

failures, managers are not in a position to take corrective or preventive

action. Furthermore, Naval Air Systems Command-wide data on

engineering investigation requests were not available, and reports have not

been combined with quality deficiency reports to provide managers with a

systemwide view of spare parts problems.

According to Navy and Defense Logistics Agency quality assurance

officials, premature parts failures are an important aspect of quality, and

The Program Does Not

Report Parts That Fail

Prematurely
Page 9 GAO-01-923 Defense Inventory

without this data the Navy is not in a position to completely identify its

problems with parts and suppliers. Premature parts failures could indicate

problems in design, manufacture, or installation that, if not corrected,

could lead to unanticipated parts shortages and increased costs.

Quality deficiency reporting data that were collected under the program

have been of limited value because they frequently lacked key information

on the causes of the parts failures and identification of whom was

responsible. Navy and Defense Logistics Agency quality assurance officials

said that identifying whether a contractor is responsible for deficiencies is

important for obtaining credits or refunds and preventing recurring

problems.

We reviewed the Navy’s systemwide database14 of quality deficiencies for

the Naval Air, the Naval Sea, and the Naval Supply Systems Commands.

We reviewed the number of reports submitted during calendar years

1997-99 (19,124 reports) and determined their status as of September 20,

2000. We found that in most cases the causes of problems had not been

identified in the database and responsibility for the deficiencies had not

been determined. Specifically, we found that

• about 72 percent (13,675) of the reports did not identify the specific causes

for the failures, which is information needed for effective corrective and

preventive actions, and

• about 70 percent (13,287) of the reports did not identify who—a private

contractor or a Navy or other government activity—was responsible for

the deficiencies.

According to Navy and Defense Logistics Agency quality assurance

officials, analyzing product quality deficiencies to determine causes and

responsibilities for failures is often difficult, time-consuming, and staff

intensive. They said that the information needed to fill out the deficiency

form is not always available, the deficient part might have been damaged

or misplaced, or the part may not be forwarded for analysis to determine

the cause of the deficiency. Also, a supplier might have provided a

replacement part and not identified the cause of the problem. They said

 14 This database is part of the Product Data Reporting and Evaluation Program.

Deficiency Reports Omit

Key Data on Causes of

Failures
Page 10 GAO-01-923 Defense Inventory

problems were more likely among deployed units. Officials at units we

visited identified similar problems.

According to an Assistant Secretary of the Navy, Research, Development

and Acquisition official, when the Navy screening points receive a quality

deficiency report, they work with the originators to provide the missing

descriptive data and decide if an in-depth analysis is needed. If an analysis

is needed, other problems may arise such as a lack of access to contractor

information, which can prevent a complete analysis of the cause of a

quality deficiency.

The need for completed quality deficiency reporting to identify cause and

responsibility for the deficiencies is important to achieving program

results and is especially important for the Navy and the Defense Logistics

Agency to obtain some type of credit for deficient parts, where allowed by

the parts contract. Credit can involve a contractor providing replacement

parts or monetary consideration. Also, determining responsibility is the

first step in providing feedback to the supplier that deficient material has

been provided, manufacturing or repair processes must be reviewed, and

corrective actions may be necessary. Without such a determination,

neither credit nor quality parts may be obtained.

According to Navy quality assurance officials, this information is also

needed for other Navy programs. For example, the Navy’s

Red/Yellow/Green Program is designed to help reduce the risk of receiving

products that do not conform to requirements and late shipments. This

program uses quality deficiency reports as one of the key inputs to the

evaluation, but only when such reports show that a specific contractor

was found to be responsible for the deficiencies in parts. However, since

the quality deficiency data we examined were so often incomplete, many

of the reports lacked the needed information. According to Navy and

Defense Logistics Agency quality assurance officials, the lack of complete

and reliable quality deficiency data limits their usefulness in identifying

suppliers of deficient parts.

In addition to the problems of incomplete and underreported data,

concerns about using the data to determine the extent of spare parts

quality deficiencies are twofold. First, to be meaningful, the number of

quality deficiencies identified should be compared with the total number

of parts used, but the data to compute such a deficiency rate are often not

available. Second, even if a deficiency rate could be determined, criteria

for determining what constitutes a reasonable deficiency rate for a

particular part have not been established for the quality deficiency
Page 11 GAO-01-923 Defense Inventory

reporting program as it has been, for example, for the Red/Yellow/Green

Program.

Navy officials at many levels—maintenance personnel, program officials,

quality assurance managers, and Command-level staff—indicated that

program ineffectiveness is to some extent the result of a lack of action by

Navy management to emphasize the importance of the program to the

Navy. In addition, Navy officials identified the following causes of program

ineffectiveness:

• Limited training to supply, maintenance, and key command personnel

explaining reporting procedures, types of quality deficiencies to be

reported, and benefits to the Navy to be derived from the program.

• Limited incentives and competing priorities for available staff resources to

fill out the quality deficiency reports and do all their other work as well.

• Lack of Navy-wide visibility into the results being derived from the

program.

According to Navy quality assurance officials, some training that covers

filling out the standardized quality deficiency reporting form has been

given, but it has not been effective in encouraging additional quality

deficiency reporting. Navy and Defense Logistics Agency quality assurance

officials said that their sailors and their commanders do not receive

training on the importance of the quality deficiency reporting program to

the Navy. Without such training, reporting quality deficiencies does not

become a priority within units.

Officials within the Naval Systems Commands told us that compliance

with quality deficiency reporting has diminished because fewer resources

have been available to carry out tasks that are deemed more essential.

They indicated that if maintenance personnel must choose between

repairing needed equipment and filling out quality deficiency reports, they

choose the repair work to support their primary mission. Limited

incentives exist at the unit level to encourage compliance with program

reporting requirements because financial credits for deficient parts are

often not returned to the reporting units, so unit commands may not see

the credits as an incentive to expend resources for quality deficiency

reporting. They also said that new automation and decision support tools

might help facilitate the deficiency reporting and analysis processes and

therefore improve compliance with reporting requirements.

Program Ineffective Due to

Limited Emphasis,

Training, Incentives, and

Visibility
Page 12 GAO-01-923 Defense Inventory

Navy and Defense Logistics Agency quality assurance officials said that

clearly reported program results could stimulate greater management

emphasis and staff support for the program. However, while the program

is designed to provide a basis for reporting, correcting, and preventing

spare parts quality deficiencies, the results are not always measured or

clearly reported. For example, a Navy-wide annual report shows that

during the 3-year period 1997-99, quality deficiency reports submitted from

the Naval Air, Sea, and Supply Systems Commands identified about $466

million in rejected material, mostly on aircraft parts. The meaning of these

data, however, is unclear because information is not available on what

portion of the rejected material was investigated, was found deficient, and

yielded some type of credit or reimbursement from contractors to the

government. Also, the data did not include any reporting of parts design

modifications, manufacturing changes, or other actions taken based on

quality deficiency reporting in order to prevent recurrence of problems.

Without such reporting of results, program weaknesses such as

incomplete data may not appear to be important issues to Navy and

Department managers.

According to Navy quality assurance officials, although one Navy

instruction governs the analysis of quality deficiency reports, the level of

execution can vary significantly among units, depending on the program

emphasis assigned and resources made available. For example, Navy

Inventory Control Point officials who manage ships’ quality deficiency

reporting told us they track the quality deficiencies and identify costs

avoided and recovered from contractors. Their internal metrics for fiscal

years 1998 through 2000 identified several million dollars in replacement

items, refunds, and credits received from contractors that they said were

directly attributable to quality deficiency reports. They said that cost

avoidance is an important measure of results and should be tracked and

reported Navy-wide along with other metrics. However, they said that such

reporting is not required and the extent of reporting varies significantly

among the Naval Air, Sea, and Supply Systems Commands and their

subordinate units.

Without an effective Navy-wide program to document feedback from users

of parts on the quality deficiencies they encounter, Navy managers lack

the data needed to fully assess the extent and seriousness of spare parts

quality problems. Furthermore, to the extent that the data are incomplete

or are not analyzed to determine the causes of and accountability for

deficiencies, managers cannot effectively correct quality problems,

address supplier issues, or ensure high quality when buying or rebuilding

Conclusions
Page 13 GAO-01-923 Defense Inventory

spare parts. Such activities are important because they can affect the

safety, readiness, mission performance capabilities, and support costs of

military forces. The Navy’s Product Quality Deficiency Reporting Program

has been largely ineffective in meeting these management needs due to

weaknesses in program implementation, including insufficient training,

limited incentives and automation support, competing priorities for staff

resources, and a lack of Navy-wide measurement of program results. A

stronger quality deficiency reporting program would better enable

management to take corrective and preventive actions that over time can

result in both mission performance improvements and cost reductions.

Given the importance of high quality spare parts to safety, readiness,

mission performance, and support costs, and the role that an effective

Product Quality Deficiency Reporting Program can play in helping to

ensure high quality, we recommend that the Secretary of Defense direct

the Secretary of the Navy to

• increase the program’s levels of (1) training, describing what quality

deficiencies to report, how to report them, and why it is important to the

Navy; (2) incentives, including financial credits back to the reporting unit

where appropriate to encourage participation; (3) automation support, to

simplify and streamline reporting and analysis; and (4) management

emphasis provided to the program, as necessary, to determine the causes,

trends, and responsibilities for parts failures and achieve greater

compliance with joint-service requirements, including reporting on parts

that fail before the end of their design life, and

• require program officials to measure and periodically report to the

appropriate Defense and Navy managers the results of the program in such

areas as actions taken to correct parts quality deficiencies, prevent

recurrences, and obtain credits or reimbursements from suppliers for

deficient products.

In written comments on a draft of this report, Department of Defense

concurred with our recommendations. It stated that the Navy would

initiate the recommended enhancements to the Navy Product Quality

Deficiency Reporting Program no later than September 15, 2001. In

addition, the Navy will provide a status update to the Office of the

Secretary of Defense on accomplishments and remaining challenges no

later than March 15, 2002. The Department’s comments are presented in

their entirety in appendix I.

Recommendations for

Executive Action

Agency Comments
Page 14 GAO-01-923 Defense Inventory

To determine whether the Navy’s Product Quality Deficiency Reporting

Program has been effective in gathering the data needed for analyses,

correction, and prevention of deficiencies in spare parts, we analyzed the

completeness of the quality deficiency data contained in the Navy’s

Product Deficiency Reporting and Evaluation Program database. These

data cover aircraft, ships, and other spare parts in the Navy, including

parts managed for the Navy by the Defense Logistics Agency. For

comparison purposes, we also analyzed data from the Navy’s Maintenance

and Material Management System, which is designed to track maintenance

support data on how often a part failure is involved.

We discussed the causes of underreporting of quality deficiencies, the lack

of reporting of premature failures, the omission of data in deficiencies

being reported, and the causes of program weaknesses with Department,

Navy, and Defense Logistics Agency officials. Specifically, work was

conducted at headquarters offices, including the Office of the Under

Secretary of Defense (Acquisition, Technology, and Logistics); the Office

of the Assistant Secretary of the Navy (Research, Development, and

Acquisition); and the Naval Air Systems, the Naval Sea Systems, and the

Naval Supply Systems Commands. Work was also conducted at the Naval

Inventory Control Point activities in Mechanicsburg and Philadelphia,

Pennsylvania, who have assumed responsibility for quality deficiency

reporting functions. In addition, work was done at Navy field activities in

different geographical areas, including Lemoore and San Diego, California;

Norfolk, Virginia; and Portsmouth, New Hampshire.

The Marine Corps aircraft quality deficiency reporting is managed by the

Naval Air Systems Command and was included in our review. The Marine

Corps operates a separate program for ground equipment that was not

included in this review.

We conducted our work between August 2000 and June 2001 in

accordance with generally accepted government auditing standards.

Scope and

Methodology
Page 15 GAO-01-923 Defense Inventory

We are sending copies of this report to the Secretaries of Defense and the

Navy; the Commandant of the Marine Corps; the Director, Defense

Logistics Agency; the Director, Office of Management and Budget; and

appropriate congressional committees. We will also make copies available

to others upon request.

Please contact me at (202) 512-8412 if you or your staff have any questions

regarding this report. Key contributors to this report were Allan Roberts;

Lionel Cooper; Gary Kunkle; Jean Orland; Lawson Gist, Jr.; Robert B.

Brown; and Nancy Ragsdale.

David R. Warren

Director

Defense Capabilities and Management
Appendix I: Comments From the Department of Defense

Page 16 GAO-01-923 Defense Inventory

Appendix I: Comments From the Department

of Defense
Appendix I: Comments From the Department of Defense

Page 17 GAO-01-923 Defense Inventory
Related GAO Products

Page 18 GAO-01-923 Defense Inventory

Army Inventory: Parts Shortages Are Impacting Operations and

Maintenance Effectiveness (GAO-01-772, July 31, 2001).

Navy Inventory: Parts Shortages Are Impacting Operations and

Maintenance Effectiveness (GAO-01-771, July 31, 2001).

Air Force Inventory: Parts Shortages Are Impacting Operations and

Maintenance Effectiveness (GAO-01-587, June 27, 2001).

Major Management Challenges and Program Risks: Department of

Defense (GAO-01-244, Jan. 2001).

High-Risk Series: An Update (GAO-01-263, Jan. 2001).

Defense Inventory: Improved Management Framework Needed to Guide

Navy Best Practice Initiatives (GAO/NSIAD-00-1, Oct. 21, 1999).

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