Report to Congressional Committees

United States General Accounting Office

GAO

July 2001 NAVY INVENTORY

Parts Shortages Are

Impacting Operations

and Maintenance

Effectiveness

GAO-01-771
Page i GAO-01-771 Navy Inventory

Letter 1

Results in Brief 2

Background 3

Parts Shortages Adversely Affect Navy Operations, Maintenance,

and Military Personnel 8

Multiple Reasons for Parts Shortages 14

Overall Initiatives Exist to Address Problems 25

Agency Comments and Our Evaluation 29

Scope and Methodology 30

Appendix I Management Weaknesses Contribute to Spare Parts

Shortages 33

Appendix II Description of EA-6B and F-14 Spare Parts Discussed

in Report 35

Appendix III Reasons for EA-6B and F-14 Spare Parts Shortages 36

Appendix IV Comments From the Department of Defense 37

Related GAO Products 38

Tables

Table 1: Reported Rates of Mission Capability and Parts Shortages

for All Navy Aircraft 4

Table 2: Reported Mission-Capable Goals and Rates for the EA-6B 9

Table 3: Reported Mission-Capable Goals and Rates for the F-14A 9

Table 4: Reported Mission-Capable Goals and Rates for the F-14B 10

Table 5: Reported Mission-Capable Goals and Rates for the F-14D 10

Table 6: Reported Rates at Which EA-6B and F-14 Aircraft Were

Not Mission Capable Due to Supply Shortages 11

Table 7: Reported Cannibalization Rates for All Navy Aircraft and

for the EA-6B and F-14 (all models) Aircraft 13

Contents
Page ii GAO-01-771 Navy Inventory

Table 8: Reasons for Shortages of 50 Parts for the EA-6B and F-14

Aircraft 15

Figures

Figure 1: The EA-6B Aircraft 6

Figure 2: The F-14 Aircraft 7

Figure 3: Repairs Require Two Steps, Cannibalizations Four 12

Figure 4: EA-6B Landing Gear 16

Figure 5: F-14D Television Sensor 17

Figure 6: F-14 Telescoping Shaft 18

Figure 7: EA-6B Air Navigational Computer 19

Figure 8: F-14 Transmitter 20

Figure 9: F-14 Actuator 21

Figure 10: F-14 Aircraft Wing Fairing 23

Figure 11: F-14 Power Module 24
Page 1 GAO-01-771 Navy Inventory

July 31, 2001

Congressional Committees

Having spare parts available when needed to perform maintenance is

critical to the Department of Defense’s accomplishment of its missions.

Shortages of spare parts are a key indicator of whether the billions of

dollars annually spent on these parts are being used in an effective,

efficient, and economical manner. In recent years the Navy has testified

and reported to the Congress that its aviation systems have significant

readiness and supply problems. Since 1990 we have designated the

Department of Defense’s management of its inventory, including spare

parts, as high risk because its inventory management systems and

procedures were ineffective.

The National Defense Authorization Act for Fiscal Year 20001

 requires us

to evaluate various aspects of the military services’ logistics support

capability, including the provision of spare parts. Also, the Chairman,

House Committee on Appropriations, and the Chairman, Subcommittee on

Defense, House Committee on Appropriations, requested that we review

issues related to the quality and availability of spare parts for aircraft,

ships, vehicles, and weapon systems. In response to these requests, we

reviewed known aviation spare parts shortages within the services. For

this report, we focused on the Navy and our objectives were to determine

the (1) impact of shortages of spare parts for two selected aircraft2

 and

(2) reasons for the shortages. Additionally, we identified the overall

initiatives that the Navy and the Defense Logistics Agency have in place or

planned to address overall spare part shortage issues. We will be

discussing in separate reports our reviews on the availability of spare parts

in the Army and the Air Force, the quality of Navy spare parts, funding for

spare parts,3

 and Army war reserve requirements for spare parts.4

 1

 P.L. 106-65, sec. 364.

2

 Includes Marine Corps aircraft.

3 Defense Inventory: Information on the Use of Spare Parts Funding Is Lacking

(GAO-01-472, June 11, 2001).

4 Defense Inventory: Army War Reserve Spare Parts Requirements Are Uncertain

(GAO-01-425, May 10, 2001).

United States General Accounting Office

Washington, DC 20548
Page 2 GAO-01-771 Navy Inventory

To address these objectives, we reviewed readiness indicators for the

EA-6B Prowler and F-14 Tomcat aircraft. Also, we determined the reasons

for the shortages for 50 parts that affected the capability of these aircraft

to perform their missions. We selected these aircraft because they are key

to fulfilling Navy missions and were experiencing parts shortages, as

reflected by various supply and readiness indicators. The Navy sets goals

to have a certain percentage of aircraft capable of performing their

missions. It measures the impact of parts shortages on aircraft by

determining the percentage of aircraft that cannot meet mission

requirements because repair parts are unavailable. The Navy and the

Defense Logistics Agency are responsible for managing and providing

these parts for Navy aircraft.

Spare parts shortages for the two systems we reviewed have adversely

impacted both the Navy’s readiness to perform assigned missions and the

economy and efficiency of its maintenance activities and have contributed

to problems retaining military personnel. During 1993-2000, the Navy met

its mission-capable goals for the EA-6B three times and for the F-14D only

once, in fiscal year 2000. Further, we recently testified that because of

supply shortages and pressures to meet readiness and operational needs,

the Navy is taking working parts from one aircraft and placing them in

other aircraft.5

 This practice doubles the workload, since maintenance

personnel also have to fix the aircraft that parts are removed from. The

rates at which this practice is used for the EA-6B and the F-14 are much

higher than the aggregate rate for all Navy aircraft. Lastly, we also recently

reported that the majority of factors cited as sources of dissatisfaction and

reasons to leave the military were related to work circumstances such as

the lack of parts and materials needed to perform daily job requirements.6

The primary reasons cited by Navy item managers for spare parts

shortages were that more parts were required than the Navy originally

anticipated and problems in identifying, qualifying, or contracting with a

private company to produce or repair the parts. For example, the average

quarterly demand for EA-6B landing gear was only one per quarter

 5 Military Aircraft: Cannibalizations Adversely Affect Personnel and Maintenance

(GAO-01-693T, May 22, 2001).

6 Military Personnel: Perspectives of Surveyed Service Members in Retention Critical

Specialties (GAO/NSIAD-99-197BR, Aug. 16, 1999).

Results in Brief
Page 3 GAO-01-771 Navy Inventory

(3 months) but increased to eight for two quarters due to the findings from

a new inspection requirement. In another case, shortages of F-14

transmitters developed due to delays in finding a company willing to

produce the transmitters and further delays because the company was

willing to produce the transmitters only if the Navy ordered a large

quantity. Other problems included contractors’ delays in delivering parts

as needed and delays in repairing parts at military facilities.

The Navy and the Defense Logistics Agency have numerous overall

logistics initiatives under way or planned that are designed to improve the

logistic system and alleviate shortages of spare parts. The initiatives

include best commercial inventory practices and generally address the

causes we identified of spare parts shortages. For example, the Navy has a

pilot program for one type of aircraft that is expected to improve the

supply through more accurate demand forecasting and better planning for

repairs. Another initiative is designed to make greater use of performancebased contracts to improve the availability of parts and delivery times. We

previously recommended improvements to the management framework

for implementing best commercial practice initiatives based on the

principles embodied in the Government Performance and Results Act.7

The Navy responded to these recommendations in an update of the first

quarter of fiscal year 2000 that linked the initiatives to the Department of

Defense’s Logistics Strategic Plan. Further, in response to a Defense

Department Reform initiative, the Navy developed a High Yield Logistics

Transformation Plan that is also linked to the Department’s Logistics

Strategic Plan. We have an effort under way to assess the Department’s

overall plan for improving the logistics system.

Because of our prior recommendations on improving the Navy’s

management framework for implementing commercial inventory

practices, the Department of Defense’s efforts to develop an overarching

integration plan, and our ongoing review of the Department’s strategic

plan, we are not making new recommendations at this time. The

Department of Defense generally concurred with this report.

In January 2001, we reported on Department of Defense management

challenges and noted that the Department has had serious weaknesses in

 7

 P.L. 103-62, 1993.

Background
Page 4 GAO-01-771 Navy Inventory

its management of logistics functions and in particular inventory

management. We have identified inventory management as a high-risk area

since 1990.8 In 1996 and again in 1998, we reported that despite billions of

dollars invested in inventory, the Navy’s logistics system often could not

provide spare parts when and where needed.9

 For example, in fiscal year

1995 about 12 percent of the aircraft were not mission capable due to

supply problems, and mechanics frequently had to remove parts from one

aircraft to make repairs on another. (See app. I for examples from our

prior reports on management weaknesses related to the Navy.) Table 1

shows that during the last 11 years, the Navy has never achieved its overall

goal to have 73 percent of its aircraft capable of performing at least one of

its assigned missions. Further, the rate at which the aircraft could not

perform their missions due to supply shortages has increased from

11.9 percent in fiscal year 1995 to 12.9 percent in fiscal year 2000.

Table 1: Reported Rates of Mission Capability and Parts Shortages for All Navy

Aircraft

In percent

Fiscal year

Aircraft reported as

mission capable

Aircraft reported as not

mission capable due to

supply problems

1990 69.5 13.5

1991 68.4 13.8

1992 69.1 13.4

1993 71.3 12.7

1994 72.6 11.9

1995 72.0 11.9

1996 70.0 12.5

1997 67.7 12.4

1998 68.0 12.9

1999 68.8 12.1

2000 68.2 12.9

Source: Deputy Chief of Naval Operations for Fleet Readiness and Logistics, Fleet Readiness

Division.

 8 Major Management Challenges and Program Risks: Department of Defense

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

9 Inventory Management: Adopting Best Practices Could Enhance Navy Efforts to

Achieve Efficiencies and Savings (GAO/NSIAD-96-156, July 12, 1996) and Inventory

Management: DOD Can Build on Progress by Using Best Practices for Reparable Parts

(GAO/NSIAD-98-97, Feb. 27, 1998).
Page 5 GAO-01-771 Navy Inventory

Navy officials have testified that the increased pace of operations and the

resulting accelerated aging of its systems and infrastructure are outpacing

its efforts to improve spare parts supplies and are continuing to affect

readiness. As such, the Navy has efforts under way to better define its

aviation spare parts requirements. The Navy stated in fiscal year 2000 to

the Congress that budget increases for fiscal year 2000 had begun to

address some of the Navy’s most pressing needs but that it would take

time for the positive effects to be reflected throughout the force.

Between fiscal year 1999 and 2000, the Navy increased expenditures for

aircraft parts by $631 million.10 In 1999 the Defense Department announced

plans to provide $500 million to the Defense Logistics Agency to purchase

spare parts for all the services over fiscal years 2001-2004. The Navy’s and

the Marine Corps’ share of that amount is about $190.7 million, of which

about $62.1 million had been obligated by February 2001. Further, the

Navy and the other services received additional funds in fiscal year 1999

that, unlike the funds cited above, were included in operation and

maintenance accounts, including $116 million to eliminate backlogs of

aviation spare parts. In a report issued earlier this year, we indicated that

current financial information does not show the extent to which these

funds were used for spare parts.11 The Department plans to annually

develop detailed financial management information on spare parts funding

usage but had not planned to provide it to the Congress. When we

recommended that the Secretary of Defense routinely provide this

information to the Congress as an integral part of the Department’s annual

budget justification, the Department agreed to do so.

The aviation systems that we reviewed are vital to the Navy’s achievement

of its missions but have had significant parts shortages problems. The

EA-6B, shown in figure 1, is an all-weather electronic attack aircraft that

operates from aircraft carriers and land bases and is the only Department

of Defense aircraft that can electronically jam enemy antiaircraft radar.

These aircraft were first delivered in 1971 and have had several major

upgrades. These aircraft are heavily deployed for operations and were

severely stressed during the 1999 operation in Kosovo. The F-14 Tomcat,

 10 The $631 million includes a Navy Working Capital Fund increase of $504 million for the

repair and procurement of parts, some of which can take 12 to 24 months to obtain, and an

increase of $127 million in the Navy’s procurement account to procure parts to meet

increased requirements at operating units.

11 Defense Inventory (GAO-01-472, June 11, 2001).
Page 6 GAO-01-771 Navy Inventory

shown in figure 2, is an all-weather fighter that operates from aircraft

carriers and is designed to attack and destroy enemy aircraft, in both day

and night, and is also in high demand for deployed operations. The F-14A

was first delivered in 1972. The F-14B and F-14D models consisted of new

production aircraft and remanufactured F-14A aircraft and were first

delivered in 1987 and 1990, respectively. The F-14 has a critical role in

providing air superiority and an ability to launch precision-guided

munitions.

Figure 1: The EA-6B Aircraft

Source: Defense Visual Information Center.
Page 7 GAO-01-771 Navy Inventory

Figure 2: The F-14 Aircraft

Source: Defense Visual Information Center.

The Navy uses both consumable and reparable spare parts for its weapon

systems. Consumable parts, such as nuts, bearings, and fuses, are

discarded when they fail because they cannot be repaired cost-effectively.

The Defense Logistics Agency manages most consumable parts, and the

Defense Supply Center in Richmond, Virginia, is the lead center for

managing aviation consumable parts. Reparable parts are expensive items,

such as hydraulic pumps, navigational computers, and landing gear, that

can be cost-effectively fixed and used again. The Naval Supply Systems

Command, through its Naval Inventory Control Point, manages and

provides central control over reparable parts.
Page 8 GAO-01-771 Navy Inventory

The shortages of spare parts for the two aircraft systems reviewed not

only have affected readiness but also have created inefficiencies in

maintenance processes and procedures and have adversely affected the

retention of military personnel. Specifically, the rates at which the EA-6B

and F-14 were not mission capable due to spare parts shortages ranged

from 4.3 percent to 16.8 percent. Also, the maintenance practice used to

mitigate part shortages masks the true impact of shortages and results in

increased work for maintenance personnel, causing morale problems and

dissatisfaction with military life.

The Navy EA-6B and F-14 varied in their achievement of mission-capable

goals during fiscal years 1993-2000, in part, due to spare parts shortages.

The EA-6B met its overall goal of 73 percent only three times during the 8-

year period (see table 2). During the same period, the F-14A met its 65-

percent goal only twice, in the most recent 2 years; the F-14B met its 65-

percent goal in 6 of the 8 years; and the F-14D met its 71-percent goal only

once, in fiscal year 2000 (see tables 3-5). Although some models of the F-14

aircraft have improved their mission-capable rates in recent years, the

Secretary of the Navy reported that the readiness of deployed forces was

being maintained to some degree at the expense of nondeployed forces,

which have often deferred ordering spare parts and delayed or reduced the

scope of maintenance.12

 12 Annual Report to the President and the Congress (2001), Part VI: Statutory Reports,

Report of the Secretary of the Navy.

Parts Shortages

Adversely Affect Navy

Operations,

Maintenance, and

Military Personnel

Parts Shortages

Contributed to Two

Aircraft Systems’ Failure

to Achieve

Mission-Capable Goals
Page 9 GAO-01-771 Navy Inventory

Table 2: Reported Mission-Capable Goals and Rates for the EA-6B

In percent

Fiscal year

Mission-capable

goal

Reported missioncapable rate Difference

1993 73 71.6 (1.4)

1994 73 75.5 2.5

1995 73 78.8 5.8

1996 73 71.4 (1.6)

1997 73 74.0 1.0

1998 73 65.7 (7.3)

1999 73 59.9 (13.1)

2000 73 56.9 (16.1)

Source: Deputy Chief of Naval Operations for Fleet Readiness and Logistics, Fleet Readiness

Division.

Table 3: Reported Mission-Capable Goals and Rates for the F-14A

In percent

Fiscal year

Mission-capable

goal

Reported missioncapable rate Difference

1993 65 58.0 (7.0)

1994 65 60.8 (4.2)

1995 65 64.8 (0.2)

1996 65 64.8 (0.2)

1997 65 58.3 (6.7)

1998 65 58.9 (6.1)

1999 65 66.2 1.2

2000 65 67.8 2.8

Source: Deputy Chief of Naval Operations for Fleet Readiness and Logistics, Fleet Readiness

Division.
Page 10 GAO-01-771 Navy Inventory

Table 4: Reported Mission-Capable Goals and Rates for the F-14B

In percent

Fiscal year

Mission-capable

goal

Reported missioncapable rate Difference

1993 65 65.0 0

1994 65 63.3 (1.7)

1995 65 66.5 1.5

1996 65 69.2 4.2

1997 65 63.3 (1.7)

1998 65 71.0 6.0

1999 65 76.5 11.5

2000 65 75.7 10.7

Source: Deputy Chief of Naval Operations for Fleet Readiness and Logistics, Fleet Readiness

Division.

Table 5: Reported Mission-Capable Goals and Rates for the F-14D

In percent

Fiscal year

Mission-capable

goal

Reported missioncapable rate Difference

1993 71 58.1 (12.9)

1994 71 64.4 (6.6)

1995 71 58.4 (12.6)

1996 71 63.7 (7.3)

1997 71 57.0 (14.0)

1998 71 60.8 (10.2)

1999 71 63.5 (7.5)

2000 71 72.3 1.3

Source: Deputy Chief of Naval Operations for Fleet Readiness and Logistics, Fleet Readiness

Division.

The Navy reporting system also identifies whether aircraft are not mission

capable due to supply shortages or for maintenance requirements.

However, the Navy has not established specific goals related to the

categories of not mission capable due to supply or maintenance. As shown

in table 6, spare parts shortages have affected the capability of EA-6B and

F-14 aircraft to perform their missions. Sometimes unit personnel must

wait a long time to receive the parts they have ordered. For example, as of

June 2000, the average wait time to fill 229 requisitions for mission-related

parts for the F-14 was 185 days; for the EA-6B, the average wait time to fill

20 requisitions for parts was 77 days.
Page 11 GAO-01-771 Navy Inventory

Table 6: Reported Rates at Which EA-6B and F-14 Aircraft Were Not Mission

Capable Due to Supply Shortages

In percent

Not mission capable due to supply shortage

Fiscal year EA-6B F-14A F-14B F-14D

1993 11.5 16.1 13.4 16.8

1994 11.8 11.0 11.3 12.8

1995 9.1 10.7 10.5 13.5

1996 13.7 9.9 8.3 10.0

1997 10.8 9.5 7.0 11.7

1998 12.2 6.8 6.3 12.4

1999 12.3 6.4 4.3 11.1

2000 14.2 7.5 4.5 7.6

Source: Deputy Chief of Naval Operations for Fleet Readiness and Logistics, Fleet Readiness

Division.

To compensate for a lack of spare parts, maintenance personnel

sometimes remove usable parts from one aircraft to replace broken parts

on others, a practice called cannibalization (see table 7). According to

Navy testimony and reports, the Navy is “cannibalizing” nonmissioncapable aircraft to keep other aircraft flying and to maintain readiness.

While the mission-capable rates of the aircraft that are kept in the air

appear to be higher, the practice masks the impact of the shortages and

causes morale problems with maintenance personnel because of the extra

work involved, wastes consumable parts, and risks damage to the aircraft

and its components. Also, a part removed from one aircraft will not last as

long as a part from the supply system and will require maintenance

sooner. We recently testified that the shortage of parts is the main reason

for cannibalizations and that local commanders are willing to do whatever

is necessary to keep readiness ratings high, even if this requires

cannibalizing aircraft constantly and having personnel routinely work

overtime.13

Cannibalization requires at least twice the maintenance time of normal

repairs because it involves removing and installing components from two

aircraft instead of one (see fig. 3).

 13Military Aircraft: Cannibalizations Adversely Affect Personnel and Maintenance

(GAO-01-693T May 22, 2001). We will provide a report on this issue later this year to the

Chairman, Subcommittee on National Security, Veterans Affairs, and International

Relations, House Committee on Government Reform.

Parts Shortages Cause

Inefficient Maintenance

and Hamper Retention of

Maintenance Personnel
Page 12 GAO-01-771 Navy Inventory

Figure 3: Repairs Require Two Steps, Cannibalizations Four

Source: GAO.

As shown in table 7, the aggregate cannibalization rate (the number of

times maintenance personnel used the practice per 100 flying hours) for

Navy aircraft did not change significantly during fiscal years 1993-2000.

The aggregate rates are misleading, however, because cannibalizations are

frequently not reported. In 1998 a Navy study group noted that as much as

50 percent of all cannibalizations were not reported. Nevertheless, the

reported cannibalization rates for the EA-6B and F-14 were much higher

than the aggregate, and the rate for the EA-6B rose significantly in fiscal

year 1999, reportedly because of its extensive use during the Kosovo

operation. Aside from the reported rates, Navy personnel’s perception is

that cannibalization has increased. Of 3,711 personnel surveyed by the

Naval Inspector General, 2,932, or 79 percent, reported that

cannibalizations had increased and that they did not have enough parts to
Page 13 GAO-01-771 Navy Inventory

maintain mission-capable rates needed to meet training and operational

requirements.14

Table 7: Reported Cannibalization Rates for All Navy Aircraft and for the EA-6B and

F-14 (all models) Aircraft

Cannibalization rate per 100 flying hours

Fiscal year

Aggregate Navy

aircraft (rate) EA-6B (rate)

F-14 (all models)

(rate)

1993 9.8 15.3 26.7

1994 9.6 14.1 27.0

1995 8.4 11.7 18.7

1996 9.4 15.7 18.9

1997 9.6 13.0 21.3

1998 9.3 16.1 18.7

1999 9.3 18.1 19.1

2000 8.8 16.7 16.2

Source: Deputy Chief of Naval Operations for Fleet Readiness and Logistics, Fleet Readiness

Division.

The practice of cannibalizing aircraft burdens maintenance personnel and

seriously affects their morale. Cannibalization causes double work, as the

maintenance personnel must remove a part from a donor aircraft and

install it on another aircraft and later install a replacement part on the

donor aircraft. According to maintenance and supply personnel at the

units we visited, supply shortages were a significant problem that caused

inefficient cannibalizations and expedited repairs. During fiscal year 2000,

the Navy reported spending about 441,000 maintenance hours on

cannibalizations. The EA-6B and F-14 accounted for about 34,000 and

27,000 of these cannibalization hours, respectively.

The effects of inefficient logistics system practices on morale and

retention have been noted in several personnel surveys. According to the

Naval Inspector General survey, 74 percent of the 3,711 personnel

surveyed said that the conditions they work under negatively affected

their decision to stay in the Navy.15 Similarly, as we testified in March 2000,

a Department of Defense 1999 survey of active duty members showed that

 14 Final Report of Naval Aviation Spares and Readiness, Naval Inspector General

(Apr. 28, 2000).

15 Final Report of Naval Aviation Spares and Readiness, Naval Inspector General

(Apr. 28, 2000).
Page 14 GAO-01-771 Navy Inventory

retention problems were concentrated in career fields such as equipment

repair.16 Also, in August 1999, we reported the results of our survey of

about 1,000 of the Department’s active duty personnel in job occupations

that the Department of Defense believed were experiencing retention

problems. 17 We reported that the majority of factors (62 percent)

associated with dissatisfaction and reasons to leave the military were

work circumstances, including the lack of parts and equipment to perform

daily job requirements. Both officers and enlisted personnel ranked the

availability of needed equipment, parts, and materials among the top 2 of

44 quality-of-life factors that caused their dissatisfaction. Finally,

according to a fall 1998 survey of 114 Navy servicemembers and civilian

personnel in the aviation, surface, and submarine communities, over

70 percent of the air community rated spares and repair parts as the area

most in need of improvement.18 In our recent testimony, we discussed

examples of how cannibalizations may become the source of waste or

frustration. In one case, a major component needed for an EA-6B aircraft

to perform its mission was removed from or reinstalled on four different

aircraft, for a total of 16 times in 6 days.

The primary reasons for shortages of the 50 spare parts for the EA-6B and

F-14 aircraft that we reviewed were (1) greater demands than anticipated

for the parts, (2) delays in awarding contracts for the purchase and repair

of parts, (3) contractors’ delivery delays, (4) delays in repairs at military

facilities, and (5) other problems. An internal Department of Defense study

found similar reasons for parts shortages.19

The 50 parts we selected for review were recorded as having the largest

number of unfilled requisitions that had affected the capability of the

EA-6B and F-14 aircraft to perform their missions. (See app. II for a

 16 Military Personnel: Preliminary Results of DOD’s 1999 Survey of Active Duty

Members (GAO/T-NSIAD-00-110, Mar. 8, 2000). The survey of active duty members is

projectable to the entire force.

17 Military Personnel (GAO/NSIAD-99-197BR, Aug. 16, 1999).

18 Fleet Perceptions of Overall Logistics Support Quality, Center for Naval Analyses,

June 1999.

19 Aviation Spare Parts Inventory Funding for Readiness, Office of the Secretary of

Defense, Program Analysis and Evaluation (Feb. 1, 2001).

Multiple Reasons for

Parts Shortages

Shortages of Parts for Two

Selected Systems
Page 15 GAO-01-771 Navy Inventory

description of the parts discussed in this report.) Because of the

interrelated nature of the supply system, some parts were unavailable for

more than one reason. Table 8 is a summary of the reasons for the

shortages of the 25 problem parts for each aircraft that we identified

primarily through interviews with item management officials and

documentation on each part. (See app. III for a more detailed list of the

reasons for the parts shortages discussed in this report.)

Table 8: Reasons for Shortages of 50 Parts for the EA-6B and F-14 Aircraft

Reason EA-6BaF-14bTotal

Actual demand exceeded anticipated 11 10 21

Delays in awarding contracts 7 9 16

Contractor problems 6 9 15

Delays in repairing parts at military facilities 4 8 12

Other 5 2 7

Total 33 38 71

Note: Totals add to more than 50 because some parts in our sample were in short supply for more

than one reason.

a The time period for the shortages was May and June 2000.

b

 The time period for the shortages was July 2000.

Source: GAO analysis of Naval Inventory Control Point-Philadelphia data.

Twenty-one (42 percent) of the 50 sampled parts had greater demands

than anticipated that contributed to shortages of the parts. Accurately

forecasting the demand for parts is difficult because of the large number of

variables that affect demand, including flying hour frequency and

environment. The Navy forecasts the demand for parts using an average of

historical demands. Although this average is periodically adjusted, it is

subject to some degree of error. Forecasting the demand for a new part is

often more challenging because the part has not been in the Navy supply

system long enough to develop a pattern of demands.20 Also, according to a

Navy supply official, forecasting for parts with infrequent demands is

particularly difficult. Examples of parts for which there was unanticipated

demand follow:

• Although the average demand for the EA-6B landing gear (see fig. 4) was

about one per quarter (3 months), there were eight demands for the gear

 20 When establishing initial spares for new parts, the Navy uses, in part, engineering

estimates to determine the quantities of spare parts to purchase.

Actual Demand Was

Greater Than Anticipated
Page 16 GAO-01-771 Navy Inventory

during the two most recent quarters. The demand exceeded the stock on

hand and contributed to a shortage of the part. The main reason for the

increased demand was a new requirement for inspection of the gear. The

purpose of these inspections was to reduce part failures and improve

reliability during operations. The findings of these new inspections

resulted in the replacement of more parts. As of June 2000, one unfilled

requisition was affecting the capability of an EA-6B to perform its mission.

Figure 4: EA-6B Landing Gear

Note: The arrow points to the landing gear.

Source: Naval Inventory Control Point, Philadelphia, Pennsylvania.
Page 17 GAO-01-771 Navy Inventory

• A new version of an F-14D television sensor (see fig. 5) that was expected

to operate 32,000 hours worked much less than anticipated. The increased

failure rate and the associated increase in demand were partially

attributed to improper installation of the sensor by Navy maintenance

personnel. As of July 2000, the Navy was unable to fill 13 requisitions that

affected the mission capability of the F-14.

Figure 5: F-14D Television Sensor

Source: Naval Inventory Control Point, Philadelphia, Pennsylvania.

• An unexpected surge in demand for the F-14 telescoping shaft (see fig. 6),

which affects wing control during maneuvers, occurred about March 2000

because of a problem in the shaft that was found during a major

engineering change to strengthen the wing. The shaft had severe corrosion

from normal use and had to be replaced. The Navy repair facility increased

its scheduled number of repairs, but as of July 2000, 11 requisitions were

unfilled that affected the capability of the F-14.
Page 18 GAO-01-771 Navy Inventory

Figure 6: F-14 Telescoping Shaft

Note: The arrow points to the telescoping shaft.

Source: Naval Inventory Control Point, Philadelphia, Pennsylvania.

Sixteen (32 percent) of the parts we reviewed were in short supply due to

delays in awarding contracts to repair or produce them and were affecting

the capabilities of the EA-6B and F-14 to perform their missions. For

example:

• The Navy had difficulties in locating a company that would produce the

aging air navigational computer (see fig. 7) due to obsolescence. The Navy

had planned to replace this computer with a newer model as part of an

aircraft improvement program that was canceled in late 1994 due to

funding constraints. The Navy considered several alternatives and decided

that the most economical solution was to contract for a modification of an

even older version of the computer to substitute for the current version.

The first deliveries of the modified computers are expected in July 2001.

As of May 2000, the Navy could not fill two requisitions that affected the

capability of EA-6B aircraft to perform their missions.

Delays in Awarding

Contracts
Page 19 GAO-01-771 Navy Inventory

Figure 7: EA-6B Air Navigational Computer

Source: Naval Inventory Control Point, Philadelphia, Pennsylvania.

• Similarly, the Navy had problems finding a company that would

manufacture F-14 transmitters (see fig. 8), creating shortages of the part.

These transmitters are designed to transfer signals regarding the aircraft’s

movements and position to the appropriate instruments. The Navy had not

procured the transmitter for at least 10 years, and potential contractors

were reluctant to manufacture the aging part. The only willing

manufacture required a minimum purchase of 100 transmitters. Although

the contractor had an expected delivery date of July 1999, its transmitter

had problems passing a quality test. As of July 2000, the Navy had five

unfilled requisitions that affected the capability of F-14 aircraft to perform

their missions.
Page 20 GAO-01-771 Navy Inventory

Figure 8: F-14 Transmitter

Note: The arrow points to the transmitter.

Source: Naval Inventory Control Point, Philadelphia, Pennsylvania.

The Navy could not find a company to repair an F-14 filter after the

previous contractor ceased repair operations in 1995-96. The Navy had not

required repairs for several years because it had enough parts on hand to

fill the few requisitions it received each year. The previous contractor

eventually agreed to reestablish repair capability. However, as of July

2000, four requisitions had been unfilled that affected the capability of

F-14 aircraft to perform their mission.

Contractor delivery delays contributed to shortages of 15 (30 percent) of

the parts we reviewed. Delays in contractor repairs and production of new

parts were due to problems with parts passing quality tests, equipment

failures, and company buy-outs.

Problems With Contractors
Page 21 GAO-01-771 Navy Inventory

• The repairs of two types of EA-6B antennas were delayed because the

contractor completely halted repair work from December 1999 to about

March 2000 due to a company merger. Later, one of these types of

antennas had problems passing final quality tests, which caused a shortage

of the antenna. As of June 2000, there was an unfilled requisition for each

of the two types of antennas that was affecting the capability of EA-6B

aircraft.

• Contractor repairs of an F-14 actuator (see fig. 9), which helps to adjust

the aircraft’s wings for takeoff and landing, were delayed for several

reasons. The contractor’s test equipment indicated that repaired actuators

were faulty when they had actually been properly repaired. Also, the

contractor maintained that repairs were delayed because a subcontractor

had not made timely repairs to a subcomponent. However, a Navy supply

manager told us that during a visit to the contractor’s facility he identified

a large number of subcomponents that should have been sent to the

subcontractor. This situation contributed to the contractor’s delays in

repairing the actuators. As of July 2000, there were nine unfilled

requisitions critical to the mission capability of the F-14 aircraft.

Figure 9: F-14 Actuator

Note: The arrow points to the actuator.

Source: Naval Inventory Control Point, Philadelphia, Pennsylvania.

One company’s buy-out of another company and a later plant move

resulted in delayed repairs and deliveries of an F14D wave-guide assembly,
Page 22 GAO-01-771 Navy Inventory

creating a shortage of the part. Although the buy-out and the plant move

occurred over 2 years ago, deliveries were still slow and below the

expected quantity level. The buy-out also delayed the procurement of

more F-14 wave-guide assemblies. As of July 2000, there were eight

unfilled requisitions for the assembly affecting the capability of the F-14

aircraft.

Delays in repairing 12 (24 percent) parts at military facilities caused

shortages of the parts. The delays resulted from complications in

establishing and sustaining repair capabilities due to maintenance

equipment and other problems.

• Problems with the equipment used to test an F-14 axial pump, which

provides power to the aircraft’s flight control system, led to delays. The

repair facility did not resolve these test equipment problems until

5 months later, in October 2000. As of July 2000, 21 unfilled requisitions

were affecting the mission capability of F-14 aircraft.

• A military repair facility had problems meeting the repair schedule for an

F-14 aircraft wing fairing (see fig. 10) because its manufacture of the parts

needed to repair the fairing was delayed. Although the facility was

scheduled to repair 10 parts in the third quarter of fiscal year 2000, it

repaired only 5. Repair problems continued in the fourth quarter of 2000.

The facility was scheduled to repair 13 parts but repaired only 4. As of the

end of July 2000, there were nine unfilled requisitions affecting the mission

capability of F-14 aircraft.

Delays in Repairing Parts

at Military Facilities
Page 23 GAO-01-771 Navy Inventory

Figure 10: F-14 Aircraft Wing Fairing

Note: The arrow points to the aircraft wing fairing.

Source: Naval Inventory Control Point, Philadelphia, Pennsylvania.

• A shortage of EA-6B special indicators developed because the designated

repair facility did not repair the items as required. After the closure of one

Navy repair facility, repair responsibility for the indicators was transferred

to a different facility. However, this facility never developed the

capability—that is, the parts, equipment, expertise, and staff to repair the

indicators. In the third quarter of fiscal year 1999, the facility was

scheduled to repair six indicators but repaired none. After discovering the

problem, the item manager had the items repaired by a contractor. As of

May 2000, there was one unfilled requisition that was reportedly affecting

the capability of an EA-6B aircraft in performing its missions.

Other reasons for shortages of parts included decisions not to purchase

needed parts for economic reasons and nonrecurring problems such as a

pricing error. These varied reasons contributed to spare parts shortages

for seven (14 percent) of the parts we reviewed. Sometimes, item

managers made economical decisions not to purchase additional items

because the parts were to be replaced. For example, the item manager

purchased minimal quantities of an EA-6B multiport panel because the

Navy had decided to redesign the panel as part of an overall engineering

Other Reasons for

Shortages
Page 24 GAO-01-771 Navy Inventory

change to the aircraft. A shortage of the panels developed while the

redesign was taking place. As of June 2000, two unfilled requisitions for

the multiport panel were affecting the capability of the EA-6B aircraft to

perform their missions.

Also, an error in the contract pricing structure for repairs of an F-14 power

module (see fig. 11) resulted in spare parts shortages. During an evaluation

of the requirements for these parts, the item manager identified an error

that would have resulted in customers not being charged the full cost of

repairs. The award of the contract and the associated repairs were delayed

while the contract pricing problem was corrected. As of July 2000, four

unfilled requisitions were keeping F-14 aircraft from performing any of

their missions.

Figure 11: F-14 Power Module

Note: The arrow points to the power module.

Source: Naval Inventory Control Point, Philadelphia, Pennsylvania.
Page 25 GAO-01-771 Navy Inventory

An internal study conducted by the Department of Defense found similar

reasons for Navy reparable parts shortages.21 The study examined parts

causing aircraft to be not mission capable and found that there were two

reasons for the shortages. The first was an insufficient inventory of certain

reparable parts. The second was that although there were enough parts in

the system, other constraints prevented the repair facility from repairing

the items in a timely manner. The study states this may happen for several

reasons. The parts may not have been returned from the units to the repair

facility, the repair facility may have lacked capacity in certain key areas

such as repair equipment, the consumable parts required to fix the

repairable item may not have been available, and item managers may not

have requested the repair facility to repair the part because of a lack of

funding. The study recommended that the Navy budget include an

additional $355 million for fiscal years 2004 through 2007 to help address

the inventory shortages. According to a Navy official, the Navy agreed and

included an additional $357 million in its budget.

The Navy and the Defense Logistics Agency have initiatives under way or

planned that may improve the availability of parts, including the use of

best commercial inventory practices. The initiatives are intended to

improve the efficiency and effectiveness of the logistics system and

generally address the specific reasons for the shortages identified by our

review. Under a March 2000 Department of Defense directive, the Navy

developed a High Yield Logistics Transformation Plan, which links its

logistics initiatives to the objectives in the Department’s Logistics

Strategic Plan. The directive requires that these plans include a

management framework that conforms to Government Performance and

Results Act requirements. We have, in the past, made various

recommendations to address this issue. 22 We will be reviewing the

transformation plan’s initiatives, once they are more fully developed, to

evaluate their likely effectiveness and to assess whether additional

 21Aviation Spare Parts Inventory Funding for Readiness, Office of the Secretary of

Defense, Program Analysis and Evaluation (Feb. 1, 2001).

22 Defense Inventory: Improved Management Framework Needed to Guide Navy Best

Practices Initiatives (GAO/NSIAD 00-1, Oct. 21, 1999) and Defense Logistics: Actions

Needed to Enhance Success of Reengineering Initiatives (GAO/NSIAD-00-89,

June 23, 2000).

Department of Defense

Internal Study Found

Similar Reasons for

Shortages

Overall Initiatives

Exist to Address

Problems
Page 26 GAO-01-771 Navy Inventory

initiatives are needed. We describe some of the Navy and Defense

Logistics Agency initiatives in the sections that follow.

The Navy’s High Yield Logistics Transformation Plan and its schedule of

best commercial inventory practices identify many initiatives that

generally address the reasons for spare parts shortages that we identified,

such as contract and repair problems. While some have been

implemented, many of these initiatives are now being implemented and it

is too soon to tell whether they will effectively reduce aviation spare parts

shortages.

The Navy’s performance-based logistics program is designed to improve

support to customers and reduce total costs. The program is to use a

variety of different long-term, performance-based contracts that will hold

contractors accountable for specific performance requirements, including

delivery times, at a cost that is at or below current system costs. Although

the scope of each contract is somewhat different, the purpose of each is to

solve problems with the unavailability, low reliability, and obsolescence of

parts. Many of these contracts will provide an incentive to a contractor or

require reliability improvements to ensure that the best product is

delivered on time. These contracts also may require a contractor to

preempt and solve problems due to the obsolescence of parts. The Navy

will prioritize systems to be included under this program based on high

repair costs, low reliability, and low availability of the systems. The Navy

plans to assess the success of this program by measuring the time it takes

a contractor to fill a requisition and the percentage of the time a

contractor can satisfy a requirement within contractually specified times.

Under another initiative, the Navy manages the parts but uses long-term

contracts, with performance periods of up to 5 years, to minimize the time

it takes to request and receive parts from contractors. These contracts

allow contractors to procure material ahead of time to reduce their

production times and reduce the Navy’s administrative times. For fiscal

year 2000, the Navy reported that these long-term contracts had accounted

for over 30 percent of its funds for contracts and had procurement times

of only 35 days compared to 89 days for other types of contracts. The Navy

plans to monitor this initiative and expects long-term contracts to reduce

the Navy’s inventory and increase readiness.

Navy Initiatives

Contractor Initiatives
Page 27 GAO-01-771 Navy Inventory

The Navy has, among others, the following initiatives designed to improve

its aviation repair facilities operations, including a reduction in repair

times:

• The Navy established business process teams for material management,

planning and scheduling, and the repair of system components at aviation

repair facilities. The three teams have developed processes designed to

improve operations and they are to be implemented at the three Navy

repair facilities by June 2006. As part of this effort, Navy depots are

working with the Defense Logistics Agency to requisition material for

repairs in advance of actual demand, based on a credible forecast. The

Navy expects this effort to reduce the repair times and costs, improve

readiness, reduce inventories, and annually save $39 million by fiscal year

2005.

• The Navy plans to use an automated system to provide planning,

scheduling, capacity, and other information to reduce repair cycle times

and improve the rate at which customer delivery dates are met. The Navy’s

goal is to fully implement the system at its three repair facilities by

September 2002.

• The Navy plans to reduce the time it takes to transport inoperable items

from units to repair facilities, especially for parts that are in short supply.

As of June 2000, implementation of this initiative had been delayed due to

problems in implementing a reporting system that accounts for material in

transit between the receiving and sending points.

The Navy has several broad-based initiatives that may reduce spare parts

shortages. One of these is the aviation supply chain/material management

initiative. The Navy expects this initiative will improve forecasting for the

demand of parts and repair planning. Other features of this initiative

include better tracking of inoperable items and the potential for automatic

induction of parts into the repair cycle. The Navy plans to test the new

process on the E-2C aircraft starting in December 2001. If the pilot proves

successful, the Navy plans to expand the initiative to all Navy weapon

systems. Estimated costs are $80 million per year from fiscal year 2002

until the break-even point during fiscal year 2006. Performance measures

and baseline data will be developed after July 2001.

Other planned logistics system process improvements include the

following:

• The Aviation Maintenance-Supply Readiness Study Group, chartered in

March 1998, is to identify specific actions to improve readiness and

develop systemic improvements to increase mission capability rates. The

Maintenance Initiatives

Broad-Based Logistics

Initiatives
Page 28 GAO-01-771 Navy Inventory

group is addressing problems such as the cannibalization of aircraft parts,

the time that repair facilities take to repair and return parts, and reliability

problems.

• The Department of Defense is planning to use the time that customers wait

for parts as a key measure for evaluating the overall effectiveness of the

logistics system. As such, the Navy intends to track the time it takes from

the ordering of a part to its delivery, develop a strategy for improving the

timeliness of the process at different shore facilities and deployment sites,

and then optimize the Navy’s investment in spare parts.

• The Navy plans to track items by serial number so that it can better

measure reliability, predict parts requirements, identify maintenance

deficiencies, develop solutions, improve readiness, decrease repair time,

and manage warranties. This initiative is expected to cost $8.5 million but

achieve a return on investment of $30 million per year plus labor savings

of about 20,000 hours per year.

The Defense Logistics Agency’s major initiative to reduce aircraft spare

parts shortages is its Aviation Investment Strategy. This initiative, which

started in fiscal year 2000, focuses on replenishing consumable aviation

repair parts identified as having availability problems that affect readiness.

To achieve this initiative within the Navy, the Defense Logistics Agency

plans to invest about $190.7 million in Navy and Marine Corps aviation

spare parts over fiscal years 2000-2003. As of February 2001,

$62.1 million had been obligated for this purpose, but only $9.9 million

worth of parts had been delivered.

The purpose of the Defense Logistics Agency’s Aging Aircraft Program is

to consistently meet the customers’ needs regarding the availability of

spare parts for Army, Navy, and Air Force aviation weapon systems. The

program’s focus will be to (1) provide inventory control point personnel

with complete, timely, and accurate information on current and projected

parts requirements; (2) reduce customers’ wait time for parts for which

sources or production capability no longer exist; and (3) create an

efficient and effective management structure and processes for

achievement of program goals. The Defense Logistics Agency plans to

spend about $20 million on this program during fiscal years 2001-2007.

Defense Logistics Agency

Initiatives

Aviation Investment Strategy

Aging Aircraft Program
Page 29 GAO-01-771 Navy Inventory

To provide a mechanism to improve the potential for successfully

implementing commercial inventory initiatives and measure results, we

recommended in October 1999 that the Secretary of Defense direct the

Secretary of the Navy to improve the management framework for

implementing best practice initiatives based on principles embodied in the

Government Performance and Results Act. The Department of Defense

concurred and stated that the Navy would provide an update in the first

quarter of 2000. The Navy’s updated schedule links its commercial

inventory practice initiatives to the broad objectives of the Department of

Defense’s Logistics Strategic Plan.

We also recommended in June 2000 that the Department develop an

overarching plan that integrates the individual military service and defense

agency logistic reengineering plans to include an investment strategy for

funding the initiatives and details on how the Department plans to achieve

its final logistics system goals. The Department agreed with the

recommendation and stated it plans to integrate the various logistics

strategies and service initiatives. Further, as required by the House

Committee on Armed Services report on the Floyd D. Spence National

Defense Authorization Act for Fiscal Year 2001,23 we are assessing the

methodology the Department of Defense used in formulating its August

1999 long-range Logistics Strategic Plan.

Because of our prior recommendations on improving the Navy’s

management framework for implementing commercial inventory

practices, the Department of Defense’s efforts to develop an overarching

integration plan, and our ongoing review of the Department’s strategic

plan, we are not making new recommendations at this time.

In written comments on a draft of this report, the Principal Assistant,

Deputy Under Secretary of Defense for Logistics and Material Readiness

indicated that the Department of Defense generally concurred with the

report. The Department’s comments are reprinted in their entirety in

appendix IV.

 23 House Report 106-616, p. 339.

The Department of

Defense Is Working to

Respond to Our

Recommendations for

Better Planning

Agency Comments

and Our Evaluation
Page 30 GAO-01-771 Navy Inventory

To determine the impact of shortages of spare parts for two selected

aircraft, we reviewed April 1999 through December 2000 Department of

Defense Quarterly Readiness Reports to Congress; Navy mission-capable

goals and rates and the rates of not mission capable due to supply and

maintenance problems for fiscal years 1993-2000; and demand and unfilled

requisition data for major aircraft systems for March and June 2000 from

the Naval Inventory Control Point-Philadelphia, Operations Directorate.

We also discussed supply and maintenance issues with weapon system

program managers at the Naval Air Systems Command. We did not

independently verify the readiness and other data. We also visited

maintenance and supply officials at the Naval Air Station, Oceana, Virginia

Beach, Virginia, and the Second Marine Air Wing, Cherry Point, North

Carolina.

To determine the reasons for shortages of mission-related spare parts for

the EA-6B and the F-14, we reviewed requisition data at the Naval

Inventory Control Point-Philadelphia and judgmentally selected 50 parts

that affected the capability of the two aircraft to perform their missions.

These parts had the largest number of unfilled requisitions at the time of

our visit: the end of May and June 2000 for the EA-6B and the end of July

2000 for the F-14. We interviewed the managers responsible for each

selected part. To obtain customer views of critical parts problems, we also

attended F-14 and EA-6B supply conferences. To help validate the reasons

inventory managers provided for the parts shortages, we reviewed

inventory management documents such as the March 2000 stratification

reports, the 5-year demand history, and other relevant supply management

documentation, including repair facility production schedules and

completion data for the fourth quarter of fiscal year1998 through the

fourth quarter of fiscal year 2000 from the Naval Inventory Control PointPhiladelphia Industrial Support Division.

To identify initiatives that the Navy and the Defense Logistics Agency have

under way or planned to address spare parts shortages for all aircraft, we

interviewed Navy and Marine Corps headquarters officials and examined

relevant documentation. Specifically, we reviewed the Navy’s Logistics

Transformation Plan for fiscal year 2000 and the Navy and Marine Corps

reports on the best commercial inventory practices. We also discussed

various initiatives with Naval Supply Systems Command and Naval

Inventory Control Point officials. We reviewed our prior reports and

relevant Navy and Department of Defense reports and studies, including

those published by the Naval Inspector General, the Navy’s Aviation

Maintenance-Supply Readiness Study Group, and the Office of the

Secretary of Defense for Program Analysis and Evaluation.

Scope and

Methodology
Page 31 GAO-01-771 Navy Inventory

During our audit, we interviewed supply and maintenance officials and

obtained information from the following locations:

• Deputy Under Secretary of Defense for Readiness (Personnel and

Readiness), Arlington, Virginia.

• Joint Chiefs of Staff, Logistics Directorate, Arlington, Virginia.

• Joint Forces Command, Logistics Directorate, Norfolk, Virginia.

• Deputy Chief of Naval Operations, Fleet Readiness and Logistics,

Arlington, Virginia.

• Commander in Chief, U.S. Atlantic Fleet, Logistics Directorate, Norfolk,

Virginia.

• Commander, Naval Air Forces Atlantic Fleet, Logistics Directorate,

Norfolk, Virginia.

• Naval Supply Systems Command, Mechanicsburg, Pennsylvania.

• Naval Inventory Control Point, Philadelphia, Pennsylvania.

• Naval Air Systems Command, Patuxent River, Maryland.

• Naval Air Station, Oceana, Virginia Beach, Virginia.

• Marine Corps Headquarters, Aviation Supply Logistics, Arlington, Virginia.

• Marine Corps Forces, Atlantic, Norfolk, Virginia.

• Second Marine Air Wing and Squadrons, Cherry Point, North Carolina.

• Defense Logistics Agency Headquarters, Alexandria, Virginia, and Defense

Supply Center Richmond, Richmond, Virginia.

We performed our review between February 2000 and June 2001 in

accordance with generally accepted government auditing standards.

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; and the Director, Office of Management and Budget. 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 Lawson Gist,

Jr.; Dan Omahen; Tracy Whitaker; and Nancy Ragsdale.

David R. Warren

Director, Defense Capabilities

 and Management
Page 32 GAO-01-771 Navy Inventory

List of Congressional Committees

The Honorable Carl Levin

Chairman

The Honorable John Warner

Ranking Minority Member

Committee on Armed Services

United States Senate

The Honorable Daniel Inouye

Chairman

The Honorable Ted Stevens

Ranking Minority Member

Subcommittee on Defense

Committee on Appropriations

United States Senate

The Honorable Bob Stump

Chairman

The Honorable Ike Skelton

Ranking Minority Member

Committee on Armed Services

House of Representatives

The Honorable Bill Young

Chairman, Committee on Appropriations

House of Representatives

The Honorable Jerry Lewis

Chairman

The Honorable John Murtha

Ranking Minority Member

Subcommittee on Defense

Committee on Appropriations

House of Representatives
Page 33 GAO-01-771 Navy Inventory

Our high-risk series of reports over the past several years noted that the

Department of Defense inventory and financial management weaknesses

have contributed to the unavailability of parts when needed. In January

2001, we reported on Department of Defense management challenges and

noted that it has serious weaknesses in its management of logistics

functions and, in particular, inventory management.1

 Although not

specifically identified with the systems we reviewed, these management

weaknesses directly or indirectly contribute to the shortages of spare parts

the Navy is facing. For example:

• We reported in January 2001 that nearly half of the Department’s inventory

exceeded war reserve or current operating requirements and that the

Department had inventory on order that would not have been ordered

based on current requirements.2 Thus, the Department was purchasing

items that exceeded requirements with funds that could be used to

purchase needed parts.

• We have issued several reports on the Navy’s problems in maintaining

adequate oversight of material being shipped to and from military

activities. For example, in March 1999, we reported that during fiscal years

1996-98, the Navy reported losing accountability of in-transit inventory,

including some classified and sensitive items, worth over $3 billion.3

 In

August 2000, we reported that the Navy had reported on actions that we

believed would improve in-transit inventory management once fully

implemented.4

 Some of the corrective actions had an estimated completion

date of December 2000, while a long-term solution would be to reengineer

the entire in-transit process.

• In November 2000, we reported that the Navy’s processes for setting prices

that customers pay for aviation spare parts had led to the Navy’s seeking

supplemental appropriations and delaying the procurement of needed

parts that could affect readiness.5

 1 Major Management Challenges and Program Risks: Department of Defense

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

2 Major Management Challenges and Program Risks (GAO-01-244, Jan. 2001).

3 Defense Inventory: Navy’s Procedures for Controlling In-Transit Items Are Not Being

Followed (GAO/NSIAD-99-61, Mar. 31, 1999).

4 Defense Inventory: Status of Navy Initiatives to Improve Its In-Transit Inventory

Process (GAO/OSI/NSIAD-00-243R, Aug. 24, 2000).

5 Defense Acquisitions: Prices of Navy Aviation Spare Parts Have Increased

(GAO-01-23, Nov. 6, 2000).

Appendix I: Management Weaknesses

Contribute to Spare Parts Shortages
Page 34 GAO-01-771 Navy Inventory

In addition, the Department of Defense’s long-standing financial

management problems may also contribute to the Navy’s spare parts

shortages. As we recently reported, existing weaknesses in inventory

accountability information can affect supply responsiveness.6 Lacking

reliable information, the Department of Defense has little assurance that

all items purchased are received and properly recorded. The weaknesses

increase the risk that responsible item managers may request funds to

obtain additional unnecessary items that may be on hand but not reported.

 6 Major Management Challenges and Program Risks (GAO-01-244, Jan. 2001).
Page 35 GAO-01-771 Navy Inventory

Part Description

Landing gear Supports the aircraft while on the ground

Air navigational

computer

Is a navigation component for the automatic flight control

system

Antenna Supports the ALQ-99 transmitters/receivers

Special indicator Measures the angle between the longitudinal axis of the aircraft

and the relative wind

Multiport panel Loads encrypted data on board communications systems

Television sensor Records mission data from the heads-up display for mission

playback during post-flight reviews

Telescoping shaft Maintains continuous flap and slat control during aircraft

maneuvers

Transmitter Transfers signals regarding the aircraft’s movements and

positions to the appropriate instruments

Filter Is a part of the electronic countermeasure system and extracts

incoming jamming signals that may disrupt the aircraft’s

electronics

Actuator Helps to adjust the aircraft’s wings for takeoff and landing

Wave-guide assembly Used with the F-14D radar set, connects low power output to

the transmitter

Axial pump Provides power to the aircraft flight control system

Aircraft wing fairing Protects the fuel lines and some hydraulics and helps maintain

airflow integrity over the aircraft

Power module Provides backup hydraulic power to the control surfaces in the

event of a failure in the primary hydraulic system

Appendix II: Description of EA-6B and F-14

Spare Parts Discussed in Report
Page 36 GAO-01-771 Navy Inventory

Reason for shortage EA-6B part F-14 part

Actual demand was greater than

anticipated

1. Air navigational computer

2. Movable canopy

3. Actuating cylinder

4. Multiport panel

5. Access cover

6. Structural panel

7. Cylinder assembly

8. Landing gear

9. Hydraulic swivel assembly

10. Engine duct assembly

11. Indicating light panel

1. Television camera

2. Hydraulic servovalve

3. Television sensor

4. Telescoping shaft

5. Aircraft wing fairing #1

6. Aircraft wing fairing #2

7. Frequency converter

8. Landing gear

9. Air-gas drier #1

10. Regulating valve

Delays in awarding contracts 1. Air navigational computer

6. Structural panel

12. Exhaust pipe-older version

13. Landing gear door

14. Exhaust pipe-new version

15. Countermeasure control

16. Gearbox assembly

1. Television camera

8. Landing gear

11. Axial pump

12. Solenoid valve

13. Air-gas drier #2

14.Wave-guide assembly

15. Aircraft oxygen system

16. Transmitter

17. Filter

Problems with contractors 5. Access cover

13. Landing gear door

17. Switch box

18. Antenna #1

19. Accelerometer

20. Antenna #2

2. Hydraulic servovalve

10. Regulating valve

11. Axial pump

12. Wave-guide assembly

18. Video sensor

19. Actuator

20. Pressure sensor #1

21. Pressure sensor #2

22. Motor generator

Delays in repairing parts at military

facilities

7. Cylinder assembly

21. Right hand horn

22. Special indicator

23. Shouldered shaft

5. Aircraft wing fairing #1

6. Aircraft wing fairing #2

8.Landing gear

9. Air-gas drier#1

11. Axial pump

12. Solenoid valve

23. Fin tip assembly

24. Accelerometer

Other

Item tracking problem 24. Receiver-transmitter 3. Television sensor

Purchased limited quantity 4. Multiport panel

15. Countermeasure control

24. Receiver-transmitter

Procedural error 25. Solenoid valve

Internal pricing error 25. Power module

Note: Part numbers assigned to identify each part. Part with the same name has more than one

reason for shortages.

Source: Naval Inventory Control Point-Philadelphia.

Appendix III: Reasons for EA-6B and F-14

Spare Parts Shortages
Page 37 GAO-01-771 Navy Inventory

Appendix IV: Comments From the

Department of Defense
Page 38 GAO-01-771 Navy Inventory

Major Management Challenges and Program Risks: Departments of

Defense, State, and Veterans Affairs (GAO-01-492T, Mar. 7, 2001).

Tactical Aircraft: Modernization Plans Will Not Reduce Average Age of

Aircraft (GAO-01-163, Feb. 9, 2001).

Major Management Challenges and Program Risks: A Governmentwide

Perspective (GAO-01-241, Jan. 2001).

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

Defense Acquisitions: Prices of Navy Aviation Spare Parts Have

Increased (GAO-01-23, Nov. 6, 2000).

Defense Acquisitions: Price Trends for Defense Logistics Agency’s

Weapon System Parts (GAO-01-22, Nov. 3, 2000).

Defense Inventory: Status of Navy Initiatives to Improve Its In-Transit

Inventory Process (GAO/OSI/NSIAD-00-243R, Aug. 24, 2000).

Contingency Operations: Providing Critical Capabilities Poses

Challenges (GAO/NSIAD-00-164, July 6, 2000).

Defense Inventory: Process for Canceling Inventory Orders Needs

Improvement (GAO/NSIAD-00-160, June 30, 2000).

Defense Logistics: Actions Needed to Enhance Success of Reengineering

Initiatives (GAO/NSIAD-00-89, June 23, 2000).

Defense Inventory: Plan to Improve Management of Shipped Inventory

Should Be Strengthened (GAO/NSIAD-00-39, Feb. 22, 2000).

Department of the Navy: Breakdown of In-Transit Inventory Process

Leaves It Vulnerable to Fraud (GAO/OSI/NSIAD-00-61, Feb. 2, 2000).

Defense Inventory: Opportunities Exist to Expand the Use of Defense

Logistics Agency Best Practices (GAO/NSIAD-00-30, Jan. 26, 2000).

Defense Inventory: Management of Repair Parts Common to More Than

One Military Service Can Be Improved (GAO/NSIAD-00-21, Oct. 20, 1999).

Related GAO Products
Page 39 GAO-01-771 Navy Inventory

Military Operations: Some Funds for Fiscal Year 1999 Contingency

Operations Will Be Available for Future Needs (GAO/NSIAD-99-244BR,

Sept. 21, 1999).

Department of Defense: Status of Financial Management Weaknesses

and Actions Needed to Correct Continuing Challenges

(GAO/T-AIMD/NSIAD-99-171, May 4, 1999).

Defense Inventory: DOD Could Improve Total Asset Visibility Initiative

With Results Act Framework (GAO/NSIAD-99-40, Apr. 12, 1999).

Defense Reform Initiative: Organization, Status, and Challenges

(GAO/NSIAD-99-87, Apr. 21, 1999).

Defense Inventory: Status of Inventory and Purchases and Their

Relationship to Current Needs (GAO/NSIAD-99-60, Apr. 16, 1999).

Defense Inventory: Continuing Challenges in Managing Inventories and

Avoiding Adverse Operational Effects (GAO/T-NSIAD-99-83, Feb. 25,

1999).

High-Risk Series: An Update (GAO/HR-99-1, Jan. 1999).

Major Management Challenges and Program Risks: Department of

Defense (GAO/OCG-99-4, Jan. 1999).

Navy Inventory Management: Improvements Needed to Prevent Excess

Purchases (GAO/NSIAD-98-86, Apr. 30, 1998).

Defense Depot Maintenance: DOD Shifting More Workload for New

Weapon Systems to the Private Sector (GAO/NSIAD-98-8, Mar. 31, 1998).

Defense Inventory: Management of Surplus Usable Aircraft Parts Can Be

Improved (GAO/NSIAD-98-7, Oct. 2, 1997).

(709528)

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