a

GAO

United States General Accounting Office

Testimony

Before the Subcommittee on National Security, Veterans 

Affairs, and International Relations, Committee on 

Government Reform, House of Representatives

For Release on Delivery

Expected at 10:00 a.m.

Tuesday, June 25, 2002

DOD MANAGEMENT

Examples of Inefficient 

and Ineffective Business 

Processes

Statement of Gregory D. Kutz

Director, Financial Management and Assurance

David R. Warren

Director, Defense Capabilities and Management

GAO-02-873T
Page 1 GAO-02-873T 

Mr. Chairman and Members of the Subcommittee:

We are pleased to be here today to discuss two case studies that clearly 

demonstrate the need for the Department of Defense (DOD) to reform its 

business operations. These two case studies are microcosms of the broad 

management challenges facing DOD that were highlighted in our June 4, 

2002, testimony1

 before this Subcommittee. At that hearing, we provided 

our views of the underlying or root causes of DOD’s long-standing inability 

to successfully reform its business operations, including a lack of sustained 

top-level leadership, cultural resistance to change, and military service 

parochialism. In addition, we identified what we believe are seven key 

elements necessary for successful reform, including approaching DOD’s 

broad array of management challenges using an integrated, enterprisewide 

approach.

As discussed in our June 4, 2002, testimony, the failure of past reform 

efforts has lead to DOD’s current business processes and data systems not 

being designed and implemented in an integrated fashion. These current 

processes and systems have been in place since the 1960s and 1970s and 

over time have evolved into an overly complex and error-prone operation 

including (1) little standardization across DOD components, (2) multiple 

systems performing the same tasks, (3) the same data stored in multiple 

systems, (4) manual data entry into multiple systems, and (5) a large 

number of data translations and interfaces that combine to exacerbate 

problems with data integrity. 

1

U.S. General Accounting Office, DOD Financial Management: Important Steps 

Underway But Reform Will Require a Long-term Commitment, GAO-02-784T (Washington, 

D.C.: June 4, 2002).
Page 2 GAO-02-873T 

Today, at your request, we will discuss two case studies and the related 

financial and inventory management and systems modernization2

challenges facing DOD. These case studies examine in detail the processes 

and data systems used by DOD to procure, control, and pay for critical 

items. The two case studies pertain to (1) the Joint Service Lightweight 

Integrated Suit Technology (JSLIST)3

 chemical and biological protective 

garments—coat and trousers—procured by contract and (2) computer 

equipment procured using the government purchase card. You also 

requested that we evaluate the economy, efficiency, and effectiveness of 

the processes and compare certain aspects of DOD’s processes to those of 

two large leading-edge retail companies—Sears and Wal-Mart. 

Summary Both of these case studies highlight significant differences between DOD’s 

business operations and those of two benchmark companies. These 

differences offer stark contrasts in the efficiency and cost of doing 

business. With regard to our first case study, for the inventory management 

process related to JSLIST, stovepiped, nonintegrated systems and 

processes result in DOD, the military services, and the military units not 

knowing how many items they have and where they are located. This lack 

of visibility has resulted in DOD excessing and selling JSLIST while at the 

same time procuring hundreds of thousands of new garments annually. 

The lack of system integration4

, meaning the ability to share data across 

business applications, continues to force multiple manual data entry into 

numerous systems. These manual processes result in errors, add 

significant administrative cost, and generally exacerbate asset visibility 

problems. Although the purchase card process was somewhat automated, 

we identified inefficient duplication of efforts and costly manual entry of 

2

Financial management, inventory management, and systems modernization are three of the 

six agency-specific high-risk areas related to DOD. For further details see U.S. General 

Accounting Office, Major Management Challenges and Program Risk: Department of 

Defense, GAO-01-244, (Washington, D.C.: Jan. 2001).

3

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

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

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

to the warfighter against chemical and biological contaminants without negatively 

impacting the ability to perform mission tasks.

4

An integrated financial system coordinates a number of functions to improve efficiency and 

control. For example, integrated financial systems are designed to avoid the unnecessary 

duplication of data entry because transactions are entered only once. Systems can also be 

interfaced which means they have the ability to share data electronically.
Page 3 GAO-02-873T 

data at the Defense Finance and Accounting Service (DFAS)-Columbus 

which sometimes resulted in processing fees well in excess of the cost of 

the item purchased.

DOD’s business processes for procuring, controlling, and paying for JSLIST 

rely on manual data transmission and entry into nonintegrated data 

systems. We identified 128 processing steps performed by 11 DOD 

components, such as the Defense Logistics Agency (DLA), DFAS, and the 

military services. Of the 128 steps, 100—or 78 percent—involved manual 

entry or re-entry of data into one or more of the 13 nonintegrated data 

systems supporting the JSLIST processes. In addition to the inefficiencies 

associated with this complex, error-prone process, DOD lacks asset 

visibility over JSLIST at all levels. According to DOD, by the end of fiscal 

year 2001, it had procured 1.6 million JSLIST and about 1.2 million of these 

had been issued to the military services. However, the complex, 

nonintegrated, error-prone process precludes DOD from being able to 

quickly and accurately identify the location and condition of these JSLIST. 

The DOD Inspector General has reported that the inventory system that 

DLA uses to control and maintain visibility over JSLIST not yet issued is of 

questionable accuracy. Further, at the military units that we visited, the 

methods they used to control and maintain visibility over JSLIST issued to 

them ranged from automated information systems, to spreadsheet 

applications, to paper, to dry eraser board, to none. The data maintained 

also varied. Some units maintained specific data including manufacturer, 

manufacture date, and production lot number, while other units maintained 

little or no data. 

Lacking an integrated system with standard data, if DOD needed to 

immediately identify the location and condition of JSLIST, it would have to 

initiate a labor-intensive, time-consuming data call with no assurance of 

accurate results. This lack of visibility has also resulted in packaged, 

unused JSLIST—coat and trousers—being declared excess and sold to the 

public over the Internet for about $3 each, while at the same time DOD was 

procuring hundreds of thousands of JSLIST annually at a cost of over $200 

per set (coat and trousers). 

The business practices we identified at Sears and Wal-Mart, recognized as 

leading-edge inventory management companies, offer a glimpse of what 

improvements in the efficiency and effectiveness of DOD’s business 

processes could yield. For example, we found that both companies had 

automated systems that electronically receive and exchange standard data 
Page 4 GAO-02-873T 

throughout the entire inventory management process, thereby reducing the 

need for manual data entry. As a result, for Sears and Wal-Mart, financial 

and logistical information moved through data systems with automated 

ordering of inventory from suppliers; receiving and shipping at distribution 

centers; and receiving, selling, and reordering at retail stores. Unlike DOD, 

with a proliferation of nonintegrated systems using nonstandard data, 

Sears and Wal-Mart require all components and subsidiaries to operate 

within a standard systems framework and do not allow individual systems 

development. 

With respect to inventory visibility, we found that the automated systems 

allowed both Sears and Wal-Mart to quickly identify the location of 

inventory items at their distribution centers and retail stores. For example, 

based on our inquiry, Wal-Mart headquarters staff in Bentonville, Arkansas, 

was able to readily identify for us the number of 6.4 ounce tubes of a 

specific brand of toothpaste on hand at their Fairfax, Virginia, retail store 

along with other information such as daily and weekly sales. 

Shifting to our second case study, we found that the purchase card process 

was somewhat automated and provided the flexibility to acquire goods and 

services on the day that they are needed. However, as we have found in 

related audit work,5

 purchases of computers with the purchase card were 

often not recorded in property records. Recording these items in the 

property records is an important step to ensure accountability and financial 

control over these assets and, along with periodic inventory, to prevent 

theft or improper use of government property. Without an automated 

mechanism to record accountable items acquired with the purchase card in 

the property records, the individual receiving the computer must manually 

inform the property management office of the acquisition for it to get 

properly recorded. 

With respect to payment, for certain transactions processed through DFASColumbus, monthly credit card statements are mailed or faxed, and DFASColumbus personnel manually re-enter each purchase. This manual 

process occurs because (1) the Navy has chosen not to electronically 

submit its purchase card statements, (2) the DFAS-Columbus payment 

5

U.S. General Accounting Office, Purchase Cards: Control Weaknesses Leave Two Navy 

Units Vulnerable to Fraud and Abuse, GAO-01-995T, (Washington, D.C.: July 30, 2001) and 

Purchase Cards: Continued Control Weaknesses Leave Two Navy Units Vulnerable to 

Fraud and Abuse, GAO-02-506T, (Washington, D.C.: Mar 13, 2001). 
Page 5 GAO-02-873T 

system is not capable of accepting electronic purchase card statements 

from CitiBank, the purchase card contractor, and (3) defense agencies have 

not yet implemented electronic purchase card processing. According to 

DFAS-Columbus, defense agencies should have this capability this summer. 

The charge to DFAS-Columbus customers of processing manually reentered purchase card statements is over $17 per line rather than nearly 

$7 per line for electronic transactions. In one example, a Navy activity 

submitted a monthly purchase card statement with 228 transactions for 

which DFAS charged over $3,900 to process, with the $17 per line 

processing fee well in excess of the price of several items purchased. In 

contrast, both Sears and Wal-Mart make extensive use of electronic data 

receipt and transmission. 

Scope and 

Methodology

To trace the information flow and document key data systems used to 

procure, control, and pay for JSLIST, we reviewed and analyzed procedures 

and system documentation. Further, we discussed business processes with 

managers and observed processing at key DOD organizations, including the 

JSLIST Program Office, DLA, DFAS-Columbus, and the Defense Contract 

Management Agency. We discussed and observed JSLIST production with 

managers at the Southeastern Kentucky Rehabilitation Industries and 

discussed JSLIST inventory and issue to the warfighter at selected military 

units. To trace the information flow and identify key data systems related 

to a computer bought using the government purchase card, we reviewed 

established procedures and discussed processes with managers of key 

organizations, including DOD’s Purchase Card Program Office, DFASColumbus, and two selected military service units. 

To compare certain aspects of DOD’s JSLIST inventory management and 

business processes related to a computer bought using the government 

purchase card, we discussed best business practices used by two leading 

retailers—Sears and Wal-Mart. We selected Sears and Wal-Mart based on 

our review of the study Achieving World-Class Supply Chain Alignment: 

Benefits, Barriers, and Bridges, by the Center For Advanced Purchasing 

Studies, Tempe, Arizona: 2001. We discussed and observed best practices 

used by these companies to manage their supply chain and compared these 

practices to the DOD business processes to identify opportunities to 

improve DOD’s business processes. We briefed DOD managers, including 

officials from DOD’s JSLIST Program Office, DLA, and DFAS, on the details 

of our review, including our objectives, scope, and methodology and our 

findings and conclusions. DOD officials generally agreed with our findings 

and conclusions. We relied upon our past work and that of the DOD 
Page 6 GAO-02-873T 

Inspector General in regard to accuracy and reliability of the information 

systems DOD uses to support JSLIST processing. Further, we did not audit 

the financial data provided by DOD or contained in its inventory systems. 

Details on where we performed our audit work are included in appendix I. 

We conducted our audit work from July 2001 through June 2002 in 

accordance with U.S. generally accepted government auditing standards, 

and we performed our investigative work in accordance with the standards 

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

Case Study One: Joint 

Service Lightweight 

Integrated Suit 

Technology

We found that DOD’s processes for procuring, controlling, and paying for 

JSLIST rely on manual data transmissions and entry into as many as 13 

nonintegrated data systems. Much of the data required to procure and field 

JSLIST are transmitted using e-mails, faxes, telephones, and hard-copy 

documents that must be read and manually entered into automated 

systems. This reliance on manual data results in slow, error-prone business 

processes.

In addition to these inefficiencies, the use of manual, stovepiped, and 

nonintegrated processes and systems have limited DOD’s ability to know 

how many JSLIST it has and where they are located. This lack of visibility 

was due to several factors. First, not all military units maintained the same 

JSLIST data. For example, some military units tracked key data such as 

manufacturer, manufacture date, and production lot number, while other 

units maintained little or no data. Second, military units maintained 

inventory data in nonstandard, stovepiped systems that did not share data 

with other DOD systems. The methods used to control and maintain 

visibility over JSLIST ranged from stand-alone automated systems, to 

spreadsheet applications, to pen and paper. One military unit we visited 

did not have any inventory system for tracking JSLIST. DOD’s inability to 

quickly identify and locate JSLIST has contributed to some military units 

declaring them excess to their immediate needs, while at the same time 

DOD had been attempting to expedite the issuance of the JSLIST to military 

units in response to the events of September 11, 2001.

Discussions with two leading private sector companies identified 

innovative best practices that offer opportunities for DOD to improve its 

business processes. Unlike DOD, Sears and Wal-Mart have highly 

automated inventory management processes and use standard data and 

systems and electronic data transmission and entry. From the corporate 

level, these two entities maintain continuous visibility over inventory from 

their suppliers to the store shelf.
Page 7 GAO-02-873T 

Background During Operation Desert Shield/Desert Storm, DOD noted that its chemical 

and biological equipment (1) could cause unacceptable heat stress to the 

wearer, (2) could limit freedom of movement and impair job performance, 

(3) was bulky, and (4) was not fully interoperable across the services. 

Furthermore, most of the existing suits were no longer manufactured and 

those still in service would expire by 2007, given the 14-year expected life. 

To address these issues, DOD developed new, lightweight individual 

protective equipment such as the JSLIST, which DOD began procuring in 

1997. An improved, multipurpose overboot is in procurement and new 

protective gloves are under development to improve manual dexterity 

and/or reduce heat stress on the wearer. Similarly, since the existing masks 

may cause some breathing difficulty, DOD is developing a new mask but 

does not expect to begin procurement until fiscal year 2006.6

JSLIST is a universal, lightweight, two-piece garment—coat and trousers—

designed to provide maximum protection against chemical and biological 

contaminants. Figure 1 shows the entire ensemble, which in addition to the 

coat and trousers includes footwear, gloves, protective mask, and 

breathing device. Our study did not include these other components.

6

U.S. General Accounting Office, Chemical and Biological Defense: Improved Risk 

Assessment and Inventory Management Are Needed, GAO-01-667 (Washington, D.C.: Sept. 

28, 2001).
Page 8 GAO-02-873T 

Figure 1: The Joint Service Lightweight Integrated Suit Technology (JSLIST) 

Ensemble

Source: JSLIST Program Office

Together, the ensemble is designed to provide maximum protection to the 

warfighter against chemical and biological contaminants without 

negatively affecting the ability to perform mission tasks. The focus of our 

review was to map the flow of data associated with the procurement, 

inventory control, and payment for JSLIST.
Page 9 GAO-02-873T 

According to DOD, for each JSLIST coat and trousers set they pay 

approximately $204. DOD began procuring JSLIST in fiscal year 1997 and 

expects to purchase about 4.4 million garments at a cost of about $1 billion 

over a 14-year period ending in fiscal year 2011. According to DOD, this 

amount includes the JSLIST procurement cost and a DLA surcharge for 

services, such as clarifying requirements, developing contract 

specifications and negotiating production levels with the contractors, 

developing and maintaining delivery schedules, and storing JSLIST7

 until 

issued to the military services. According to the JSLIST Program Office, by 

the end of fiscal year 2001, DOD had procured approximately 1.6 million 

JSLIST, and about 1.2 million had been issued to the military services. 

According to the Joint Service Set-Aside Project office, the JSLIST are 

expected to last about 14 years. The Joint Service Set-Aside Project office 

is responsible for testing JSLIST after 5 years in inventory, which 

represents the manufacturer’s warranty period. Officials indicated that 

they have started to test JSLIST that were procured in 1997 and to date 

none have failed. 

Figure 2 shows the private and public sector organizations involved in the 

production of JSLIST and the relationship among the various entities.

7

DLA stores JSLIST at its distribution centers in Albany, Georgia; San Joaquin, California; 

and Yokuska, Japan.
Page 10 GAO-02-873T 

Figure 2: Private and Public Sector Organizations Involved in the Production of the JSLIST

Source: JSLIST Program Office

These organizations include 8 private manufacturing companies, 1 private 

testing and technical support firm, and 11 DOD organizations. Of the 8 

private sector companies, 5 actually manufacture the JSLIST garments and 

the other 3 provide the component parts—the outer shell, carbon spheres, 

and protective liner. All these organizations play a role in JSLIST 

production ranging from requirements development to issuance of JSLIST 

to the warfighter. 

At this Subcommittee’s June 2000 hearing on individual chemical and 

biological protective equipment, the DOD Inspector General testified that 

the DLA had weak inventory controls over the Battle Dress Overgarment 

(BDO)—the JSLIST predecessor. DLA had major problems identifying and 

removing from inventory defective BDO protective suits. As a result, some 

of the defective suits had been shipped to U.S. forces in high-threat areas. 

The DOD Inspector General also pointed out that DLA had “materially 

misstated” the number of protective suits being stored. According to DLA, 

Joint Service

Materiel Group

Develop materiel solutions

Army Navy

Air

Force

Marine

Corps

Marine Corps Logistics

Base-Albany

Manages joint service

surveillance

Joint Service

Integration Group

Develop requirements

Natick Engineering

Support

Technical support

Defense Supply CenterPhiladelphia

contract

Department of Defense

Non Department of Defense

Creative Apparel

Associates

Peckham Vocational

Industries (National Industries of

the Severely Handicapped)

Southeastern Kentucky

Rehabilitation Industries

(National Industries of the

Severely Handicapped)

National Center for the

Employment of the Disabled

(National Industries of the

Severely Handicapped)

Tex-Shield

Manufactures protective

liner

Blucher

Manufacturers carbon

spheres

Group Home

Foundation Bradford

Manufactures outer

shell

Battelle

Testing and technical

support

(National Industries of the

Severely Handicapped)

▲

▲

▲

▲

▲ ▲ ▲ ▲

▲ ▲ ▲ ▲ ▲ ▲

▲ ▲

▲

▲ ▲

▲

▲

▲

▲ ▲

▲ ▲

▲

▲

▲

▲

▲

JSLIST

Joint Program Office

Defense Logistics

Agency

Manages inventory
Page 11 GAO-02-873T 

misplacement of items in the wrong storage areas and incorrect counts 

when the material was received contributed to the inventory inaccuracy. 

Extensive Manual Processes 

Used to Procure, Control, 

and Pay for JSLIST

Our analysis of the data flows for the different JSLIST processes 

documented 128 steps. Of these 100 steps—78 percent—were manual, 

meaning that much of the data are transmitted using e-mails, faxes, 

telephones, and paper documents that must be read, interpreted, and 

entered into the 13 nonintegrated systems. The remaining 28 steps—22 

percent—were by automated means. Appendix II provides a brief 

description of each system and identifies the function performed and the 

DOD system owner. 

With so many manual processes, substantial data entry is required. We also 

found that even data transmitted electronically are manually verified 

before being entered into another data system. Such practices are highly 

inefficient and prone to error. DOD has acknowledged that in today’s 

environment, current processes are slow and susceptible to errors. The 

following three sections highlight the data flows for the procurement, 

inventory control, and payment process. They provide a simplified 

representation of the actual processes and data flows, and the methods 

used for data transmission. 

Procurement In mapping the data flow for JSLIST, we found the procurement process to 

be the least automated. Figure 3 demonstrates the extensive use of manual 

processes between the JSLIST Program Office, the Defense Supply CenterPhiladelphia, the contractors, and the Defense Distribution Center. Figure 

3 does not include all of the processes that are associated with the 

procurement process.
Page 12 GAO-02-873T 

Figure 3: Overview of the JSLSIT Procurement Process and the Use of Manual 

Processes

Source: GAO

As shown, most of the data transmissions are manual—e-mail, fax, and 

regular mail. For example, JSLIST garments requirements data—which 

show the number and specific sizes that are to be manufactured—are emailed from the JSLIST Program Office to DLA’s Defense Supply Center, 

Philadelphia, which is responsible for negotiating the terms of the contract 

with the five manufacturers. The contractor— via fax—notifies the 

Defense Supply Center, Philadelphia, that the JSLIST garments have been 

produced and shipped to the Defense Distribution Center for storage. The 

contractors also send shipping documents, including the Material 

JSLIST

Program Office

Defense Supply 

Center - Philadelphia

Requirements (email)

Contractors

Contract and 

delivery schedules 

(mail)

Defense Distribution 

Center – (Albany)

Shipping 

Document 

(fax)

JSLIST and 

shipping 

documents 

(truck)

Defense 

Contract 

Management 

Agency

MOCAS

MOCAS – Mechanization of 

Contract Administration System

Contract

(mail)
Page 13 GAO-02-873T 

Inspection and Receiving Report (DD Form 250), with the JSLIST shipment 

to the Defense Distribution Center.

Inventory Control The inventory control process is slightly more automated than the 

procurement process. This is due to DLA’s use of the Distribution Standard 

System (DSS) and the Standard Automated Material Management System 

(SAMMS). However, as shown in figure 4, the military service units still use 

extensive manual data entry in their efforts to control the JSLIST garments 

that have been distributed to them. 
Page 14 GAO-02-873T 

Figure 4: Overview of the Inventory Control Process for the JSLIST

Source: GAO.

According to DLA personnel, DSS contains data on the number of JSLIST 

procured, the number in DLA’s warehouse facilities, and the number of 

JSLIST that have been distributed to the military services. The data must 

be manually entered into DSS from the shipping documents that are 

Contractors

Defense 

Distribution 

Center 

(Albany)

DSS

Army Units Air Force

Units Navy Units

JSLIST and Shipping 

Documents (Truck)

Manual 

Entry from 

Shipping 

JSLIST and Documents

Shipping 

documents (truck)

SARSS Paper Dry Erase

Board None

Manual 

Entry

Manual 

Entry

Manual 

Entry

Manual 

Entry

Manual 

Entry

Manual 

Entry

MICAS

Excel 

Spreadsheet

Defense 

Supply Center 

(Philadelphia)

SAMMS

DSS – Defense Standard System

MICAS – Mobile Inventory Control Accountability System

SARSS – Standard Army Retail Supply System

SAMMS – Standard Automated Material Management System

Electronic

Transmission
Page 15 GAO-02-873T 

received from the contractors. Once entered into DSS, shipping receipt 

data are electronically passed from DSS to SAMMS at the Defense Supply 

Center-Philadelphia. DLA also pointed out, however, that once JSLIST are 

distributed to the military services, DSS does not maintain any inventory 

control. At this point, JSLIST data are removed from DSS and DLA loses 

visibility of JSLIST. As shown in figure 4, military services use various 

methods to maintain inventory control. Of the three Army units that we 

visited, one used an automated system—Standard Army Retail Supply 

Systems (SARSS), one used a spreadsheet application, and one used paper 

and pen. Of the two Navy units visited, one used a dry eraser board, with 

handwritten notes and one did not maintain an inventory of JSLIST. Both 

of the Air Force units visited used the Mobility Inventory Control 

Accountability System (MICAS) to control their JSLIST inventory. Since 

MICAS is a stand-alone system that operates independently at each 

location, data cannot be shared between the various locations, nor does it 

have the capability to provide data to higher command levels. 

Payment Process The payment process is the most automated. DFAS—the central 

organization in the payment process—uses more automated processes 

than any other organization visited. As shown in figure 5, electronic 

exchange of data was used more often in the payment process than in the 

procurement and inventory control processes. 
Page 16 GAO-02-873T 

Figure 5: Overview of the Payment Process for the JSLIST

Source: GAO.

As shown in figure 5, once the invoice is received from the contractor—via 

the mail—DFAS electronically obtains shipping data from the SAMMS, and 

contract data from the Mechanization of Contract Administration System 

(MOCAS). Invoice, contracting, and shipping data are all needed for DFAS 

to process the payment to the contractor by electronic funds transfer 

through the Standard Accounting and Budgeting Reporting System 

(SABRS). 

(SAMMS)

Contractor(s)

DFAS

Defense 

Supply 

Center -

Philadelphia

Defense 

Contract 

Management 

Agency

Contract Data

(MOCAS)

Invoice 

(mail)

Requisition 

Requirement 

Delivery 

Schedule data

EFT – Electronic Funds Transfer

MOCAS – Mechanization of Contract Administration System

SAMMS – Standard Automated Material Management System

EFT Payment

S GAO
Page 17 GAO-02-873T 

Once the data enters DFAS, the payment process is automated and each 

DFAS division involved in the payment process has the ability to use the 

same data. For example, payment data are transmitted to the JSLIST 

Program Office via the SABRS. However, DFAS still relies on some manual 

processing. In DFAS’ Entitlement Division, individuals manually check to 

ensure that required invoice data are in the Electronic Document 

Management system, and then manually enter these data into MOCAS 

system. This system helps supports the contract administration aspects of 

the JSLIST program. We have previously reported8

 on long-standing 

problems in contract pay through MOCAS. For example, for fiscal year 

1999, DFAS data showed that almost $1 of every $3 in contract payment 

transactions was for adjustments to previously recorded payments—$51 

billion of adjustments out of $157 billion in transactions.

We have also reported9

 that the manual entry of data into systems is prone 

to keypunch errors, errors caused when data entry personnel are required 

to interpret sometimes illegible documents, and inconsistencies among 

data in the systems. DOD has acknowledged that the systems used to 

support its business operations do not provide relevant, reliable, and timely 

information. As discussed in our June 4 testimony,10 the department has 

begun efforts to develop an enterprise architecture that should detail the 

target or “to be” environment for DOD’s business operation systems and 

show how these systems will interact. Managed properly, an integrated 

system development effort can clarify and thus help to optimize the 

interdependencies and interrelationships among an organization’s business 

operations and the underlying data systems supporting these operations.

Lack of Asset Visibility 

Affects Mission Readiness

DOD and the military services lack asset visibility and control over JSLIST. 

There is no DOD-wide system that contains the data needed—number of 

JSLIST, manufacturer, manufacture date, and production lot number—to 

locate specific JSLIST garments that are in the possession of the military 

services. As a result, if the JSLIST garments had to be recalled for any 

reason, there is no assurance that DOD can readily or accurately locate the 

8

U.S. General Accounting Office, Canceled DOD Appropriations:$615 Million of Illegal or 

Otherwise Improper Adjustments, GAO-01-697 (Washington, D.C.: July 26, 2001). 

9

U.S. General Accounting Office, Financial Management: Seven DOD Initiatives That 

Affect the Contract Payment Process, GAO/AIMD-98-40 (Washington, D.C.: Jan. 30, 1998). 

10GAO-02-784T. 
Page 18 GAO-02-873T 

1.2 million JSLIST that have been issued to the military services. In 

essence, DOD is faced with the same predicament today as it had in June 

2000, when hearings by this Subcommittee chronicled DOD’s inability to 

identify the location of the BDOs—the predecessor of JSLIST. BDOs 

needed to be recalled and removed from the inventory because they were 

found to be defective, but even after a data call DOD was unable to retrieve 

all of the BDOs. 

Our September 2001 report11 noted that as of April 2001, DOD had not 

found about 250,000 of the defective BDO suits. DOD was not certain if the 

suits had been used, were still in supply, or were sent to disposal. That 

report also pointed out that DOD could not (1) monitor the status of its 

protective equipment inventory because the military services and DLA used 

at least nine different nonintegrated data systems, (2) determine whether 

all of its older chemical suits would adequately protect service members 

because some of the inventory systems did not contain essential data 

needed to determine usability of inventoried chemical suits, and (3) easily 

identify, track, and locate defective suits because inventory records did not 

always include contract and lot numbers. These shortcomings are 

consistent with the long-term problems in 

DOD’s inventory management that we have identified as a high-risk area 

due to a variety of problems, including ineffective and wasteful 

management systems and procedures.12 To improve DOD’s control and 

accountability of chemical and biological equipment, we made several 

recommendations, one of which was to implement a fully integrated 

inventory management system.

Our visits to DLA’s Defense Distribution Center, Albany, GA, and selected 

military service units found that these weaknesses remain today. DOD 

does not have reliable asset visibility for JSLIST throughout the 

department. This problem can be attributed to several factors. First, 

according to the DOD Inspector General in testimony before this 

Subcommittee in June 2000, DSS—a relatively new and modern system is 

“chronically inaccurate.” The DOD Inspector General pointed out that its 

physical count of chemical protective suits disclosed that 420,000 suits 

were not on-hand as recorded in the inventory balance in DSS. Even if DSS 

11GAO-01-667.

12GAO-01-244.
Page 19 GAO-02-873T 

were accurate, it only provides visibility and control over JSLIST located in 

DLA’s warehouse facilities. DSS does not contain any data that can be used 

from a departmentwide perspective to identify the location of the 1.2 

million JSLIST garments that have been distributed to the military services. 

Second, once JSLIST are issued to the military service units, the lack of 

standard data and nonintegrated systems hinders asset visibility. Our visits 

to Army, Navy, and Air Force military units disclosed that all units did not 

maintain key data such as manufacturer, manufacture date, and production 

lot number. These data would be essential if JSLIST had to be recalled. 

Without these data, DOD would have to initiate a worldwide data call, with 

no assurance of the accuracy of the result. Of the three Army units visited, 

only one maintained these data, while neither of the two Navy units 

maintained these key data. Both Air Force units maintained the 

manufacturer, manufacture date, and production lot number. 

In addition, the units we visited used stovepiped, nonintegrated systems to 

track their JSLIST. As shown in figure 4, the method used varied from an 

automated system to no tracking of any kind. Of the Army units, one unit 

used the Standard Army Retail Supply System, another unit used a standalone spreadsheet application, and the third unit used paper and pen to 

control its JSLIST inventories. At the two Navy units visited, one used a 

marker and dry eraser board and the other Navy unit did not maintain a 

JSLIST inventory—manual or automated. Both Air Force units used 

MICAS to control JSLIST. According to Air Force personnel, this is a 

standard system used to maintain comprehensive control of assets from 

receipt to disposal. Information must be entered manually into MICAS. Air 

Force personnel also stated that they are able to identify and locate service 

personnel that have JSLIST in their possession by using MICAS. The Air 

Force personnel noted that MICAS was designed for use at the unit level, 

but the Air Force plans to upgrade the system to provide more visibility 

over JSLIST to higher command levels. 

Personnel at the Army and Navy units were interested in the potential for 

using MICAS. We provided these personnel with a point of contact in the 

MICAS program office. As of May 2002, one Army unit decided to try 

MICAS in a stand-alone mode to test its suitability and one Navy unit 

decided not to consider the use of MICAS it only used JSLIST for training 

and therefore it determined that a system was not needed. The other Army 

and Navy units are considering the use of MICAS. 
Page 20 GAO-02-873T 

Because of DOD’s weaknesses locating and recalling defective BDOs, we 

inquired of the Defense Threat Reduction Agency—responsible for funding 

the JSLIST program—if they had the means to locate all JSLIST 

departmentwide if a similar situation were to occur. A program official 

stated that they could account for the JSLIST up to the point they are 

distributed to the military services. As noted previously, once suits are 

distributed, accountability becomes more difficult because each service 

has a separate logistics, supply, and maintenance management system for 

tracking items. Further, the official noted that these systems are not 

connected. 

The program official also stated that the requirement to track location, 

manufacturer, manufacture date, and production lot number of each 

JSLIST would be the responsibility of DLA’s Business System 

Modernization (BSM) program. BSM is an 8-year (fiscal year 2000 through 

fiscal year 2007), four-phased program that is intended to modernize DLA’s 

business functions such as materiel management, distribution, and 

cataloguing by replacing obsolete, nonintegrated data systems with a 

web/network-based logistics system using commercial, off-the-shelf 

products. The project is estimated to cost nearly $900 million. As 

discussed in our June 2001 report,13 BSM is intended to modernize DLA’s 

current materiel management business function from being a mere 

provider and manager of physical inventory to becoming primarily a 

manager of supply chains—linking customers with appropriate suppliers 

and tracking physical and financial assets. 

However, we believe reliance on BSM to provide adequate visibility over 

JSLIST is ill advised for several reasons. First, as pointed out in our June 

2001 report, BSM was being implemented without the benefit of a DLA 

architecture or a DOD-wide logistics management architecture. Further, we 

noted that DLA did not have the management controls in place to develop, 

implement, and maintain an architecture. As discussed in our June 4 

testimony,14 without an architecture to guide and constrain information 

technology investments, DOD runs the serious risk that its system efforts 

will perpetuate the existing system environment that suffers from system 

13U.S. General Accounting Office, DLA Should Strengthen Business System Modernization 

Architecture and Investment Activities, GAO-01-631 (Washington, D.C.: June 29, 2001).

14GAO-02-784T
Page 21 GAO-02-873T 

duplication, limited interoperability, and unnecessarily costly operation 

and maintenance. 

Second, even if DLA successfully implements the inventory control phase 

of BSM by March 2005, the majority of JSLIST may have already been 

procured and issued to the military services without asset visibility, 

including a record of critical tracking data, such as manufacturer, 

manufacture date, and production lot number. As of the end of fiscal year 

2001, about 1.6 million JSLIST had been purchased and about 1.2 million 

garments had already been issued to the military services. At the expected 

procurement rate of 330,000 to 350,000 JSLIST annually, DOD will have 

purchased about 3 million of the 4.4 million of the JSLIST by fiscal year 

2005. 

Lack of Visibility 

Contributed to Excessing 

and Selling JSLIST 

DOD’s lack of asset visibility over the JSLIST has resulted in poor inventory 

control. While DOD expedited the issue of the JSLIST garments to the 

military services in response to the events of September 11, 2001, Army, 

Navy, and Air Force units have sent JSLIST to the Defense Reutilization 

Marketing Office (DRMO) as being excess to their immediate needs. From 

January 2001 through June 2002, 1,934 JSLIST coats and trousers valued at 

about $207,00015 were turned into DRMO. Of the 1,934 coats and trousers 

declared excess, 1,813 were turned-in after September 11, 2001. Table 1 

shows the disposition of the 1,934 coats and trousers.

Table 1: Disposition of JSLIST Coats and Trousers Declared Excess 

a

Not usable property

b

Reissued to another DOD component, federal agency or program

c

Items still in the property screening phase and eligible for reutilization 

15Reported acquisition price.

Number of coats and trousers excessed Acquisition price Disposition 

429 $45,745 Public auction

917 $96,206 Scrappeda

275 $30,141 Reutilizedb

313 $34,891 Pendingc
Page 22 GAO-02-873T 

As shown in the table 1, 275 of the coats and trousers were reissued to 

other government entities. One of the purposes of DRMO is to reallocate 

inventory that is excess to one organization’s needs to an organization that 

has insufficient inventory to meets its needs. We do not have any 

information regarding the rationale as to why 917 coats and trousers were 

scrapped and 313 are considered pending, which means they are eligible 

for reutilization. 

According to DLA, the 429 coats and trousers that were sent to a DOD 

contractor, Government Liquidation,16 and reportedly sold, at internet 

auction for approximately $1,100—or less than $3 each. As of June 18, 

2002, none of the JSLIST reportedly sold by Government Liquidation had 

been released and remained at the company’s warehouse in Kapolei, 

Hawaii.

We met with personnel at Hickam Air Force Base, Hawaii, and the Navy 

Explosives Ordnance Disposal Unit, Barbers Point, Hawaii, to determine 

why the JSLIST were excessed and sent to DRMO. 

• Officials from the Air Force unit stated that JSLIST was sent to DRMO 

because (1) they did not belong to their unit and had been in their 

warehouse for at least 3 years, (2) the boxes containing JSLIST were 

marked “training only,” and (3) although still in vacuum-sealed 

packages, they thought JSLIST had exceeded their expiration date. 

They also indicated that prior to turning JSLIST in to DRMO, they 

checked with the Base Supply Office and were informed that no one else 

on the base needed JSLIST. 

• The Navy unit stated that JSLIST were sent to DRMO because they had 

more than the 32 required to meet their immediate needs. Prior to 

turning JSLIST in to DRMO, the Navy unit did not consult with the 

Supply Office to determine if they could be used elsewhere. They 

indicated that they thought this was a DRMO responsibility. Believing 

that the garments were in excellent condition, they coded them “E” 

upon turning them in to DRMO. However, an item code of “E” signifies 

that the goods are damaged. 

16Government Liquidation, LLC (GL) is under contract with the Department of Defense for 

the sale of surplus property. GL operates an online sales channel that allows surplus buyers 

to purchase available assets over the Web in a “convenient and open environment.” GL 

manages over 2 million square feet of warehouse space and maintains offices on over 150 

military bases throughout the continental U.S., Alaska, Hawaii, Puerto Rico, and Guam.
Page 23 GAO-02-873T 

Our physical inspection of the JSLIST garments in the Government 

Liquidators warehouse found that all but 30 were marked “training only.” 

These 30 were turned in by the Navy unit and appeared to be in good 

condition. The “training only” JSLIST should not be used in a combat 

environment because they are considered to be defective for that purpose. 

However, since they were still in vacuum-sealed packages, they appeared 

suitable for training purposes. When JSLIST are issued to the warfighter, 

they generally receive a number of sets—coat and trousers—based upon 

their assignment. For example, at one of the Air Force units we visited, 

each member is to have five JSLIST sets—four for operations and one for 

training. Without a “training only” JSLIST, one that would have otherwise 

been available for operations must be used for training. 

On June 19, 2002, we told the JSLIST Program Manager about this situation. 

He stated that he was not aware that JSLIST garments were being excessed 

and sold and acknowledged that DOD does not have visibility over the 

JSLIST garments. He also stated that military service units were 

“clamoring” for JSLIST garments for training purposes. Further, he stated 

that none of these garments should have been turned in to DRMO. We 

suggested that he take action to terminate the sale of these garments. He 

indicated that he would initiate immediate action to do so. 

Best Business Practices 

Offer Opportunities for 

DOD to Improve Efficiency 

and Effectiveness of its 

Business Operations

Private sector companies, driven by today’s globally competitive business 

environment, have developed innovative best business practices to cut 

costs and meet customer needs by streamlining their logistics operations. 

Best business practices refer to the processes, practices, and systems 

identified in public and private organizations that performed exceptionally 

well and are widely recognized as improving an organization’s performance 

and efficiency in specific areas. Some of the most successful improvement 

efforts include a combination of practices that are focused on improving 

the entire logistics pipeline—an approach known as supply chain 

management. DOD has acknowledged that best business practices of 

private industry offer opportunities for making significant improvements to 

its business operations. As evidenced by the information presented today, 

implementation of fundamental private sector supply chain management 

practices by DOD would substantially improve it efficiency and 

effectiveness. 
Page 24 GAO-02-873T 

Our discussions with two leading-edge retail companies—Sears and WalMart—identified business practices that are vastly different than those 

employed by DOD. Unlike DOD, which has a proliferation of nonintegrated 

systems, nonstandard data, extensive use of manual processes, and limited 

visibility over inventory, Sears and Wal-Mart are at the other end of the 

spectrum. Sears and Wal-Mart are highly automated, use standard data, 

and make extensive use of electronic data interchange (EDI).17 Further, 

each entity is able to maintain visibility of its inventory throughout the 

various levels of its organization. 

Sears, a leading retailer of apparel, home and automotive products, and 

services, had reported annual revenue of over $41 billion and net income of 

approximately $735 million for its fiscal year 2001. Sears operates 867 mallbased retail stores, most with co-located Sears Auto Centers, and an 

additional 1,318 specialty stores including hardware, outlet, tire and battery 

stores as well as independently owned stores, primarily in smaller and rural 

markets. Wal-Mart Stores, Inc., is the world’s largest retailer with reported 

annual net revenue of over $193 billion and net income of almost $6.3 

billion for its fiscal year 2001. The company operates 4,189 retail stores in 

all 50 states and 9 foreign countries. Of these stores, 2,348 are regular 

stores, 1,294 are supercenters, 528 are Sam’s Clubs, and 19 are 

neighborhood markets. 

Wal-Mart and Sears Are Highly 

Automated

As previously discussed, the processes DOD uses to procure, control, and 

pay for the JSLIST garments are characterized by numerous manual 

interventions with support from as many as 13 nonintegrated automated 

information systems. With 78 percent of the data used to support the 

JSLIST program involving some form of manual entry, DOD’s logistics 

processes are slow and susceptible to error. As a result, DOD’s business 

processes do not provide relevant, reliable, and timely financial and 

logistical information. In contrast, Sears and Wal-Mart have systems that 

provide relevant, reliable, and timely information. 

As noted in our June 4 testimony18 before this Subcommittee, systems have 

proliferated within DOD. At the time of the hearing, DOD acknowledged 

that it used at least 1,127 systems in the processing of financial information. 

17Electronic data interchange (EDI) is the automated exchange of predefined and 

standardized business data among information systems of two or more organizations.

18GAO-02-784T. 
Page 25 GAO-02-873T 

For the most part, these systems are not integrated with each other. In the 

past, DOD’s system development efforts have been stovepiped within the 

department’s organizational entities, with system development money 

spread across DOD and no central control. In addition, standard data were 

not always used across organization boundaries. These limitations 

preclude DOD and the Congress from receiving the relevant information 

that is needed in the decision-making process. 

This is clearly demonstrated by the use of 13 nonintegrated systems 

associated with JSLIST. In our discussions with Wal-Mart officials, they 

noted that Wal-Mart does not permit its subsidiaries or components to 

develop their own system solutions. System funding and development is 

viewed from a corporate perspective. Therefore, stovepiped efforts that 

exist in DOD would not occur within Wal-Mart. Wal-Mart also noted that 

when an acquisition is made, the new entity is required to convert to the 

Wal-Mart system—this brings about the standardization of data. 

Standardization of data and integration of systems is important because it 

aids in financial accounting and inventory management, including asset 

visibility. 

In dealing with suppliers, both Sears and Wal-Mart make extensive use of 

EDI—which means that data are received and transmitted to and from 

suppliers electronically. In essence, using EDI virtually eliminates the need 

for human intervention and thereby helps to reduce the risks of errors 

being made. Sears and Wal-Mart representatives stated that the more 

manual intervention in the process, the less likely the information will be 

relevant, reliable, and timely. Sears’ personnel pointed out that over 99 

percent of vendors’ purchase orders are processed using EDI. According 

to Sears’ representatives, if a supplier does not have EDI capability, they 

are required to contract with a third party to submit the data to Sears 

electronically. Similar to Sears, Wal-Mart also makes extensive use of EDI. 

According to Wal-Mart representatives, about 85 percent of their suppliers 

use EDI. 

Visibility Over Inventory As previously discussed, DOD cannot readily determine the location of the 

1.2 million JSLIST that have been issued to the military services because of 

nonstandard systems and the lack of standard data across DOD—

manufacturer, manufacture date, and production lot number—that would 

be needed to quickly locate and remove JSLIST from inventory, if recalled. 

These data should also be maintained to locate the JSLIST and, if necessary 

move them where needed in the event of a chemical or biological attack. 

Unlike DOD, Sears and Wal-Mart have integrated systems with standard 
Page 26 GAO-02-873T 

data across the organizations and as a result have visibility over inventory 

regardless of location. 

For example, at our request, Wal-Mart headquarters staff in Bentonville, 

Arkansas immediately identified for us the number of 6.4 ounces tubes of a 

brand-name toothpaste on the shelf at one of their retail stores in Fairfax, 

Virginia. In addition to identifying 25 tubes of this toothpaste at Fairfax, 

Virginia, at approximately 1:15 PM, on June 12, 2002, Wal-Mart’s system 

showed daily and weekly product sales and the date of the last shipment 

and the quantity received. Figure 6 compares Wal-Mart’s and DOD’s 

visibility over their respective inventories. 

Figure 6: DOD and Wal-Mart Visibility Over Inventory

Source: GAO

According to Wal-Mart representatives, the level of visibility they have over 

inventory items as shown in figure 6, is critical to quickly remove from the 

shelf any recalled items. Wal-Mart views the efficient and effective removal 

of recalled items essential to maintaining credibility with its customers.

Corporate 

Office

Distribution 

Center Retail Centers Private Sector

Inventory Object

DOD

Defense 

Logistics 

Agency

Military 

Units

Military 

Services

DOD

Full Visibility

Partial Visibility

No Visibility

Toothpaste
Page 27 GAO-02-873T 

Wal-Mart also demonstrated control and visibility over its inventory at the 

Bentonville, Arkansas Distribution Center. The information in the system 

showed the specific location and number of a certain brand of 27-inch 

televisions in the warehouse. We selected 4 of the 202 televisions listed and 

verified that all 4 were at the specific location indicated in the system. 

In addition to using technology to streamline their inventory processes, 

Sears and Wal-Mart personnel identified several other keys to their success. 

For example, they stated there needs to be an understanding throughout 

the organization of what it is trying to achieve. Clearly, all must understand 

the goals and objectives and it is imperative that all parties work in a 

cooperative manner. At DOD, as discussed in our June 4 testimony,19 this 

has not always been the case. Cultural resistance to change and military 

service parochialism have played a significant role in impeding past 

attempts to implement broad-based management reforms at DOD. If the 

barriers to change are not removed, DOD will continue to be faced with the 

business-as-usual mentality and its current endeavors to bring about 

substantive change to the department’s current flawed business operations 

will be unsuccessful. If this occurs, as it has in the past, billions of dollars 

will have been spent without any marked improvement in departmental 

operations.

Wal-Mart officials also noted that another key element in their success has 

been the use of individual performance metrics and incentives throughout 

the organization. Whether it is the manager of a given store or someone 

working in the warehouse, performance metrics have been established and 

each person is evaluated against those metrics on a routine basis. If the 

person’s performance exceeds the metrics, he or she is rewarded. For 

example, hourly workers can receive wage increases for exceeding 

corporate productivity and inventory accuracy goals. Store managers have 

metrics such as store profitability and inventory shrinkage and receive 

bonuses for achieving the metrics. For DOD we previously identified20 the 

lack of incentives as one of the major underlying causes for the failure of 

past reform efforts within the department. 

19GAO-02-784T. 

20GAO-02-784T. 
Page 28 GAO-02-873T 

Case Study Two: 

Government Purchase 

Cards

Using computers acquired by government purchase cards as a case study, 

we found that inefficient billing procedures at DFAS-Columbus have 

increased the costs being incurred by some DOD customers for the 

payment of monthly purchase card statements. For certain transactions 

processed through DFAS-Columbus, monthly credit card statements are

mailed or faxed and each purchase is manually re-entered because (1) the 

Navy has chosen not to electronically submit its purchase card statements, 

(2) the payment system is not capable of accepting electronic purchase 

card statements from CitiBank, the purchase card contractor, and 

(3) defense agencies have not implemented electronic purchase card 

processing. DFAS-Columbus charges customers over $17 per line if the 

data are manually entered and about $7 per line if the data are transmitted 

electronically. According to the DFAS-Columbus Commercial Pay Services 

Business Manager, across all DFAS Centers21 purchase card statements are 

processed electronically for about 90 percent of the Air Force’s statements, 

about 80 percent of the Army’s statements, and about 50 percent of the 

Navy’s statements. 

Background The purchase card is a governmentwide commercial credit card issued 

under a government contract to federal agency employees to more 

efficiently purchase needed goods and services directly from vendors. The 

purchase card can be used for both micropurchases and payment of other 

purchases. The Federal Acquisition Regulation, Part 13, “Simplified 

Acquisition Procedures,” establishes criteria for using purchase cards to 

place orders and make payments. In addition, the Department of the 

Treasury, DOD and the military services have issued regulations, policy, 

and guidelines governing the use of the purchase card.

Prior to DOD’s implementation of the purchase card program in 1994, 

buying goods and services was a labor- and paper-intensive process—

requisitions were prepared and sent to procurement offices. The 

procurement offices issued purchase orders, goods and services were 

delivered, receiving reports were prepared, and payments were then made. 

The purchase card program was designed to simplify the purchase process 

by eliminating the need to process purchase requests through procurement 

21DFAS Centers are located in Columbus, OH; Cleveland, OH; Denver, CO; Indianapolis, IN; 

and Kansas City, MO.
Page 29 GAO-02-873T 

offices and avoiding the administrative and documentation requirements of 

the traditional contracting processes. In mapping the flow of data for the 

use of the purchase card to procure, control, and pay for a computer item, 

we identified 19 systems. Appendix III provides a brief description of each 

system identified, the function performed by the system, and the system 

owner. 

When scanning the purchase card to obtain authorization through the bank 

network, merchants are to verify the validity of the transactions using a 

point of sale scanning device. This device can perform up to 50 

authorization checks such as verifying the expiration date and account 

number, ensuring the card has not been reported lost or stolen, and 

determining that the purchase amount is within the prescribed dollar 

limits. In fiscal year 2001, DOD reported that it used the purchase card in 

procuring goods and services valued at over $6.1 billion. 

Although we support a well-controlled purchase card program to 

streamline the government’s acquisition process, significant breakdowns in 

internal controls have contributed to fraudulent, improper, and abusive 

purchases and theft and misuse of government property. Our March 13, 

2002,22 testimony highlighted the vulnerability of two Navy units to 

fraudulent, improper, and abusive use of government purchase cards. 

Currently, we have additional efforts ongoing to review internal controls 

over purchase card processes used by selected Army, Air Force, and Navy 

units. 

Inefficient Billing Process 

Increases Costs

At DFAS-Columbus, we observed that much of the purchase card payment 

process is manual. Certified monthly purchase card statements are 

manually received from Navy working capital fund activities and defense 

agencies. Upon receipt of the monthly statements, DFAS-Columbus 

accounting technicians manually enter line-by-line transaction data into the 

Computerized Accounts Payable System (CAPS) for payment. The data 

entered include information such as document number, year, activity and 

funding code, cost code, and dollar amount for each individual transaction. 

The manual entry of the data is the result of CAPS not being capable of 

accepting purchase card statements electronically from CitiBank—the 

government contractor providing purchase card services to the Navy. 

22GAO-02-506T.
Page 30 GAO-02-873T 

Further, DFAS-Columbus personnel informed us that even if CAPS had the 

capability, Navy working capital fund purchase card transactions would 

have to be entered manually because the Navy has decided not to 

electronically submit purchase card statements. 

According to DFAS-Columbus officials, DFAS charges $17.13 for each line 

on the monthly statement that must be manually entered into the payment 

system. However, the processing fee is reduced to $6.96 per document line, 

if the monthly statement is electronically processed. Since DFAS is a 

working capital fund activity, the fee charged should represent the actual 

cost being incurred in providing the service. We did not audit these fees to 

determine if they represented actual costs. As noted previously, in our 

discussions with Sears and Wal-Mart, we were informed that the use of EDI 

is critical. For example, at Sears, over 99 percent of the purchase orders 

are transmitted via EDI, which greatly reduces the amount of manual entry 

that is needed and also reduces the risk that errors will be made in the reentry of data. 

The following examples show the cost of manual entry of purchase card 

transactions. 

• On February 13, 2002, DFAS-Columbus received a certified purchase 

card monthly statement detailing 271 purchases totaling nearly $24 

million from the Defense Commissary Agency, Fort Lee, Virginia. At 

$17.13 per document line, the DFAS fee for manually processing this 

invoice was over $4,600. If the Defense Commissary Agency could have 

submitted the invoice electronically, the DFAS fee would have been 

about $1,890, or less than half the charge of manual processing. 

• On January 29, 2002, DFAS-Columbus received a certified purchase card 

monthly statement detailing 228 lines on the monthly statement for 

purchases costing nearly $957,000 from the Navy Fleet Material Support 

Office in Mechanicsburg, Pennsylvania. Since the 228 lines had to be 

manually entered into CAPS, the Navy incurred a processing fee of 

$3,900. However, if the monthly statement had been electronically 

processed, the Navy would have paid DFAS approximately $1,590. 

As shown in table 2, we found instances in which the amount of the 

purchase was less than the amount charged for processing the one line 

from the monthly statement. 
Page 31 GAO-02-873T 

Table 2: Selected Line Items From a Purchase Card Monthly Statement and Related 

DFAS Processing Fee

Source: Certified purchase card monthly statement dated January 21, 2002, from the Fleet Industrial 

Supply Center, Norfolk, VA, and DFAS-Columbus.

DFAS-Columbus officials informed us that purchase card statements from 

Navy working capital fund activities that are paid by DFAS-Columbus are 

manually processed for two reasons. First, the Navy has chosen not to 

electronically send purchase card statement paid from Navy working 

capital fund activities. Second, DFAS-Columbus has not yet made the 

necessary enhancements to the payment system to receive electronic 

invoices from the Citidirect system—the system used by the contractor 

providing the Navy purchase cards. Third, defense agencies have not 

implemented electronic purchase card processing. According to DFASColumbus personnel, monthly statements they receive from defense 

agencies, including the Defense Contract Management Agency, Defense 

Commissary Agency, and the Defense Information Systems Agency are to 

be received electronically beginning this summer. 

Further, our November 2001 report23 discussed concerns we had with the 

failure to record accountable items in the property records. Accountable 

property includes easily pilferable or sensitive items such as computers 

and related equipment, digital cameras, and cell phones. Our report pointed 

out that at two Navy activities we identified instances where computer 

monitors and laptop computers were not recorded in their property 

records and could not be found. Recording these items in the property 

records is an important step to ensure accountability and financial control 

over these assets. In addition, our also report expressed concern about the 

use of the government purchase card to procure computers that could be 

more economically and efficiently procured through bulk purchases. We 

made recommendations to the Commander of the Naval Supply Systems 

Command aimed at correcting both of these problems. 

Vendor Amount of purchase Processing fee

Staples $4.37 $17.13

Culligan Water Conditioning $5.50 $17.13

Office Depot $8.59 $17.13

23U.S. General Accounting Office, Purchase Card: Control Weaknesses Leave Two Navy 

Units Vulnerable to Fraud and Waste, GAO-02-32 (Washington, D.C.: Nov. 2001). 
Page 32 GAO-02-873T 

Conclusion The JSLIST and purchase card case studies clearly demonstrate that DOD’s 

current business operations are inefficient and ineffective. Specifically, 

these case studies are real-time examples of the high cost of nonintegrated 

systems that require substantial manual intervention in nearly every step of 

the process. In addition, mission performance is also affected by these 

processes as shown by DOD’s lack of visibility over the JSLIST. These case 

studies are small examples of the broader financial and inventory 

management and systems modernization challenges facing DOD that were 

highlighted in our June 2, 2002 testimony24 before this Subcommittee. 

The integrated, automated processes used by Wal-Mart and Sears offer a 

glimpse of the cost savings and improved mission performance that DOD 

could achieve with successful reform. Unlike DOD, market forces and a 

strong system of accountability drive Sears and Wal-Mart to operate as 

efficiently and effectively as possible. As we have previously stated, for 

DOD to succeed in its reform efforts, strong leadership from the Secretary 

will be necessary to develop a system of accountability and incentives and 

to cut through the deeply embedded cultural resistance to change and 

service parochialism. In addition, continued congressional oversight such 

as the hearing today will be critical to successfully reforming DOD’s 

business operations. The Secretary has recognized the importance of 

reform and estimated that DOD could save 5 percent of its budget—or 

about $15 billion to $18 billion annually—by successfully transforming 

DOD’s business processes.

Mr. Chairman, this concludes our statement. We would be pleased to 

answer any questions you or other members of the Subcommittee may 

have at this time. 

Contacts and 

Acknowledgments

For further information about this testimony, please contact Gregory D. 

Kutz at (202) 512-9095 or kutzg@gao.gov, or David R. Warren at (202) 512-

8412 or warrend@gao.gov. Other key contributors to this testimony 

include Lon Chin, Francine Delvecchio, Ted Hu, Richard Newbold, Sanford 

Reigle, John Ryan, Darby Smith, and Earl Woodard. 

24GAO-02-784T
Page 33 GAO-02-873T 

Appendix I

Locations Visited ApendxiI

In mapping the information flow for the procurement, inventory control, 

and payment of the Joint Service Lightweight Integrated Technology Suit, 

we visited the following locations.

• JSLIST Program Office, Quantico, Virginia.

• Defense Supply Center, Philadelphia, Pennsylvania.

• Defense Finance and Accounting Service, Columbus, Ohio.

• Defense Contract Management Agency, Cincinnati, Ohio.

• Defense Distribution Center, Albany, Georgia.

• Joint Set-Aside Project, Marine Corps Logistics Base, Albany, Georgia.

• Air Force’s 919th Special Operations Wing, Eglin Air Force Base, Florida.

• Air Force’s 16th Special Operations Wing/Logistics, Hurlburt Field, 

Florida.

• Air Force’s Chemical Training Unit, Hickam Air Force Base, Hawaii.

• Army’s 101st Airborne Division, Fort Campbell, Kentucky.

• Army’s 5th Special Operations Forces, Fort Campbell, Kentucky.

• Army’s 160th Special Operations Aviation Regiment, Fort Campbell, 

Kentucky.

• Navy’s Disaster Preparedness, Naval Air Station, Pensacola, Florida.

• Navy’s Explosive Ordnance Disposal Unit, Eglin Air Force Base, Florida.

• Navy’s Explosive Ordnance Disposal Unit, Barbers Point, Hawaii.

In mapping the information flow for the procurement, inventory control, 

and payment of a computer item using a government purchase card, we 

visited the following locations.

• DOD Purchase Card Program Office, Falls Church, Virginia.
Appendix I

Locations Visited

Page 34 GAO-02-873T 

• Defense Finance and Accounting Service, Columbus, Ohio.

• Air Force Materiel Command, Wright-Patterson Air Force Base, Ohio.

• Army Soldier Biological and Chemical Command, Natick, 

Massachusetts.

In order to compare DOD business processes with those of leaders in the 

retail industry we visited:

• Sears, Roebuck, and Company, Hoffman Estates, Illinois.

• Wal-Mart Incorporated, Bentonville, Arkansas.
Page 35 GAO-02-873T 

Appendix II

Key Data Systems Used to Procure, Control, 

and Pay for JSLIST Protective Garments ApendxiI

This section includes general information describing each of the 13 

information systems used to support the procurement, inventory control, 

and payment processes for the JSLIST protective chemical/biological 

equipment purchased through contracts. 

System 

owner System name

Process

supported System description

DLA Distribution Standard System 

(DSS)

Inventory control Supports management of all business processes of the department’s 

warehouse operations, including the processing of material requisition 

orders, reporting shipping information to customers, and providing 

visibility of asset quantity, condition, and location.

DLA Standard Automated Materiel 

Management System 

(SAMMS)

Procurement, 

Inventory control 

and

Payment

Supports wholesale consumable item inventory management 

processes at defense supply centers, including processing requisitions, 

forecasting requirements, generating purchase requests, and 

maintaining stock levels, technical data, item identification, and asset 

visibility. 

DFAS Electronic Document Access 

(EDA)

Procurement and

Payment

Stores documents such as contracts, contract modifications, 

government bills of lading, and payment vouchers as electronic images 

and provides personnel from multiple DOD communities access to 

these documents. 

DFAS Electronic Document 

Management (EDM)

Procurement and

Payment

Converts and stores paper documents such as contracts, invoices, and 

receiving reports as electronic images providing document imaging, 

electronic folders, and workflow processing to DFAS personnel at a 

single location. 

DFAS Program Budget Accounting 

System – Funds Distribution 

(PBAS-FD)

Payment Records and controls obligation and expenditure authority for all 

organizational levels except the allotment holder allowing DOD 

financial managers to electronically receive and issue funds for the 

Office of the Secretary of Defense, Army, and Navy. 

DFAS Standard Accounting, 

Budgeting, and Reporting 

System (SABRS)

Payment Standardizes all Marine Corps transactions and provides a transaction 

driven general ledger in compliance with the U.S. Standard General 

Ledger Charts of Accounts.

DFAS and 

DCMA

Mechanization of Contract 

Administration Services 

(MOCAS)

Procurement and

Payment

Supports the administration and payment of supply and service 

contracts by contract administration offices, payment offices, 

procurement offices, funding stations, and consignees. 

Air Force Mobility Inventory Control 

Accountability System 

(MICAS)

Inventory control Provides comprehensive asset control and shelf life management, 

including receiving, accounting, controlling, tracking, issuing, 

deploying, and reporting of chemical and biological equipment.

Army Standard Army Retail Supply 

System (SARSS-O)

Inventory control Supports retail supply operations and maintains the accountable 

record of material received, stored and issued.

Army Standard Property Book 

System – Redesign (SPBS-R)

Inventory control Automates overall property accountability and asset visibility functions, 

including the creating of master hand receipts and the passing of asset 

data on item shortages and overages to other Army systems.
Appendix II

Key Data Systems Used to Procure, Control, 

and Pay for JSLIST Protective Garments

Page 36 GAO-02-873T 

Navy Shipboard Non-Tactical 

Automated Data Processing 

System (SNAP)

Inventory control Provides numerous applications for shipboard use, including 

processing of material requirements, requisitions, and receipts; 

tracking inventory stock location, balances, demand and usage; 

providing individual custody records; and reconciling requirements, 

requisition, inventory, and financial data.

Navy Standard Automated Logistics 

Tool Set (SALTS)

Inventory control Provides means to move logistics and administrative data from a single 

point of entry to databases and data services world-wide, including 

DLA’s SAMMS, Army’s Total Asset Visibility system, and Air Force’s Air 

Force Logistics Information File. 

Marine 

Corps

Defense Equipment 

Management Program

Inventory control Maintains total asset visibility over chemical and biological protection 

equipment held for future testing and tracking results using a 

spreadsheet application. 

(Continued From Previous Page)

System 

owner System name

Process

supported System description
Page 37 GAO-02-873T 

Appendix III

Key Data Systems Used to Procure, Account, 

Control, and Pay for Computer Items Using 

the Purchase Card ApendxiI

This section includes general information describing each of the 19 

information systems used to support the procurement, inventory control, 

and payment processes for computer equipment purchased using the 

government purchase card. 

System 

owner System name

Process

supported System description

DFAS Central Procurement 

Accounting System (CPAS)

Procurement 

and 

Payment

Provides DFAS and Air Force financial service offices with on-line 

access to current status information of procurement programs, 

allotments, initiations, commitments, obligations, and disbursements for 

central procurement appropriations. 

DFAS Computerized Accounts 

Payable System (CAPS)

Payment Provides standard installation center level vendor pay system using a 

personal computer-based application with interfaces with DOD 

standard procurement, disbursing and accounting systems.

DFAS Defense Business 

Management System (DBMS)

Procurement Supports the major accounting functions of general ledger accounting, 

budgetary accounting and funds control, job order and cost accounting, 

accounts receivable and payable, and accounting and managerial 

reporting for DFAS, DLA depot and supply centers, Defense Contract 

Audit Agencies, and the Defense Commissary Agencies.

DFAS Defense Industrial Financial 

Management System (DIFMS)

Procurement Provides about 17 Navy, Marine Corps, and Air Force field-level and 

headquarters-level activities with transaction-driven funds control, 

accounting for budget execution, and management information, 

including cash, labor, other cost, material, cost summary, job order and 

customer order, billing, general ledger accounts, fixed asset accounting, 

and cost competition data.

DFAS Electronic Document 

Management (EDM)

Payment Converts and stores paper documents such as contracts, invoices, and 

receiving reports as electronic images providing document imaging, 

electronic folders, and workflow processing to DFAS personnel at a 

single location. 

DFAS Vendor Pay Integrated 

Accounts Payable System 

(IAPS)

Payment Provides rapid and timely vendor payments to Air Force vendors by 

processing commitment transactions electronically to the GAFS; 

compares invoice, receiving report and contract data to create a 

payment vouchers; and concurrently passes electronic funds transfer 

data to both disbursing and accounting systems. 

DFAS Program Budget Accounting 

System – Funds Distribution 

(PBAS-FD)

Procurement 

and

Payment

Records and controls obligation and expenditure authority for all 

organizational levels except the allotment holder allowing DOD financial 

managers to electronically receive and issue funds for the Office of the 

Secretary of Defense, Army, and Navy. 

DFAS Standard Accounting, 

Budgeting, and Reporting 

System (SABRS)

Payment Standardizes all Marine Corps transactions and provides a transaction 

driven general ledger in compliance with the U.S. Standard General 

Ledger Charts of Accounts.

DFAS Standard Finance System 

Redesign – Subsystem 1 

(SRD-1)

Payment Incorporates military pay, travel, accounts payable, accounting, and 

disbursing functions into an on-line, interactive menu-driven system for 

DFAS to produce cash payments, vouchers, and reports. 
Appendix III

Key Data Systems Used to Procure, Account, 

Control, and Pay for Computer Items Using 

the Purchase Card

Page 38 GAO-02-873T 

Navy Standard Accounting and 

Reporting System (STARS)

Payment Consolidates all Department of Navy general fund accounting, 

contractor and vendor commercial entitlements, transportation 

payments, and travel payments for the Navy, the Marine Corps, and the 

Army; and the Navy departmental reporting and funds distribution.

DLA Defense Property 

Accountability System (DPAS)

Inventory control Provides a transaction-driven subsidiary ledger to the general ledger 

designed to achieve physical and financial control over real and 

personal property.

Air Force Automated Business Services 

System (ABSS)

Procurement Enables Air Force officials to electronically request assets or services, 

coordinate approval officials’ actions, send electronic documents worldwide, and provide data interface to all standard Air Force accounting 

and contracting systems.

Air Force General Accounting and 

Finance System (GAFS)

Procurement Provides Air Force a standard accounting system for appropriated 

funds accommodating the standard appropriation accounting records, 

such as funding authority, commitments, obligations, and balances of 

available funds.

Air Force Information Processing 

Management System (IPMS)

Inventory control Provides inventory accountability, configuration management, and life 

cycle management for Air Force information technology assets, 

including hardware and software.

Army Purchase Card Management 

System (PCMS)

Procurement Provides Army Materiel Command and Army-Natick users a personal 

computer web-based system to log and track purchase card requests, 

obtain required approvals, create timely commitments and obligations, 

and track and record property and equipment.

Army Standard Operations and 

Maintenance, Army Research 

and Development System 

(SOMARDS)

Payment Provides Army a standard accounting and reporting system for 

reimbursable customer and direct mission funds control data; reporting 

for labor, reimbursable billings, advances, and general operation 

expenses; general ledger reporting; and month-end and year-end close 

and purge processes.

Army Standard Property Book 

System – Redesign (SPBS-R)

Inventory control Automates overall property accountability and asset visibility functions, 

including the creating of master hand receipts and the passing of asset 

data on item shortages and overages to other Army systems. 

CitiBank CitiDirect Payment Delivers to the Navy and Marine Corp purchase cardholders and 

approval officials’ a web-based reporting and communication tool to log 

purchases, review and adjust card transactions, and certify account and 

billing statements.

U.S. Bank Customer Automation and 

Reporting Environment 

(CARE) system

Payment Delivers to Air Force and Army purchase cardholders’ and approval 

officials’ a web-based reporting and communication tool to log card 

purchases, review and adjust card transactions, and certify account and 

billing statements.

(Continued From Previous Page)

System 

owner System name

Process

supported System description

(192031)