GAO

United States General Accounting Office

Report to Congressional Committees

June 2000 DEFENSE LOGISTICS

Actions Needed to 

Enhance Success of 

Reengineering 

Initiatives

GAO/NSIAD-00-89

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Contents

Letter 3

Appendixes Appendix I: Recent Department of Defense Studies on Logistics 

Restructuring 28

Appendix II: DOD Weapon System Pilots and Associated Product 

Support Strategies 31

Appendix III: Comments From the Department of Defense 33

Appendix IV: GAO Contacts and Staff Acknowledgments 37

GAO Related Products 39

Tables Table 1: Estimated Fiscal Year 2000 Logistics System Personnel 

and Costs 7

Table 2: Number of Pilot Programs Whose Plans Are Not Likely to 

Meet Logistics Reengineering Time Lines 13

Figures Figure 1: Key Reengineering Milestones 11

Abbreviations

DOD Department of Defense
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United States General Accounting Office

Washington, D.C. 20548

National Security and

International Affairs Division

B-284598 Letr

June 23, 2000

Congressional Committees

The Department of Defense estimates that in fiscal year 2000, it will use 

about one-third of its $280-billion budget (about $84 billion) for logistics 

support activities. Logistics activities include weapon system maintenance, 

supply management, engineering, storage, distribution, and transportation 

of military goods. In recent years, a number of studies have stressed the 

need to improve the efficiency and effectiveness of the Department’s 

logistics processes, systems, and infrastructure to provide improved 

support to combat forces and to achieve savings that can be used to 

modernize weapon systems. Accordingly, the Department is seeking to 

reengineer1

 its logistics support. 

Central to the Department’s overall approach, which is being guided by the 

Office of the Secretary of Defense, is a move toward a system that places 

greater reliance on the private sector and uses improved logistics 

processes and capabilities. The Department’s August 1999 Logistics 

Strategic Plan outlines its approach to logistics reengineering and includes 

a time frame for implementation. The plan states that by the end of fiscal 

year 2005, the Department’s logistics process will be a highly efficient, 

integrated system that provides required support to combat forces. A key 

element of the reengineering strategy is 30 pilot weapon system programs 

(10 in each service) that will be used to test the use of best commercial 

practices2

 and give increased responsibility and authority to program 

managers of weapon systems, with the expectation of reducing total 

ownership costs over the life of the weapon systems. The Department’s 

goal is to use lessons learned from the pilots to implement successful 

reengineering concepts Department-wide. At the same time, the services 

and the defense agencies have about 400 ongoing individual

1

The Department and the military services refer to changes in logistics systems as 

reengineering, restructuring, transforming, etc. For consistency, we use the term 

reengineering throughout this report. 

2

Best commercial practices are techniques used by private industry to achieve superior 

performance. They include activities such as outsourcing and electronic commerce. 
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initiatives to improve logistics support.3

Section 364 of the National Defense Authorization Act for Fiscal Year 20004

requires us to review the Department’s logistics reengineering initiatives, 

focusing in particular on whether the effort would provide adequate 

supplies to military units and installations should it be necessary for the 

Department to execute the National Military Strategy prescribed by the 

Chairman of the Joint Chiefs of Staff.5

 As discussed with your offices, we 

will be responding to this mandate with a series of reports.6

 For this report, 

we assessed (1) what actions are underway and how complete the 

Department’s plans for reengineering are, (2) what the potential effect of 

the reengineering effort is on combat forces, and (3) what factors could 

limit the achievement of reengineering goals.

Results in Brief The Department of Defense has taken significant steps toward 

reengineering its logistics processes. However, many aspects of the overall 

plan are incomplete, raising questions about whether the overall goals of 

improved service and lower costs will be achieved. Key steps the 

Department has taken include establishing a special office responsible for 

coordinating implementation of the reengineering effort and overseeing 

efforts to link hundreds of ongoing service-sponsored logistics 

reengineering initiatives to the Department’s overall reengineering plans. 

The Department has also established 30 pilot programs to test various 

reengineering concepts. However, it has not developed an overarching plan 

that integrates individual service efforts into a single Department-wide 

implementation strategy. Further, plans to test, evaluate, and fully 

implement reengineered support strategies Defense-wide by the end of 

2005 face a number of challenges, making it unlikely that the pilot 

programs will be able to provide key information in time to support interim 

decision-making deadlines. In some instances, pilot test plans have not 

3

The 1999 Defense Reform Initiative update used this figure to identify major logistics 

actions under way. 

4

P. L. 106-65.

5

The National Military Strategy requires that the Department be able to respond to the full 

spectrum of crises, from small-scale contingencies to major wars.

6

Additional reviews are under way to address other issues in the mandate, including spare 

parts shortages, war reserve planning, and prepositioned stocks. These reports will be 

completed at a later date. 
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been fully developed, in others, test results may be delayed. Additionally, 

because many of the 30 pilot programs have multiple objectives, it will be 

difficult to link results and savings to specific reengineering concepts. 

Finally, the Department has not estimated the total costs of completing 

logistics reengineering or developed a supporting budget plan. Without 

such an investment strategy, there may not be sufficient funds to 

adequately test the reengineering concepts being piloted and to implement 

the results on a Department-wide basis. 

It is too early to assess the impact of reengineering logistics support on 

combat forces. Officials representing combat forces have brought up a 

number of concerns, including the effects of having large numbers of 

private contractors on or near the battlefield to provide logistics support, 

the ability of contractors to meet the surge in demand resulting from 

intensifying military operations, and the effects of outsourcing on the 

number of positions available to military personnel returning to the United 

States from overseas assignments or at-sea deployments. The Department 

is in the early phases of developing its Joint Logistics Warfighter Initiative 

test that may be useful in assessing the impact of various logistics 

reengineering efforts on combat forces in an operational environment. 

However, the test is scheduled to take place before the reengineering 

initiatives are fully implemented, and its usefulness will therefore be very 

limited in assessing the impact of the reengineering concepts on combat 

forces.

Several factors, if not addressed, could limit the Department’s ability to 

achieve its reengineering goals of improved service and lower costs. These 

include the effect of not centrally managing parts, the impact that solesource, long-term contracts would have on anticipated reengineering 

savings, and how to manage reengineering logistics within the bounds of 

existing laws and policies. 

This report makes recommendations to improve the planning and 

implementation of the logistics reengineering effort. The Department 

generally agreed with the report and its recommendations. 

Background The Department of Defense (DOD) owns and operates a vast array of 

weapon systems and equipment, including airplanes, ships, and tanks. 

Military units perform some maintenance and repairs on these items, while 

the Department relies on its own maintenance depots and private-sector 

facilities to perform major overhauls and upgrades. New spare and repair 
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parts are procured from the private sector and distributed through the 

Department’s centrally managed supply system. Equipment components 

are repaired by both DOD repair facilities and by the private sector. The 

defense infrastructure also includes a centralized transportation system 

that moves equipment and parts both within the continental United States 

and overseas using military and private-sector movers and shippers. 

We have previously reported that the Department’s accounting systems do 

not routinely capture the total costs of its logistics support activities,7

 and 

differing estimates of these costs exist within the Department. However, a 

special assessment initiated by the Under Secretary of Defense for 

Acquisition and Technology in 1999 to better define these costs indicated 

that DOD will spend about $84 billion on logistics in fiscal year 2000, as 

shown in table 1.

7

Department of Defense: Progress in Financial Management Reform (GAO/T-AIMD/NSIAD00-163, May 9, 2000).
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Table 1: Estimated Fiscal Year 2000 Logistics System Personnel and Costs

a

Includes military active duty and reserve personnel and DOD civilian employees.

b

Includes costs for both DOD and contractor operations. 

c

Includes maintenance that is not part of the defense working capital fund (such as ordnance depots 

and ship maintenance activities not in a depot).

d

Refers to unit level functions.

e

Includes funding and personnel attributable to operational logistics but not categorized exclusively into 

maintenance, supply, or transportation.

f

Includes miscellaneous product support not categorized exclusively as maintenance, supply, or 

transportation (such as logistics administrative support).

g

Consists of strategic transportation, clothing, subsistence, and medical supplies not directly related to 

a specific weapon system. 

Source: Logistics Management Institute estimate prepared for DOD.

DOD has completed a number of studies on ways to improve its support 

processes. Generally, these studies have focused on increasing reliance on 

the private sector to meet the Department’s logistical support needs, as 

well as making greater use of improved technologies, new business 

processes, and commercial transportation. The studies have laid the 

groundwork for the Department’s current reengineering efforts discussed 

in this report. (The objectives of each study are described in app. I.)

Dollars in billions

Function Personnela Costsb

Depot maintenance 61,987 $5.9

Other national-level maintenancec 13,378 3.9

Material management 39,068 19.1

Distribution and transportation 16,339 2.6

Operationald

 maintenance 403,320 16.7

Operationald supply 141,327 5.8

Operationald transportation 44,119 1.3

Other operational logisticse 158,298 6.0

Other product supportf 3,744 0.2

Logistics support not related to weapon systemsg 363,051 22.3

Total 1,244,631 $83.8
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Progress Has Been 

Made, but Planning and 

Processes for the 

Reengineering Effort 

Can Be Improved 

DOD has taken some steps to reengineer its logistics support activities. It 

has outlined important principles and concepts that it wants to test for 

broader application in logistics restructuring. It has also established an 

office with specific responsibility for overseeing the process and is 

beginning to develop a new logistics architecture—a blueprint that is 

intended to guide and control the development and maintenance of the 

many related logistics systems. However, it has not developed an overall 

plan to link its broad reengineering goals to the approximately 

400 individual service initiatives that are already under way to improve the 

logistics support system. Although the services have been directed to 

develop a plan that links their initiatives to DOD’s overall vision, it remains 

unclear how these individual service plans will be integrated into the 

overarching architecture. Further, many of the 30 pilot programs set up to 

test the logistics reengineering concepts face a number of challenges and 

likely will not be able to generate sufficient information in time to support 

key decision-making milestones. Therefore, the planned DOD-wide 

logistics reengineering completion date of 2005 is questionable. In some 

instances, questions exist about whether selected pilot projects will 

provide meaningful tests of reengineering concepts because the projects 

are more oriented to meeting objectives other than those associated with 

logistics reengineering.

Reengineering Principles 

Have Been Defined, and a 

Coordinating Office Has 

Been Established

Two key documents set forth the general principles of the reengineering 

process. The first is DOD’s August 1999 Logistics Strategic Plan, which 

outlines the characteristics of the new logistics concept and a time frame 

for implementation. The plan states that by the end of fiscal year 2005, 

DOD’s logistics process will be a highly efficient, integrated system that 

provides required support to combat forces. The second document is 

DOD’s April 1998 Report to Congress on Actions to Accelerate Movement 

to the New Workforce Vision, which provides a broad overview of planned 

reengineering efforts. The report discusses five fundamental reengineering 

concepts:

• Reengineering product support (logistics support focused on a weapon 

system or its support system) by adopting the best practices used by 

private industry to achieve superior performance. 
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• Competitively sourcing product support by using competition (either a 

public/private competition or a competition among private-sector 

sources) or business case analysis8

 to select a source for long-term 

total life-cycle9

 support. 

• Modernizing systems by replacing outmoded components with new 

components that have increased reliability, maintainability, or 

supportability. 

• Expanding the use of prime vendors and virtual prime vendors10

through long-term partnerships with private-sector providers to support 

weapon systems using techniques such as on-demand manufacturing.

• Establishing weapon systems program manager oversight of lifecycle support by expanding the manager’s role in the support phase of a 

system’s life span. 

The first four concepts were more fully addressed by the July 1999 report, 

Product Support for the 21st Century, and the fifth by the October 1999 

report, Program Manager Oversight of Life-Cycle Support.11 On the basis of 

the two reports, DOD adopted 30 pilot programs (10 in each service) that 

will be used to test the 5 concepts. Conducting a pilot program for the 

purpose of reengineering logistics support involves (1) selecting systems 

that represent the variety of equipment in the DOD inventory, (2) deciding 

which concepts might apply to the selected pilots, (3) designing tests of the 

concepts for the selected pilots and establishing milestones and ways to 

measure results, (4) performing the tests and accumulating resulting data, 

and (5) analyzing the test results to determine which approaches 

8

In the absence of competition, the services will use a business case analysis, which involves 

a comparison of the costs and benefits of the current logistics support process with the 

estimated costs and benefits of the proposed alternative approaches.

9

The life-cycle of a system includes development, production, operational support, and 

disposal.

10A prime vendor is a private firm that provides commercial products using commercial 

pricing and established distribution arrangements. A virtual prime vendor is a private firm 

that performs integrated supply chain management, a broad set of functions involving the 

movement, maintenance, technology improvement, or configuration management of 

products. The concept has been widely applied for consumable goods and is now being 

adopted for reparable items.

11The October 1999 Program Manager Oversight of Life-Cycle Support report was released 

as a study group report, not as an implementation report for DOD’s April 1998 Report to 

Congress on Actions to Accelerate Movement to the New Workforce Vision.
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accomplish the objective of reducing logistics support costs and improving 

the level of support to combat forces. 

In October 1999, DOD established the Office of the Assistant Deputy Under 

Secretary of Defense for Logistics Architecture to oversee the 

Department’s logistics reengineering efforts, including those involving the 

30 pilot programs, and to build on the hundreds of major reengineering 

efforts that are under way in the services and Defense agencies. The Office 

is responsible for designing a logistics system for business processes, 

physical infrastructure, and information technologies, as well as defining 

the services’ responsibilities within the new logistics architecture. 

The Office has begun work on an integrated logistics architecture that is 

intended to facilitate the implementation of reengineered logistics support 

processes and procedures by the end of fiscal year 2005. In the same way 

that a building’s plans must show its features, its systems and their 

functions, the relationships between components, and the construction of 

these components, the logistics architecture must show the features, 

relationships, makeup, and functions of different logistics components. In 

April 2000, the Office selected two contractors to develop competing 

logistics architecture designs. The Office plans to begin evaluating the 

contractors’ proposals in June 2000 as an initial step toward developing a 

logistics architecture design. Subsequently, an implementation plan will be 

developed to facilitate implementing the new logistics design across the 

Department by the end of fiscal year 2005. Figure 1 shows the projected 

milestones for key reengineering efforts.
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Figure 1: Key Reengineering Milestones

Note: Each year indicates the beginning of the fiscal year.

Source: Our analysis.

Individual Efforts Not 

Linked to Overarching Plan 

In an effort to achieve consistency among the reengineering initiatives 

under way in the services and the Department’s overall strategy, the 

Department, in a March 23, 2000 directive, required the military services to 

establish logistics reengineering plans by July 1, 2000. The directive 

requires that the plans relate the 400 different service-sponsored logistics 

reengineering initiatives to the DOD Logistics Strategic Plan objectives and 

include performance measures for reporting progress and meeting 

milestones. The directive also requires the Under Secretary of Defense 

(Acquisition, Technology, and Logistics) to review the military service and 

Defense agency logistics reengineering plans annually. However, there is no 

requirement to develop an overall plan that integrates the service plans, 

and the absence of such an overall framework places the ultimate success 

of the effort at risk.
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The absence of an overall plan lessens the potential of the different 

initiatives now being developed by the services and Defense agencies and 

of the Department’s 30 pilot programs to pursue complementary objectives. 

For example, 2 of the 30 pilot programs, both major Marine Corps weapon 

systems,12 are pursuing product support reengineering plans developed by 

the weapon system program managers, which may be incompatible with 

the logistics support concept being developed by the Marine Corps Materiel 

Command. Under the reengineering plans developed by the Marine Corps 

program managers, the weapon systems manufacturer or its 

subcontractors would provide most logistics support for the two systems. 

However, under the Marine Corps Materiel Command’s reengineering 

concept, parts and components that are critical to a weapon system’s 

ability to perform its mission would be supported by the DOD logistics 

infrastructure. Without an overarching plan that clearly establishes 

priorities and procedures, it will be impossible to ensure that servicesponsored initiatives are compatible with the Department’s overall 

restructuring plans. In the absence of such a plan, the Department faces the 

increased risk that initiatives in some cases may duplicate each other and 

in other cases may have contradictory aims that work against each other. 

Further, without an integration plan, DOD cannot evaluate and prioritize 

competing initiatives; consequently, some funding for initiatives may not be 

spent in the most efficient way.

Current Implementation 

Schedule Is Overly 

Optimistic

DOD plans to use the 30 pilot programs to generate information to develop 

future models for reengineering and policy changes and to fully implement 

reengineered support strategies Department-wide by the end of 2005. 

However, the Department’s plans to generate such information face a 

number of challenges. Some pilot program test plans have not been fully 

developed, test objectives for others have not been clearly defined or may 

subsequently change, and test results of some pilots may be delayed. 

Likewise, the Department faces other challenges, such as transferring 

government parts inventories to the private sector or having sufficient 

funding to fully implement some pilots. As a result, key information that 

will be needed to assist in the reengineering process likely will not be 

available in time to meet decision-making deadlines. 

The 30 pilot programs are being run to test various reengineering concepts 

such as use of best commercial practices and prime vendor support 

12The Advanced Amphibious Assault Vehicle and the Medium Tactical Vehicle.
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(see app. II for the list of pilots and their associated product support 

strategies). The pilots will be used in three phases of the reengineering 

effort. In the first phase, which is expected to end in mid-fiscal year 2000, 

the Office of the Logistics Architect and the services are expected to refine 

the strategies for addressing the reengineering concepts noted earlier and 

develop plans and strategies for the specific pilot programs. The second 

phase, which began in early fiscal year 2000, involves implementing the 

various pilot program strategies and testing the effectiveness of the 

reengineering concepts. This phase is expected to end when test results are 

obtained at the end of fiscal year 2002. The third phase will start at the 

beginning of fiscal year 2003 and will involve transferring results of the 

successfully piloted reengineering concepts to other DOD systems. DOD 

estimates that the third phase will be completed by the end of fiscal year 

2005. 

DOD will likely face a number of challenges in meeting its current 

milestone to begin implementing reengineering concepts Department-wide 

at the end of fiscal year 2002. Our work shows that some pilot program test 

plans have not been fully developed because the programs only recently 

have been selected as pilots and have not had sufficient time to develop 

their plans. Further, other pilot programs have test objectives that have not 

been clearly defined or may change. Finally, test results of other pilot 

programs may not be available because pilot tests will not be completed 

before the end of fiscal year 2002. Table 2 identifies the number of pilot 

programs in each service that will have problems providing information to 

meet the Department’s reengineering schedule. 

Table 2: Number of Pilot Programs Whose Plans Are Not Likely to Meet Logistics 

Reengineering Time Lines

a

Problems are not mutually exclusive; consequently, some pilot programs are included in more than 

one category. 

Source: Our analysis.

Number of pilots, by service

Problema Army Air Force Navy Total

Test plans not yet developed 2 1 4 7

Test plans subject to change 6 7 4 17

Test results likely not available at end of fiscal 

year 2002 to support DOD-wide 

reengineering

7 68 21
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Six of the original 30 pilot programs (2 Army and 4 Navy) have been 

dropped, and implementation plans for replacement projects had not been 

fully developed as of March 31, 2000. Additionally, most program managers 

generally described their plans as tentative in nature and subject to change. 

For example, plans for seven of the Air Force’s pilot programs, while 

generally expected to address the reengineering concepts identified by the 

Department, have not been finalized, although the plans were originally 

expected to be completed in November 1999. Further, while the pilot 

programs are supposed to produce sufficient evaluative data on 

reengineering concepts by the end of fiscal year 2002, many of them will 

not produce such data until 2003 or later, well after full implementation is 

slated to begin. For example, the Navy’s LPD-17 transport ship pilot 

program includes testing the concept of contractor logistics support after 

the ship is delivered and placed into service. However, the first LPD-17 ship 

is scheduled for delivery in September 2003, approximately 1 year after the 

end of the pilot program test period. 

Pilot Programs Face 

Problems Transferring 

Inventory to Contractors

Eight of the pilot programs, including the Army’s Apache and the Navy’s 

H-60 helicopter program, are considering a contractor-managed approach 

in which a single contractor would have total responsibility for system 

performance, including, repair, maintenance, inventory management, and 

configuration control. However, before this approach can be implemented, 

the issue of how to transfer government-owned inventory to private 

contractors will have to be resolved because current regulations make such 

transfers very unattractive to the private sector. Current policies do not 

allow DOD to sell an item for less than what it originally paid, but 

according to a DOD comptroller official, contractors have been reluctant to 

purchase DOD inventory because they believe that some inventory items 

are overvalued. Our work shows that the Army’s Apache and the Navy’s 

H-60 program offices have suggested alternative methods for transferring 

control of government-owned inventory to the control of contractors 

without the contractors purchasing the items at full cost. To address the 

problem, the DOD comptroller is working with the services and the 

effected pilot programs to develop a solution. However, to date, no agreed 

solution has been reached within DOD to resolve the issue. This problem, 

which applies to most weapon systems now in use, may affect the 

Department’s ability to pursue a contractor-managed systems approach. 
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Pilots Face Funding 

Problems

Our prior work has shown that significant up-front investment costs are 

often required to implement reform initiatives; these costs may be offset 

over time as savings begin to accrue. However, DOD has not developed an 

investment strategy for the reengineering effort to include preparing an 

estimate of total costs and developing a budget plan to fund the investment 

needed to support the planned reengineering efforts. In addition, our 

financial audits have continued to highlight limitations in the Department’s 

ability to identify and track costs and associated savings. Program 

managers have noted that little new funding has been provided to invest 

specifically in the pilot efforts, and it is unclear how much funding will be 

available. Program managers also stated that they needed control of 

operational and support funding to effectively test some reengineering 

concepts. 

According to Army and Navy service logistics officials, implementing 

reengineering concepts as rapidly as is now expected could require sizable 

conversion costs that are difficult to cover within existing budgets. For 

example, the Army’s Abrams tank pilot program estimates that it will 

require about $4 billion to fully implement the program’s pilot concepts. 

This amount includes funds for overhauling existing engines and tanks, 

purchasing new and more fuel-efficient engines, awarding a performancebased logistics support contract, establishing a contractor-operated repair 

facility for tank components, and designing and acquiring built-in testing 

devices for the tank fleet. Most program officials stated that their pilot 

programs will not be able to conduct needed tests effectively, efficiently, 

and on schedule without such up-front investments. These officials 

expressed doubts that their pilot programs will receive sufficient funds to 

test the planned initiatives.

Additionally, an October 1999 DOD report13 indicated that all 10 of the 

Army’s pilot projects and 9 of the Navy’s 10 pilot programs will require that 

some operation and support14 funding be transferred from combat 

commands to program managers.15 Program officials stated that they need 

13Program Manager Oversight of Life-Cycle Support, Report of the Department of Defense 

Program Manager Oversight of Life-Cycle Support Study Group (Section 912c, Oct.1999).

14Operations and support includes fuel, repair parts, maintenance, contract and support 

services, and personnel.

15Combat commands generally control operations and support funds, while program offices 

generally control acquisition funds. 
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control of operation and support funding to effectively develop prime 

vendor relationships, provide new technology, and achieve the competitive 

sourcing envisioned by the pilot programs. The report also indicated that 

all three military departments were seeking authority to reinvest some of 

the cost savings achieved through reengineering efforts into their weapon 

system programs (cost savings are usually deducted from a program’s 

acquisition budget). Program officials see reinvestment as an incentive to 

undertake these efforts. 

Some Pilot Programs May 

Not Provide Meaningful 

Tests of Reengineering 

Concepts

On the basis of our discussions with pilot program managers and review of 

program plans and test schedules, we determined that the test results of 

most pilot programs may not be able to demonstrate a clear link to specific 

reengineering concepts because the pilot programs were based on plans 

initially designed to reduce costs, not to reengineer logistics.16 For 

example, the Navy’s Standoff Land Attack Missile pilot focuses on reducing 

program acquisition costs, mostly by increasing production rates. The 

Navy’s Smart Carrier pilot plan focuses on reducing operating and support 

costs through improved technology and work processes to reduce 

manpower requirements. Smart Carrier pilot program officials told us they 

would consider revising the pilot program plan to address reengineering 

concepts in the future but had made no firm decision about the concepts to 

be tested. It is unclear how these initiatives would directly support logistics 

reengineering concepts.

Further, the pilots will have difficulty showing how much savings or 

improvement could come from a specific reengineering concept because in 

some cases, they will have difficulty determining the causes of savings—

reengineered processes or other actions such as investments in new 

hardware. For example, the Abrams tank pilot program involves both 

changes to the logistics support system and installation of a more reliable 

and fuel-efficient engine. Reengineering plans, however, do not include a 

methodology that allows program officials to determine which of the two—

the engine or the changes in logistics—would be responsible for which 

portion of any future savings. In another example, the Air Force’s F-16 pilot 

program involves major upgrades to the aircraft’s electronics system. 

16In January of 1999, the Defense System Affordability Council directed the services to 

develop plans to reduce operating and support costs of weapon systems by 20 percent by 

2005. These plans were in place at the time weapon systems were selected as pilot programs 

and in some cases were used in lieu of separate product support reengineering plans. 
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These upgrades involve reliability, maintainability, and technology 

improvements and a reengineered process for managing new components. 

However, the reengineering effort does not have a methodology for 

distinguishing savings that come from reengineering logistics processes 

versus savings that occur as a result of investments in new components. 

Effects of 

Reengineering Efforts 

on Combat Forces Not 

Yet Known 

It is too early to assess the effect of ongoing reengineering efforts on 

combat forces because DOD does not know how the final logistics system 

will be structured. However, military officials associated with various 

combat organizations have raised some issues about the reengineering 

process that will need to be addressed soon if the initiatives are to be 

successful. Logistics support personnel from the Joint Chiefs of Staff and 

combat commands in the United States and Europe voiced a number of 

concerns about the potential effects that some reengineering efforts could 

have on their operational capability. These concerns involved the presence 

of increasing numbers of contractor personnel on or near the battlefield, 

the ability of contractors to meet “surge requirements”, the potential 

reduction of rotational positions to meet training requirements, and the 

overall impact on product support costs and funding. To address these 

concerns, DOD has begun developing a test that may be useful in assessing 

the effects of logistics reengineering efforts in an operational environment. 

However, this test may not yield results for use in key DOD-wide 

reengineering decisions planned at the end of fiscal year 2002. 

Contractors on the 

Battlefield

Some initiatives (such as the Army’s Apache Prime Vendor and the Tubelaunched Optically-controlled Wire-guided Improved Target Acquisition 

System) may use private contractors on or near the battlefield to order and 

distribute supplies, maintain items, and provide technical support. Combat 

command officials raised the following concerns about increasing the use 

of contractors on or near the battlefield: 

• Combat units’ ability to conduct wartime missions could be weakened if 

contractors are withdrawn or are unwilling to stay on or near the 

battlefield during hostilities. 

• Providing the required support and protection to contractors on or near 

a battlefield may require extra personnel and may divert resources from 

the wartime mission at a time when the services are trying to reduce 

their logistical presence in areas close to the battlefield. 

• Contractors that are included in battlefield plans would also have to be 

included in the deployment planning process; otherwise, combat forces 
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may be required to take extraordinary actions at the time of deployment 

to send needed contractors to the battlefield. 

• Someone on the battlefield would have to be assigned responsibility for 

managing and exercising control over battlefield contractors because 

with some deployed contractors being managed by a contracting officer 

stateside, the battlefield command structure may become tangled, 

frustrating the battlefield commanders’ ability to perform.

Combat personnel also indicated that a relatively small number of 

contractors on the battlefield might be manageable but that large numbers 

would definitely accentuate these issues. They could not specify this 

threshold in terms of numbers. 

Higher Requirements 

During Wartime and 

Contingency Operations

Although the logistics reengineering effort clearly aims at greater reliance 

on supply chains controlled by private contractors, combat officials raised 

concerns about the ability of such a support system to deliver the 

additional quantities of critical items that are needed to meet what are 

known as wartime “surge requirements.” 

DOD has traditionally relied on stockpiles of government-owned and 

managed inventories and repair facilities to meet day-to-day operating 

requirements and on supplemental quantities of critical items and excess 

repair capacity to meet surge requirements during extended contingency 

operations. Some reengineering pilots rely on commercial entities to 

provide these supplies and repairs, but combat officials think surge 

requirements could be a problem, especially if more than one theater of 

operation is involved. It is unclear at this point to what extent DOD would 

require contractors to maintain surge capability and whether this capability 

would be included in contracts and the resulting effects on costs. 

Combat officials believe that temporary surges in demand may be 

manageable—if not predictable—in the commercial sector, where vendors 

deal with demand patterns that are generally known. They noted that DOD 

successfully uses prime vendor arrangements for some consumable items 

such as food and medical supplies, which have large networks of suppliers. 

However, they also noted that military parts and systems have different 

characteristics. They involve limited numbers of potential suppliers and 

demand patterns that are difficult to predict because parts are often unique 

and have low usage or erratic demand. 
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Rotational Assignments for 

Military Personnel

Having more private contractors perform military functions could reduce 

the number of available assignments for military personnel to rotate to in 

the United States when returning from overseas or at-sea assignments. 

Combat command officials fear that this could increase overseas or at-sea 

tour lengths and exacerbate morale problems. For example, in responding 

to the March 1999 draft of DOD’s Product Support for the 21st Century 

report, the Navy’s Atlantic Fleet Command stated that initiatives that would 

contract out military positions ashore would need to be managed carefully 

to avoid affecting sea-to-shore rotations and associated opportunities for 

skill development.17 Navy officials from U.S. Naval Forces Europe have 

stated that the loss of support-related shore positions would require sailors 

to spend more time afloat, increasing concerns about quality of life and 

retention. The officials are also worried that the collateral duties of shore 

positions that are contracted out might have to be shouldered by remaining 

personnel, increasing the length of their workday. In reviewing a draft of 

this report, DOD officials said they are aware of this issue and are sensitive 

to combat officials’ concern about the effect contracting logistics functions 

would have on personnel returning from overseas or at-sea tours. 

Control of Funding Combat officials are concerned that they may lose the flexibility to 

prioritize funding under a reengineered logistics system that places greater 

responsibility and authority in the hands of DOD weapon system program 

managers. Although they acknowledge that quality of support is a key goal, 

officials are also concerned about the effects that different fund 

management controls may have on total costs. Some product support 

reengineering initiatives contemplate shifting control of operations and 

maintenance funding away from combat commands to program managers, 

potentially diminishing the commanders’ flexibility to manage unit funding 

priorities. Under the current process, for example, a commander can 

postpone scheduled maintenance or reduce supply levels to free up funding 

for higher priority requirements. Under the reengineered system, the 

commander might not be able to do so.

Test May Not Yield Results 

in Time for 2002 Decisions 

DOD is in the early stages of developing the Joint Logistics Warfighter 

Initiative to test the effect of logistics reengineering efforts on combat 

17Defense Outsourcing: Impact on Navy Sea-Shore Rotations (GAO/NSIAD-98-107, Apr. 27, 

1998).
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forces. The initiative will use U.S. Central Command forces during 

operational exercises in Egypt in fiscal year 2002. During this exercise, 

customer wait time data will be collected and analyzed to identify problems 

in providing logistics support to combat forces and to propose corrective 

actions. According to Office of the Secretary of Defense officials, this test 

will indirectly evaluate the operational effectiveness of reengineered 

logistics systems. The Joint Logistics Warfighter Initiative test is expected 

to determine the effects of the Department’s pilot program reengineering 

initiatives on customer wait times. However, as discussed above, it is not 

clear to what extent pilot program logistics restructuring will have evolved 

at that point. The 2002 demonstration can only test changes that will have 

already been implemented long enough for their effects to be assessed. 

Consequently, the results of the Joint Logistics Warfighter test may not 

provide results indicating the impact of pilot program reengineering 

changes before key reengineering implementation decisions are made at 

the end of fiscal year 2002.

Other Issues That 

Could Affect 

Reengineering Goals

Several factors, if not addressed, could limit the Department’s ability to 

achieve its reengineering goals of improved service and lower costs. These 

include (1) the effect not centrally managing parts would have on savings; 

(2) the impact using sole-source, long-term contracts would have on 

anticipated reengineering savings; and (3) how to manage reengineering 

logistics within the bounds of existing laws and policies. 

Impact of Not Centrally 

Managing Parts on Savings

DOD has not examined whether reengineering efforts may reduce some of 

the savings now obtained by centrally managing items used by more than 

one system. For example, a major U.S. automobile manufacturer reportedly 

saves over $1.8 billion a year by increasing the use of common parts across 

different product lines to achieve efficiencies (such as eliminating design 

duplication or consolidating purchases for more efficient buying 

practices). Similarly, in a March 1999 letter to the Deputy Under Secretary 

of Defense (Logistics), military service and Defense agency commanders 

indicated that they would consolidate orders for common items used by 

different weapon systems, thus decreasing the number of parts to be 

stocked and benefiting from the same economies of scale. Service logistics 

officials further indicated that they were concerned that if program 

managers made logistics support decisions on a system-by-system basis, 

fewer common items would emerge, just at a time when DOD is trying to 

increase the commonality of its subsystems and parts. 
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Impact of Sole-Source, 

Long-Term Contracts on 

Reengineering Savings 

Competitive sourcing is another way DOD has been trying to maximize 

savings. Our previous work in this area has indicated that competition has 

reduced costs, regardless of whether a public entity or private company 

wins a competition. In some cases, however, reengineering efforts plan to 

use sole-source, long-term contracts. Developing strategies for controlling 

cost growth in these cases will be a key issue because, as we have 

previously reported, it is difficult to control cost growth in a sole-source 

environment.18 Program managers plan to compare cost and performance 

of potential government and private-sector providers to determine whether 

to award initial long-term, sole-source contracts within the pilot programs. 

But relatively few of them envision competition among multiple privatesector firms, often because of a lack of qualified firms.

Laws and Policies Impact 

DOD’s Logistics 

Reengineering Initiatives

DOD’s efforts to implement product support reengineering concepts must 

take into account existing statutory and policy constraints. In order to fully 

implement the envisioned changes, DOD will need to change policies that 

might encumber the implementation of reengineering and take into 

account existing laws. Service and DOD officials identified some major 

statutory provisions and policies that could likely impact reengineering 

efforts: 

• 10 U.S.C. 2464 provides for a “core” logistics capability that is to be 

identified by the Secretary of Defense and maintained by DOD once 

identified. Section 2464 generally requires DOD to maintain this 

capability within a government-owned and operated facility. This 

provision can limit the ability of the services to contract with the private 

sector for performance of logistics work. 

• 10 U.S.C. 2466 prohibits the use of more than 50 percent of funds made 

available in a fiscal year for depot-level maintenance and repair for 

private-sector performance. This provision can limit the amount of 

depot-level maintenance and repair work that can be performed by 

private-sector contractors.

• 10 U.S.C. 2469 requires a competition between public and private-sector 

entities before certain depot maintenance and repair workloads can be 

changed from government performance to performance by a contractor. 

This provision limits the ability of the services to transfer depot-level 

18Defense Depot Maintenance: Contracting Approaches Should Address Workload 

Characteristics (GAO/NSIAD-98-130, June 15, 1998).
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maintenance and repair work to the private sector by requiring a 

public/private competition before moving the work. The competitions, 

while beneficial, can be time-consuming and complex and may require 

considerable resources.

• Office of Management and Budget Circular A-76, which describes the 

executive branch’s policy for the performance of commercial activities, 

and which may apply to logistics activities not covered under 10 U.S.C. 

2469, requires a comparison of government and private-sector 

performance to identify the most cost-effective alternative. The 

competitive sourcing cost studies required by A-76, like those required 

under section 2469, while beneficial, can be time consuming and 

complex and may require considerable resources.

• Pilot program proposals to segregate funds by weapon systems to 

optimize implementation of the reengineered product support concepts 

will require changes to existing funding policies within the Department, 

according to service officials.

In 1999, DOD officials began developing a legislative package requesting 

relief from legislative constraints facing the Department’s reengineering 

efforts. However, the proposals were not finalized; instead, Department 

officials decided to work within the existing legal and appropriations 

framework to define more precisely the impact of the constraints and 

better document the need for legislative changes. 

Conclusions The Department is in the process of taking actions to reengineer its 

logistics support system. The process intends to place greater reliance on 

the private sector to provide more effective and less costly support to 

combat forces by taking advantage of improved technologies, new business 

processes, and commercial transportation. However, planning and 

reengineering process implementation weaknesses put the success of this 

effort at risk.

Although the Department has developed its long-range vision and goals for 

reengineering, it does not have a plan or an investment strategy that 

integrate the individual plans of the services and Defense agencies. As a 

result, the Department faces an increased risk that initiatives may not be 

compatible with each other or may have differing objectives. Without an 

integration plan, DOD cannot evaluate and prioritize the initiatives; 

consequently, some funding for initiatives may be wasted. Without an 

investment strategy, there may not be sufficient funds to adequately test the 

reengineering concepts being piloted and to implement the results on a 
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Department-wide basis. Finally, until details are known on how the final 

logistics system will be structured, DOD cannot assess the effect of 

reengineering efforts on logistics support to combat forces. 

DOD will not have key information available from its pilot programs before 

it expects to make key implementation decisions in 2002. The test that is 

supposed to evaluate the results of the pilot programs will take place 

before the reengineering changes themselves are implemented. 

Consequently, the schedule for testing, evaluating, and implementing 

initiatives beginning in fiscal year 2003 is questionable, and DOD may make 

important decisions without all the information it needs. Furthermore, 

DOD will have difficulty determining how much savings a specific 

reengineering concept could generate because it does not have a 

methodology for making this sort of evaluation. And unless the concerns of 

combat commanders are fully addressed, DOD cannot be sure that 

reengineering concepts, which may be practical for peacetime operations, 

will function efficiently and effectively in a combat environment.

Recommendations To build on and expand DOD’s efforts to reengineer its logistics system, we 

recommend that the Secretary of Defense direct the Under Secretary of 

Defense for Acquisition and Logistics to develop an overarching plan that 

integrates the individual military service and Defense agency logistics 

reengineering plans. Among other things, the plan should include an 

investment strategy for funding the reengineering initiatives and details of 

how DOD plans to achieve its final logistics system end-state. 

To improve the implementation of DOD’s logistics reengineering, we 

recommend that before proceeding with implementation of product 

support reengineering, the Secretary of Defense (1) reassess the schedule 

for testing, evaluating, and implementing pilot program logistics 

reengineering initiatives; (2) establish a methodology showing how much 

savings or improvements come from reengineering concept tests; and 

(3) reassess the approach to addressing combat command concerns about 

the presence of increasing numbers of contractor personnel on the 

battlefield, the ability of contractors to meet surge requirements, the 

potential reduction of rotational slots to meet training requirements, and 

the overall impact on product support costs and funding. 
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Agency Comments and 

Our Evaluation 

We received written comments from the Department of Defense, which are 

reprinted in appendix III. The Department generally agreed with our report 

and recommendations and stated that significant steps remain to be taken 

to reengineer Defense’s logistics processes. DOD also provided technical 

comments that we incorporated in the report as appropriate.

In agreeing with our first recommendation, DOD stated that it has several 

actions underway or planned to integrate service and Defense agency 

reengineering plans. DOD said it plans to review service reengineering 

plans for consistency with DOD’s Logistics Strategic Planning objectives 

and use its new logistics architecture to tie various service initiatives into 

an overarching plan.

DOD partially agreed with our second recommendation. However, the 

Department’s response left unclear what, if any, actions it plans to take. It 

stated that the Department’s schedule for the pilot programs is pragmatic 

and allows the services time to develop and test various strategies and 

mitigate risks. However, as stated in our report, 21 of the 30 pilot programs 

will not likely have test results available at the end of fiscal year 2002, when 

DOD expects to begin expanding the use of successful reengineering 

efforts to other weapon systems. We believe our recommendation on the 

need for reassessing the Department’s schedule for testing, evaluating, and 

implementing program logistics reengineering initiatives is still valid. 

DOD also stated that it does not want to prescribe a methodology to assess 

the extent to which savings or improvements result from reengineering 

initiatives. Rather, DOD believes the use of metrics such as customer 

service, readiness, performance, and total ownership cost reduction are 

sufficient. We agree that such metrics can provide useful information. 

However, they are not a sufficient measure of savings or improvements 

because they cannot distinguish the impact of various initiatives from other 

changes DOD is making to weapon systems. We continue to believe that 

additional action is needed regarding the establishment of a methodology 

for tying improvements and savings to specific reengineering efforts. 

Scope and 

Methodology 

To assess DOD’s logistics reengineering initiatives, we met with 

headquarters officials in the Office of the Secretary of Defense and the 

Joint Staff. We also met with Army officials at U.S. Army Materiel 

Command, U.S. Army Training and Doctrine Command, U.S. Army Forces 

Command, and U.S. Army European Command; Navy officials at Naval Air 
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Systems Command, Naval Sea Systems Command, Naval Supply Systems 

Command and Atlantic Fleet Command, and U.S. Naval Forces Europe; Air 

Force officials at the Air Force Materiel Command, Air Mobility Command, 

Air Combat Command, and U.S. Air Forces Europe; and Marine Corps 

officials at Marine Corps Systems Command, Marine Corps Materiel 

Command, Marine Corps Combat Development Command, and Marine 

Corps Forces Europe. 

To assess DOD’s plans and the adequacy of information for developing the 

overall reengineering strategy, we reviewed ongoing and proposed 

initiatives, including 30 pilot programs (10 each from the Army, the Air 

Force, and the Navy) used to test logistics reengineering concepts. We met 

with program management officials responsible for each of the pilot 

programs to obtain a general understanding of pilot goals, milestones, and 

status as of February 2000. We then compared the anticipated pilot 

program results with Office of the Secretary of Defense statements 

regarding goals and objectives for reengineering logistics. We also relied on 

our prior work in this area, and as well as on prior reports and studies 

describing past DOD experiences and efforts in logistics reengineering 

techniques that rely more heavily on private-sector support. We also 

discussed the status of key logistics reengineering initiatives and 

challenges with responsible Office of the Secretary of Defense and 

reengineering team members. 

To assess the potential effect of the reengineering effort on combat forces, 

we discussed the concepts with representatives from operational 

commands, joint commands, and training and doctrine commands. 

Through discussions with product support reengineering managers, we 

assessed the degree of combat force input into DOD product support 

reengineering initiatives. We also discussed combat commands’ positions 

on the use of contractors to support in-theater operations and any 

unresolved issues related to the use of in-theater contractors.

To assess any other issues that could affect the achievement of 

reengineering goals, we reviewed our prior work in this area and prior DOD 

reports and studies discussing experiences in logistics reengineering. We 

also discussed legal issues with our Office of General Counsel and relied on 

the Office to assess the impact of various laws on DOD’s reengineering 

efforts. Finally, while discussing the status of key logistics reengineering 

initiatives with responsible Office of the Secretary of Defense and 

reengineering team members, we requested that the officials identify any 

other issues that might affect DOD’s reengineering efforts. 
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We conducted our review from September 1999 through April 2000 in 

accordance with generally accepted government auditing standards.

We are sending copies of this report to the appropriate congressional 

committees; the Honorable William Cohen, Secretary of Defense; the 

Honorable Louis Caldera, Secretary of the Army; the Honorable F. W. 

Peters, Secretary of the Air Force; the Honorable Richard Danzig, Secretary 

of the Navy; General James L. Jones, Commandant of the Marine Corps; 

and Lieutenant General Henry T. Glisson, Commander, Defense Logistics 

Agency. We will also make copies available to others upon request. Please 

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

concerning this report. Key contributors are listed in appendix IV.

David R. Warren, Director 

Defense Management Issues
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List of Congressional Committees

The Honorable John Warner

Chairman

The Honorable Carl Levin

Ranking Minority Member

Committee on Armed Services

United States Senate

The Honorable Ted Stevens

Chairman

The Honorable Daniel Inouye

Ranking Minority Member

Subcommittee on Defense 

Committee on Appropriations

United States Senate

The Honorable Floyd Spence

Chairman

The Honorable Ike Skelton

Ranking Minority Member

Committee on Armed Services

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 28 GAO/NSIAD-00-89 Defense Logistics

Appendix I

Recent Department of Defense Studies on Apendxies

Logistics Restructuring ApendxiI

Directions for Defense. The May 1995 report of the Commission on Roles 

and Missions of the Armed Forces recommended that the Department of 

Defense (DOD) privatize most existing depot maintenance work and all 

logistics support for new and future weapon systems. In his August 24, 

1995, letter to Congress, the Secretary of Defense agreed with the 

Commission’s recommendations but expressed a need for DOD to retain 

limited capability to meet essential wartime surge demands, promote 

competition, and sustain institutional expertise.

Joint Vision 2010—America’s Military: Preparing for Tomorrow. The 

1996 report outlined a direction to the services for developing capabilities 

within a joint framework of doctrine and programs and called for 

integration among services. The report presented a concept called Focused 

Logistics, which DOD expects will enable forces to be more mobile, 

versatile, and projectable from anywhere in the world, with the expectation 

that the military will be supported in a matter of hours or days, rather than 

weeks. DOD expects to achieve Focused Logistics through a fusion of 

information, logistics, and transportation and a transition from the vertical 

organizations of the past. The new concept will include having DOD work 

jointly with the private sector to take advantage of best business practices. 

The 1997 Quadrennial Defense Review called on DOD to reduce its 

support infrastructure and streamline its business practices. It proposed 

that DOD (1) make further reductions in civilian and military personnel 

associated with the infrastructure; (2) request authority for two additional 

rounds of base closures; (3) improve the efficiency and performance of 

support functions by adopting innovative management and business 

practices, including reengineering, downsizing, and commercializing 

operations; and (4) consider outsourcing more non-combat related DOD 

support functions, inviting commercial companies to compete with the 

public sector to undertake certain support functions.
Appendix I

Recent Department of Defense Studies on 

Logistics Restructuring

Page 29 GAO/NSIAD-00-89 Defense Logistics

The 1997 Defense Reform Initiative (DRI) called on DOD to reduce its 

support infrastructure and streamline its business practices. It was built 

around four major reform efforts, or pillars: (1) reengineering Defense 

business and support functions, primarily by adopting and applying best 

practices from the commercial sector; (2) reorganizing and reducing the 

size of DOD headquarters elements and Defense agencies, including the 

Office of the Secretary of Defense; (3) expanding the use of competitive 

sources to open DOD’s commercial activities to competition from the 

private sector; and (4) conducting two additional rounds of base 

realignments and closures and eliminating other facilities that are no longer 

needed or drain resources. In April 1999, we reported that it was too early 

to assess the effectiveness of the DRI in the long term.1

 We did, however, 

identify several areas where DOD could build on its initial efforts and give 

even greater impetus to its goals of achieving the desired “revolution in 

business affairs.” Additional efforts could include (1) incorporating other 

major ongoing reforms in the DRI to develop a more comprehensive and 

integrated strategy for reforming Defense business and support activities; 

(2) delineating more clearly the funding requirements needed to achieve 

major reforms; and (3) enhancing the Department’s ability to measure DRI 

results, particularly through financial management and related reforms.

Actions to Accelerate the Movement to the New Workforce Vision, 

delivered to Congress by the Secretary of Defense in April 1998, provided 

the Department’s plan to streamline its acquisition organizations, 

workforce, and infrastructure. The report stated that the maintenance of 

inventories would undergo dramatic change, as contractors would retain 

most inventories except for those in the hands of operational forces, while 

government-held wholesale inventory would largely disappear. The 

Secretary added that his was a vision of smaller and fewer organizations 

focused on managing suppliers rather than supplies and on the total costs 

of ownership to provide and support the high—quality goods and services 

that combat forces need. 

1

Defense Reform Initiative: Organization, Status, and Challenges (GAO/NSIAD-99-87, 

Apr. 21, 1999).
Appendix I

Recent Department of Defense Studies on 

Logistics Restructuring

Page 30 GAO/NSIAD-00-89 Defense Logistics

The 1999 Logistics Strategic Plan states that by the end of fiscal year 

2005, the joint logistics process will be a highly efficient, integrated system 

that will ensure the required support to combat forces. The plan states that 

DOD’s logistics mission is to provide responsive and cost-effective support 

to ensure readiness and sustainability for the total force across the 

spectrum of military operations. As currently envisioned, the reengineered 

logistics support system will (1) be a fully integrated supply chain of 

products and services that meets the needs of combat forces efficiently; 

(2) replace large inventories with significantly more reliable weapon 

systems, shortened processing cycles, more agile manufacturing, tailored 

maintenance support, and accurate schedules of deliveries for products 

and services; (3) use the concept of best value (most quality received at a 

reasonable cost versus the lowest cost) to determine how products and 

services will be provided; (4) use a joint-service logistics command, which 

will have control of assets and capabilities, information to set support 

priorities, and the means to direct the distribution of resources across the 

services during combat operations; (5) use commercial products and 

capabilities as the principal source of commodity and service support while 

maintaining core functions2

 within the department; and (6) provide 

widespread access to information by integrating data used by private 

industry and DOD. 

2

The study defines core functions as military capabilities that are unavailable in the 

commercial marketplace or tasks that DOD clearly performs in a manner superior to the 

private sector to satisfy inherently governmental responsibilities.
Page 31 GAO/NSIAD-00-89 Defense Logistics

Appendix II

DOD Weapon System Pilots and Associated 

Product Support Strategies ApendxiI

Service Product support strategies

Army pilots − fielded systems

AH-64 Apache Helicopter • Establish virtual prime vendor for support of Apache aircraft and sub-systems

• Modernize system with new components to upgrade system capability

M-1 Abrams Tank • Contractor logistics support on sub-systems

• Public/private partnering for overhauling tanks

• Use contractor-provided parts kits for engine overhauls

• Acquire a more fuel-efficient and reliable tank engine under a long-term performancebased contract 

Fire Support Command and Control • Reduce personnel costs by integrating responsibilities for developing new/upgraded 

systems and sustainment of in-use systems

• Reduce parts costs through use of contractor logistics support 

Heavy Expanded Mobility Tactical Truck • Partnering between the program office and the Defense Logistics Agency to reduce 

surcharges to the program 

• Upgrade the truck with existing commercial technologies to improve reliability and 

extend service life 

CH-47 Chinook Helicopter • Establish a partnership between the program office and the Army Material Command 

• Focus on system costs by using a functionally based approach 

• Concentrate on reducing non-hardware cost drivers such as training 

Guardrail Common Sensor • Reduce sustainment costs through use of performance-based contractor logistics 

support for Guardrail-unique items

Army pilots − new systems

Crusader • Integrated life-cycle support system to support user requirements and lower cost of 

ownership through use of continuous technology improvements

• Long-range plan to competitively source life-cycle support 

HIMARS Multiple Launch Rocket System • Prime contractor will have total system support responsibility 

• Partnering between prime contractor and the Army depots 

• Use of long-term contracts

RAH-66 Commanche Helicopter • Conduct a strategy support study in 2001 to determine what strategies to pursue 

Tube-launched Optically-controlled Wire-guided 

Improved Target Acquisition System

• Contractor logistic support for the life of the system that requires a 90 percent system 

operating level as a performance requirement 

Navy pilots − fielded systems 

Smart Carrier • Technology insertion, reengineered work practices, and design modifications to 

reduce workload and hence manpower requirements 

EA-6B Prowler • Defense Logistics Agency virtual prime vendor contract for parts to support J-52 

engine depot level repairs at Naval Aviation Depot, Jacksonville 

H-60 Helicopter • Virtual prime vendor support for H-60 parts and material to all levels of maintenance, 

as well as upgrading and re-manufacturing programs 

Common Ships • Technology insertion, reduced cumbersome work practices, and reengineered 

maintenance to reduce manpower requirements 

Aviation Support Equipment • Technology insertion and virtual prime vendor support for consolidated automated 

support systems 

Stand-off Land Attack Missile • Reduce system acquisition costs by accelerating buy-out of missile requirement 

Smart Ships • Technology insertion and virtual prime vendor support for integrated ship controls 
Appendix II

DOD Weapon System Pilots and Associated 

Product Support Strategies

Page 32 GAO/NSIAD-00-89 Defense Logistics

Navy pilots − new systems 

Advance Amphibious Assault Vehicle • Contractor logistics support 

LPD-17 Transport Ship • Contractor logistics support 

Medium Tactical Vehicle Replacement • Contractor logistics support 

Air Force pilots − fielded systems

F-16 Fighter Falcon • Program office enters into agreements with suppliers and reviews performance 

against agreement specifications 

• Use of a contractor for sustainment of selected avionics items, with the contractor 

having total system performance responsibility 

B-1 Lancer • Program office enters into written agreements with DOD supply sources defining 

responsibilities and metrics for performance 

• Contractor developing approaches to address diminishing manufacturing sources 

and resulting parts obsolescence

• Consolidate 19 sole-source contracts into 1 to achieve integration efficiencies 

• Meld the contractor and the Air Force deficiency reporting systems into one system

C-5 Galaxy • Conduct a comprehensive supply-chain management study to isolate and identify 

cost drivers for further action 

• Modernize the aircraft’s avionics while using a contractor to provide performancebased support for the new avionics items 

• Program office enters into written agreements with DOD repair and supply sources 

F-117A Nighthawk • Contractor will have total system support responsibility

• Contractor incentivized to modernize through spares by sharing any resulting savings 

C/KC-135 Stratolifter/Stratotanker • Use of performance-based contract to reduce repair times 

• Develop agreements with parts suppliers to provide a guaranteed level of spare parts 

• Reviewing expensive spare parts to identify improvements or replacements 

Airborne Warning and Control System • Contractor provides logistics sustainment for the mission computer upgrade 

• Partnership with NATO to jointly develop test program sets for the radar system 

improvement program 

• Contractor maintains the technical data for the system 

• Analyze partnering opportunities for wholesale depot and supply operations 

Joint Surveillance and Target Attack Radar 

System

• Contractor is given total system support responsibility using a 6-year contract, with 

22-year award term incentive 

C-17 Globemaster III • Contractor logistics support called “flexible sustainment” prior to the source-of-repair 

decision in 2003 

Cheyenne Mountain Complex Integrated Space 

Command and Control Program

• Logistics support will be integrated under one contractor that will be given total 

system performance responsibility

Air Force pilots − new systems

Space Based Infrared System • Contractor will be given total system performance responsibility
Page 33 GAO/NSIAD-00-89 Defense Logistics

Appendix III

Comments From the Department of Defense ApendxiI
Appendix III

Comments From the Department of Defense

Page 34 GAO/NSIAD-00-89 Defense Logistics
Appendix III

Comments From the Department of Defense

Page 35 GAO/NSIAD-00-89 Defense Logistics

Now on page 23.

Now on page 11.

Now on page 10.
Appendix III

Comments From the Department of Defense

Page 36 GAO/NSIAD-00-89 Defense Logistics

Now on page 23.
Page 37 GAO/NSIAD-00-89 Defense Logistics

Appendix IV

GAO Contacts and Staff Acknowledgments ApendxiIV

GAO Contacts Barry Holman (202) 512-5581

Julia Denman (202) 512-4290

Acknowledgments In addition to those named above, Glenn Knoepfle, David Epstein, 

Larry Junek, John Strong, Pam Valentine, and John Brosnan made key 

contributions to this report.
Appendix IV

GAO Contacts and Staff Acknowledgments

Page 38 GAO/NSIAD-00-89 Defense Logistics
Page 39 GAO/NSIAD-00-89 Defense Logistics

GAO Related Products

Depot Logistics: Air Force Report on Contractor Support is Narrowly 

Focused (GAO/NSIAD-00-115, Apr. 20, 2000).

Depot Maintenance: Air Force Faces Challenges in Managing to 50-50 

Ceiling (GAO/T-NSIAD-00-112, Mar. 3, 2000).

Depot Maintenance: Future Year Estimates of Public and Private 

Workloads Are Likely to Change (GAO/NSIAD-00-69, Mar. 1, 2000).

Depot Maintenance: Workload Allocation Reporting Improved, but 

Lingering Problems Remain (GAO/NSIAD-99-154, July 13, 1999).

Army Logistics: Uncertainties Surrounding Proposed Support Plan for 

Apache Helicopter (GAO/NSIAD-99-140, May 25, 1999).

Navy Ship Maintenance: Allocation of Ship Maintenance Work in the 

Norfolk, Virginia, Area (GAO/NSIAD-99-54, Feb. 24, 1999).

Army Industrial Facilities: Workforce Requirements and Related Issues 

Affecting Depots and Arsenals (GAO/NSIAD-99-31, Nov. 30, 1999).

Defense Depot Maintenance: Public and Private Sector Workload 

Distribution Reporting Can Be Further Improved (GAO/NSIAD-98-175, 

July 23, 1998).

Defense Depot Maintenance: Use of Public-Private Partnership 

Arrangements (GAO/NSIAD-98-91, May 7, 1998). 

Defense Depot Maintenance: DOD Shifting More Workload for New 

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

DOD Depot Maintenance: Information on Public and Private Sector 

Workload Allocations (GAO/NSIAD-98-41, Jan. 20, 1998).

Defense Depot Maintenance: Challenges Facing DOD in Managing Working 

Capital Funds (GAO/T-NSIAD/AIMD-97-152, May 7, 1997).

Depot Maintenance: Uncertainties and Challenges DOD Faces in 

Restructuring Its Depot Maintenance Program (GAO/T-NSIAD-97-111, 

Mar. 18, 1997, and GAO/T-NSIAD-112, Apr. 10, 1997). 
GAO Related Products

Page 40 GAO/NSIAD-00-89 Defense Logistics

Navy Ordnance: Analysis of Business Area Price Increases and Financial 

Losses (GAO/AIMD/NSIAD-97-74, Mar. 14, 1997).

Defense Outsourcing: Challenges Facing DOD as It Attempts to Save 

Billions in Infrastructure Costs (GAO/T-NSIAD-97-110, Mar. 12, 1997).

High-Risk Series: Defense Infrastructure (GAO/HR-97-7, Feb. 1997).

Defense Depot Maintenance: DOD’s Policy Report Leaves Future Role of 

Depot System Uncertain (GAO/NSIAD-96-165, May 21, 1996).

Defense Depot Maintenance: More Comprehensive and Consistent 

Workload Data Needed for Decisionmakers (GAO/NSIAD-96-166, May 21, 

1996).

Defense Depot Maintenance: Privatization and the Debate Over the PublicPrivate Mix (GAO/T-NSIAD-96-146, Apr. 16, 1996, and GAO/T-NSIAD-96-148, 

Apr. 17, 1996).

Closing Maintenance Depots: Savings, Personnel, and Workload 

Redistribution Issues (GAO/NSIAD-96-29, Mar. 4, 1996).

Depot Maintenance: Issues in Allocating Workload Between the Public and 

Private Sectors (GAO/T-NSIAD-94-161, Apr. 12, 1994).

Depot Maintenance: Issues in Management and Restructuring to Support a 

Downsized Military (GAO/T-NSIAD-93-13, May 6, 1993).

(709485) Letr
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