GAO

United States General Accounting Office

Report to Congressional Committees

September 1999 DEFENSE 

INVENTORY

Improved 

Management 

Framework Needed to 

Guide Army Best 

Practice Initiatives

GAO/NSIAD-99-217

Page 1 GAO/NSIAD-99-217 Defense Inventory

United States General Accounting Office

Washington, D.C. 20548

National Security and

International Affairs Division

B-281458 Letter

September 14, 1999

Congressional Committees

Section 347 of the Strom Thurmond National Defense Authorization Act for 

Fiscal Year 1999 provides for the secretary of each military department to 

submit to the Congress a schedule for implementing best commercial 

inventory practices for the acquisition and distribution of secondary 

inventory items.1

 A best commercial inventory practice is defined as a 

practice that enables military departments to reduce inventory levels while 

improving the responsiveness of the supply system to user needs. Section 

347 further requires that the schedule provide for implementation of such 

best practices to be completed within 5 years of enactment, or by 

October 17, 2003. The section also requires us to evaluate the extent to 

which the secretary of each military department has complied with the 

act’s requirements.

In this report, we discuss our evaluation of the Army’s best practices 

implementation schedule, which the Assistant Secretary of the Army for 

Acquisition, Logistics, and Technology submitted to the Congress on 

June 14, 1999. This report provides our evaluation of that schedule.2

 

Specifically, we (1) evaluated the extent to which that schedule responds to 

the provisions of the act and (2) identified specific elements of a 

management framework needed for effective implementation and 

oversight of the Army’s best practice initiatives.

Results in Brief The Army’s schedule is generally responsive to the act. Specifically, the 

schedule describes 18 initiatives that address the Army’s inventory 

management functions, and for most of the initiatives, it provides for 

implementation to be completed within 5 years. The initiatives are 

primarily aimed at improving the Army’s information management, 

maintenance, and acquisition processes and transferring logistics activities 

to the private sector. Specific time frames for full implementation of three 

1

 Secondary inventory includes spare parts, clothing, and medical supplies to support Department of 

Defense (DOD) operating forces worldwide.

2

 We are providing separate reports on the Army, Air Force, and Navy best practice implementation 

schedules.

Letr
Page 2 GAO/NSIAD-99-217 Defense Inventory

of the initiatives were not included in the schedule. Therefore, we could 

not determine whether these initiatives are to be implemented within the 

required 5-year time frame. 

Though generally responsive to the act’s requirements, the schedule 

provides a management framework that lacks specific elements such as an 

overall strategy and outcome-oriented goals and performance measures. 

While the initiatives are generally guided by the Army’s “Revolution in 

Military Logistics,” there is no comprehensive strategy or plan that guides 

the efforts. Consequently, no detailed framework exists to increase the 

likelihood that the initiatives are coordinated and do not conflict or 

duplicate efforts. Also, there are no specific performance goals established 

to measure the overall results of the initiatives. In our prior work, we noted 

that the lack of a detailed management framework contributed to DOD’s 

difficulty in implementing new initiatives. Without a more effective 

management framework, opportunities for oversight by the Congress and 

DOD managers would be limited since meaningful evaluations of progress 

and results would be impossible. The Government Performance and 

Results Act offers a model for developing an effective management 

framework to assess the results of the initiatives and improve the 

likelihood of successful implementation and assessment. 

To make progress and results information available to the Congress and 

DOD managers, we are recommending that the Secretary of the Army 

develop a Results Act management framework for the initiatives in the 

schedule that includes an overall strategy and performance plan. 

Background To provide reparable parts for its aviation and ground equipment, the Army 

uses an extensive logistics system that is based on management processes, 

procedures, and concepts that have evolved over time. Reparable parts are 

expensive items that can be fixed and used again, such as hydraulic pumps, 

navigational computers, engines, and landing gear. The Army’s logistics 

system, often referred to as a logistics pipeline or a supply chain, consists 

of a number of interrelated activities that provide reparable parts where 

and when they are needed.3

 These activities include the acquisition, 

3

 The Army also purchases, stores, and distributes consumable parts that are used extensively to fix 

reparable parts and aircraft. The Defense Logistics Agency provides most of the consumable parts that 

Army repair activities use and handles a large portion of the warehousing and distribution of reparable 

parts.

Letr
Page 3 GAO/NSIAD-99-217 Defense Inventory

storage, repair, and distribution of parts, which together require billions of 

dollars of investments in personnel, equipment, facilities, and inventory. 

Figure 1 is a general illustration of the interrelationship of the major 

functions of the Army’s logistics pipeline for secondary items.

Figure 1: Army’s Logistics Pipeline for Secondary Items

Source: Office of the Army Deputy Chief of Staff for Logistics.

Base level or unit

level maintenance

Base level or unit

level maintenance

Base level or unit

level supply

Base level or unit

level supply Unit Unit

Acquisition Acquisition

Depot storage Depot storage

Depot maintenance Depot maintenance

Maintenance

centers

of excellence

Maintenance

centers

of excellence

Other Army unit

or military service

supply

Other Army unit

or military service

supply
Page 4 GAO/NSIAD-99-217 Defense Inventory

Since 1990, we have identified DOD’s management of secondary 

inventories as a high-risk area because levels of inventory were too high 

and management systems and procedures were ineffective.4

 In addition, 

our financial statement audits have identified continuing significant 

problems with the integrity of DOD’s inventory data. For example, we 

reported that inaccurate inventory data resulted from weaknesses in DOD’s 

procedures relied on to maintain visibility over, and conduct physical 

counts of, on-hand inventories. Until these problems are effectively 

resolved, DOD’s ability to reliably measure and assess performance will 

continue to be impaired.5

 While DOD has made some improvements, these 

general conditions still exist, and this area remains on our high-risk list.6 

We have reported that adopting best business practices in inventory 

management and improving the reliability of financial management 

information are key steps toward solving these problems.

The Congress has recently taken specific actions to encourage DOD to 

adopt best commercial practices to improve its inventory management. The 

National Defense Authorization Act for Fiscal Year 1998 required the 

Director of the Defense Logistics Agency to develop and submit to the 

Congress a schedule for implementing best commercial practices for the 

acquisition and distribution of nine categories of consumable-type 

supplies. The act also required that the schedule provide for the 

implementation of such practices to be completed by November 2000. The 

Strom Thurmond National Defense Authorization Act for Fiscal Year 1999 

placed a similar requirement on the secretary of each military department. 

The military departments’ schedules are to provide for the implementation 

of such best practices to be completed by October 17, 2003.

DOD is working to adopt best practices in its operations. In November 

1997, the Secretary of Defense issued the Defense Reform Initiative report, 

4

In 1990, we began a special effort to review and report on the federal program areas that we identified 

as high risk because of vulnerabilities to waste, fraud, abuse, and mismanagement. This effort, which 

was supported by the Senate Committee on Government Affairs and the House Committee on 

Government Reform, brought a much-needed focus to problems that were costing the government 

billions of dollars. 

5

 Results Act: DOD’s Annual Performance Plan for Fiscal Year 1999 (GAO/NSIAD-98-188R, June 5, 1998); 

DOD Financial Management: More Reliable Information Key to Assuring Accountability and Managing

Defense Operations More Efficiently (GAO/ T-AIMD/NSIAD-99-145, Apr. 14, 1999); and Department of

Defense: Status of Financial Management Weaknesses and Actions Needed to Correct Continuing

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

6

 Major Management Challenges and Program Risks: Department of Defense (GAO/OCG-99-4, Jan. 

1999).
Page 5 GAO/NSIAD-99-217 Defense Inventory

which called for a revolution in DOD’s business affairs and identified a 

number of reengineering initiatives aimed at adopting modern business 

practices to achieve world-class standards of performance. In addition, the 

DOD performance plan for fiscal year 2000 notes that the inventory supply 

system is larger than required to support today’s smaller force structure 

and outlined goals to reduce inventory levels and streamline infrastructure. 

In March 1999 testimony, the Under Secretary of Defense (Acquisition 

Reform) stated that DOD needed “a revolution in business affairs . . . one 

that embodies the best of modern business practices, the ability to access 

the full range and scope of technologies to meet the speed and agility 

demanded by the new battlespace, and an absolute commitment to finding 

the best, most efficient means of delivering goods and services to our 

warfighters.” 

Army’s Schedule 

Generally Responds to 

the Act’s Requirements 

The Army’s schedule is generally responsive to the requirements of the act. 

It contains 18 initiatives that address the acquisition and distribution of 

secondary inventory items the Army manages and, for most of the 

initiatives, it provides for implementation within 5 years (see table 1). 

The18 initiatives are primarily aimed at improving the information 

management, maintenance, and acquisition processes and transferring 

logistics activities to the private sector. For example, the Logistics 

Integrated Data Base initiative will integrate 66 separate databases that will 

allow data to be stored once, yet be used in multiple applications. The 

Velocity Management initiative is intended to examine the entire Army 

logistics pipeline to speed up the distribution and repair of component 

parts and better utilize existing Army inventory.
Page 6 GAO/NSIAD-99-217 Defense Inventory

Table 1: Army Initiatives and Projected Completion Date

For most of the initiatives, the schedule provides background information, 

an overview of each initiative’s goals and objectives, implementation sites, 

funding requirements, projected savings, and projected dates for 

completion. However, for three of the initiatives, the schedule does not 

specify a planned completion date. Without this information, we cannot 

determine whether implementation will be completed within the required 

5-year time frame. (See app. I for a description of each initiative.)

Initiative category Initiative Projected completion date

Information 

management

Logistics Integrated Data Base

Virtual Integrated Materiel Management Center

Wholesale Logistics Modernization Program

Global Combat Support System—Army

Army Total Asset Visibility

Dec. 2000.

Sept. 2001.

Information not provided.

Sept. 2002.

Completed.

Maintenance National Maintenance Program

Depot Repair Process Improvements

Electronic Sustainment Support Centers

Sept. 2003.

Dec. 2000.

Information not provided.

Acquisition Lead Time Reduction

Modernization Through Spares

Paperless Contracting

Fiscal year 2001.

Information not provided.

Jan. 2000.

Outsourcing Apache Prime Vendor Support

M109 Family of Vehicles Fleet Management

Focused Sustainment

Consolidated Contractor Life Cycle Support—Training 

Aids and Simulators

Fiscal year 2004.

December 1999 contract award. 

10-year contract awarded in 1998.

Completed.

Other initiatives Velocity Management

Single Stock Fund

Lateral Redistribution

Completed. 

Sept. 2002.

Completed. 
Page 7 GAO/NSIAD-99-217 Defense Inventory

Management 

Framework Is Key to 

Implementing 

Initiatives 

Though generally responsive to the act’s requirements, the schedule 

provides a management framework that lacks an overall strategy and 

outcome-oriented goals and performance measures. Specifically, it does 

not have a comprehensive strategy or plan to ensure that the efforts are 

coordinated and do not conflict or duplicate efforts, nor does it establish 

specific performance goals to measure the overall results of the initiatives. 

The Government Performance and Results Act offers a model for 

developing an effective management framework to guide the 

implementation of the initiatives and provide the Congress and other 

decisionmakers with information on progress and results. 

Schedule Provides a Limited 

Management Framework 

In our past work, we reported that the lack of a management framework 

containing an overall strategy and outcome-oriented goals and 

performance measures contributed to DOD’s difficulty in implementing 

new initiatives.7 For example, we reported that DOD did not have an 

adequate management framework to clearly determine the progress being 

made in realizing the Total Asset Visibility initiative’s goals and that the 

initiative’s strategic and implementation plans were inadequate. As a 

result, DOD managers did not have a clear picture of the initiative’s 

implementation status or know how various initiatives within each service 

contributed to achieving DOD’s overall goals and objectives. We also 

reported that there was confusion over who would use the Total Asset 

Visibility system and how it would be used.

The Army’s schedule represents a collection of best practice initiatives the 

Army plans to complete within the next 5 years to improve the acquisition 

and distribution of secondary supply items managed by the Army. The 

schedule describes the initiatives within the context of the Army’s Strategic 

Logistics Plan and other DOD planning documents, but it does not contain 

a comprehensive strategy or overall outcome-oriented goals and 

performance measures. For most of the initiatives, the Army identified 

general goals and objectives, describing an end state that the Army hopes 

to achieve, such as “maximize repair capabilities and optimize the use of 

available resources,” and “reduce asset inventories,” but it did not establish 

specific performance measures for those goals.

7

 Defense Inventory: DOD Could Improve Total Asset Visibility Initiative With Results Act Framework

(GAO/NSIAD-99-40, Apr. 12, 1999).
Page 8 GAO/NSIAD-99-217 Defense Inventory

In addition, the Army associated each schedule initiative with specific 

aspects of its “Revolution in Military Logistics,” which is its overall process 

of changing logistics operations in support of DOD goals. However, the 

schedule does not define the way the individual initiatives will support 

these goals and objectives, the extent to which they may reduce the Army’s 

$9.6 billion secondary inventory,8

 or the extent to which they will improve 

the responsiveness of the supply system to user needs. Without this 

information, it is impossible to determine the magnitude of impact these 

initiatives may have on the Army’s overall logistics operations and 

objective information about implementation progress and whether the 

initiatives are achieving their desired outcomes may not be available to the 

Congress and DOD managers.

Results Act Management 

Framework

The Results Act framework generally consists of establishing strategic 

plans, performance plans, and mechanisms for measuring program 

progress and results. Such a framework includes (1) establishing broad 

general initiative goals and objectives, (2) linking these goals to DOD’s 

overall goals and objectives, (3) establishing quantifiable performance 

measures to assess whether the initiatives are achieving desired results, 

(4) defining levels of accountability and responsibility for implementing the 

initiatives and identifying the resources that will be required to achieve 

goals, (5) establishing milestones to measure progress toward full 

implementation, and (6) defining an evaluation plan to periodically 

compare actual results to established goals and objectives. This 

information allows the Congress and DOD managers to measure initiative 

implementation progress and determine if the initiatives are achieving their 

desired results.

In addition to these potential benefits, considering the initiatives as 

interrelated efforts maximizes their systemwide improvement potential. 

Our prior work on best inventory management practices has shown that 

efforts to reengineer a logistics system are more successful when the 

various logistics activities are viewed as a series of interrelated processes 

rather than isolated functional areas.9

 For example, when one airline 

began changing the way it purchased parts from suppliers, it considered 

8

 Inventory value reported in the Department of Defense Supply System Inventory Report, Sept. 30, 

1998. The Army Working Capitol Fund financial statements report this inventory value at $10.5 billion.

9

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

(GAO/NSIAD-98-97, Feb. 27, 1998).
Page 9 GAO/NSIAD-99-217 Defense Inventory

how the changes would affect mechanics in repair workshops. 

Additionally, airline officials described how a combination of supply chain 

improvements could lead to continuous improvements. They also 

described how culture changes, improved data accuracy, and more 

efficient processes lead to reductions in inventories and complexity of 

operations. These reductions can lead to further efficiencies and process 

improvements.

Conclusions The Army’s schedule generally meets the requirements of the act by 

providing information on 18 initiatives, most of which are scheduled to be 

completed within 5 years. Achieving the Army’s goal of improved 

management of secondary items will depend on the successful 

implementation of these initiatives. Implementation of the initiatives is 

generally guided by processes the Army refers to as a “Revolution in 

Military Logistics.” However, the processes set forth in that document are 

general in nature and implementation and assessment of initiatives of this 

magnitude and complexity would benefit from more specific guidance. 

The Results Act provides a framework for implementing and assessing the 

initiative results. Without a more effective management framework, 

opportunities for oversight by the Congress and DOD managers would be 

limited since meaningful evaluations of progress and results would be 

impossible.

Recommendation To provide a mechanism to improve the potential for successfully 

implementing the Army initiatives and measure results, we recommend 

that the Secretary of the Army develop a management framework for 

implementing the 18 initiatives based on the principles embodied in the 

Results Act. Specifically, the management framework should include 

• a comprehensive strategy that is directly linked to top-level DOD goals 

and objectives and that recognizes the interrelationship of the initiatives 

and the overall impact the initiatives will have on the Army’s logistics 

pipeline, such as reducing pipeline time, improved customer service, 

and reductions in total inventory and

• a performance plan that includes clearly defined goals and objectives, 

defined levels of accountability, quantifiable performance measures, 

interim schedule milestones, and plans to periodically assess the overall 

impact the initiatives have achieved in reducing inventory levels while 

improving the responsiveness of the supply system to user needs. 
Page 10 GAO/NSIAD-99-217 Defense Inventory

Agency Comments and 

Our Evaluation

In commenting on a draft of this report, DOD concurred with our 

recommendation and stated that the Army is revising its Strategic Logistics 

Plan to more clearly articulate the relationships, goals, objectives, and 

metrics of logistics initiatives. They will also provide regularly scheduled 

review and analysis to the Assistant Secretary of the Army (Acquisition, 

Logistics, and Technology). DOD further stated that approval of the 

revised Army Strategic Logistics Plan structure by the Assistant Secretary 

is anticipated during the first quarter of fiscal year 2000. DOD’s comments 

are included in their entirety as appendix II.

DOD did express concern that the draft report implied that the current 

management framework for implementing the initiatives included in the 

schedule is inadequate. DOD stated that the Army’s current management 

framework is guided by the Army’s Revolution in Military Logistics and that 

each initiative supports an element of that process. Further, DOD cited 

results that have been achieved and asserted that such results would not 

have been possible without an adequate management framework. We did 

not conclude that the Army’s framework was inadequate. However, we 

clearly believe it can be improved. We have revised our conclusion to more 

clearly reflect our position. 

Scope and 

Methodology

We have evaluated the Army, Air Force and Navy best practice 

implementation schedules separately. This report summarizes our 

evaluation of the Army’s schedule. Our analysis was based on the 

information contained in the schedule, discussions with Army officials, and 

our prior work comparing DOD and private sector logistics practices. We 

reviewed the schedule to determine the extent to which it responds to the 

act’s requirements. Specifically, we evaluated the extent to which (1) the 

initiatives cover the acquisition and distribution of secondary inventory 

items and (2) the implementation of the initiatives will be completed within 

5 years. 

In addition to determining whether the schedule responds to the act’s 

requirements, we identified areas in which it could be improved to guide 

initiative implementation and improve management of secondary inventory 

items. Specifically, we examined the schedule in terms of 

outcome-oriented Results Act principles to determine whether the 

schedule provides an overall strategy for adopting best practices and 

contains key management information to guide implementation. We did 
Page 11 GAO/NSIAD-99-217 Defense Inventory

not assess the merits of the initiatives or the initiatives’ likelihood for 

success.

We interviewed officials and obtained information about ongoing and 

planned initiatives at Army Headquarters, Washington, D.C.; the Office of 

the Secretary of the Army for Research, Development and Acquisition and 

the Army Materiel Command, Arlington, Virginia; and the Combined Arms 

Support Command, Fort Lee, Virginia. We also discussed the results of 

implementing the initiatives, the impact on supply operations, and 

customer satisfaction with logistics personnel at Fort Bragg, North 

Carolina, and Fort Campbell, Kentucky. In addition, we used information 

from reports that we have issued since 1995 and are listed in GAO related 

products.

We conducted our review from November 1998 to June 1999 in accordance 

with generally accepted government auditing standards.

We are sending copies of this report to the appropriate congressional 

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

Honorable Louis Caldera, Secretary of the Army; Lieutenant General 

Henry T. Glisson, Director, Defense Logistics Agency; and Jacob Lew, 

Director, Office of Management and Budget. 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. Major contributors to this report are listed in 

appendix III.

David R. Warren, Director

Defense Management Issues
Page 12 GAO/NSIAD-99-217 Defense Inventory

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 K. 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 P. Murtha

Ranking Minority Member

Subcommittee on Defense

Committee on Appropriations

House of Representatives
Page 13 GAO/NSIAD-99-217 Defense Inventory
Page 14 GAO/NSIAD-99-217 Defense Inventory

Contents

Letter 1

Appendix I

Summary of Army 

Initiatives

16

Appendix II

Comments From the 

Department of Defense

23

Appendix III

GAO Contacts and 

Staff 

Acknowledgments

25

Related GAO Products 28

Tables Table 1: Army Initiatives and Projected Completion Date 6

Figures Figure 1: Army’s Logistics Pipeline for Secondary Items 3

Abbreviations

DOD Department of Defense
Page 15 GAO/NSIAD-99-217 Defense Inventory
Page 16 GAO/NSIAD-99-217 Defense Inventory

Appendix I

Summary of Army Initiatives ApenxIdi

The Army’s best practices implementation schedule lists 18 best practice 

initiatives. We have categorized the initiatives into information 

management, maintenance, acquisition, outsourcing, and other. This 

appendix summarizes the information contained in the schedule submitted 

to the Congress on June 14, 1999. 

Information 

Management Initiatives

Five initiatives listed in the Army’s implementation schedule involve 

replacing old or developing new logistics information management 

systems. For example, with the Logistics Integrated Data Base initiative, 

the Army plans to integrate over 60 databases into a single database. A new 

system being developed by the Army, the Global Combat Support System– 

Army, is intended to provide field commanders with a comprehensive 

logistics picture for their units.

Logistics Integrated Data 

Base

Under the Logistics Integrated Data Base initiative, the Army plans to 

reengineer the current structure of the databases within its Logistics 

Support Activity. This initiative is designed to integrate 66 databases into a 

single database that will allow data to be stored once and used in multiple 

applications, to use commercial off-the-shelf components, and to provide 

user friendly windows-like applications. This initiative began in August 

1997, and it is scheduled for completion in December 2000. The data 

elements developed for this initiative are also intended to support the 

Global Combat Support–Army initiative. 

Virtual Integrated Materiel 

Management Center

The Army intends to reduce costs and improve performance by integrating 

logistics life-cycle management functions into one virtual materiel 

management center with this initiative. These functions include weapon 

system sustainment and integration, readiness analysis, and management 

support. Under this initiative, the Army’s geographically dispersed materiel 

management centers will operate in an integrated data environment, with 

the majority of life-cycle management data being stored in digital format. 

The Army began work on this initiative in September 1997, and it expects 

implementation to be completed by September 2001.

Wholesale Logistics 

Modernization Program

The Wholesale Logistics Modernization Program initiative is a program 

designed to ensure the Army’s combat readiness by modernizing the Army’s 

wholesale logistics processes. Under this program, the Army will rely on a 
Appendix I

Summary of Army Initiatives

Page 17 GAO/NSIAD-99-217 Defense Inventory

contractor to reengineer its business process and sustain a modernized 

software system, which will replace its 30-year old supply and depot 

management systems. The Army had planned to release the solicitation for 

this contract upon approval of an A-76 study1

 and award the contract 

10 months later. On April 20, 1999, the Army waived the A-76 requirement 

for this initiative. The union representing the affected Army civilian 

employees has appealed the waiver, and the final determination of this 

issue is pending. As a result, we were unable to determine if this initiative 

will be completed by 2003. 

Global Combat Support 

System–Army

The Global Combat Support System--Army initiative is a logistics 

information system that builds on the functions and processes of existing 

systems to generate data, integrate databases, and combine combat service 

support information from external sources as necessary to execute the 

Army’s Revolution in Military Logistics. This initiative was begun in the 

second quarter of fiscal year 1997, and it is projected to be completed 

during the fourth quarter of fiscal year 2002. Initially, the system will 

integrate the functions in the Standard Army Management Information 

Systems into a single database with a common programming language and 

operating environment. Ultimately, the system is intended to integrate with 

joint systems to serve as the land force combat support system. The system 

is intended to provide field commanders with the full logistics picture. For 

example, once in place, this system will enable field commanders to 

quickly determine the status of all supply requests. 

Army Total Asset Visibility As we have reported,2

 the Army’s Total Asset Visibility capability is an 

automated tool that is designed to improve the ability of soldiers, 

logisticians, and managers to obtain and act on information about the 

location, quantity, condition, and movement of assets through the Army’s 

logistics pipeline. Fielding of the tool, completed in 1996, provides 

visibility of 99 percent of Army inventories across all classes of supply, 

1

 In 1966, the Office of Management and Budget issued Circular A-76, which established federal policy 

for the government’s performance of commercial activities and set forth the procedures for studying 

them for potential contracting. The circular and its Supplemental Handbook provide guidance to 

federal agencies on procedures to be followed in determining whether commercial activities should be 

performed by in-house personnel, another federal agency through interservice support agreements, or 

the private sector.

2

 Defense Inventory: DOD Could Improve Total Asset Visibility Initiative With Results Act Framework

(GAO/NSIAD-99-40, Apr. 12, 1999).
Appendix I

Summary of Army Initiatives

Page 18 GAO/NSIAD-99-217 Defense Inventory

according to the Army. The Army believes that some key benefits include 

easier distribution of assets, reduced inventories and receipt processing 

time, and fewer duplicate requisitions due to improved asset tracking. This 

initiative, which the Army considers to be completed, will also support the 

Department of Defense’s (DOD) Total Asset Visibility initiative. 

Maintenance Initiatives Three initiatives focus on improving maintenance operations. The National 

Maintenance Program and Depot Repair Process Improvements initiatives 

are designed to improve maintenance operations at the installation and 

depot levels. The depot improvement initiative is also intended to simplify 

how units obtain contractor services for the maintenance and logistics 

support of communication equipment. The Electronic Sustainment 

Support Center initiative relates to maintaining and providing logistics 

support of communication equipment.

National Maintenance 

Program

This Army-wide initiative is to maximize repair capabilities and optimize 

the use of available resources at all maintenance levels within the Army. 

The initiative centralizes the management of all Army sustainment 

maintenance programs while decentralizing the actual repair of the 

components and end items. The workload will be distributed across depot 

and installation activities, and repairs will be made based on the national 

need for an item. Implementation of this initiative began in February 1996, 

and its completion is projected by the end of September 2003.

Depot Repair Process 

Improvements

The Depot Repair Process Improvements initiative is intended to improve 

depot maintenance process efficiencies by meeting production schedules, 

decreasing production costs, reducing parts and asset inventories, and 

accelerating repair times. This initiative began in March 1996, and it is 

scheduled for completion by the end of December 2000. 

Electronic Sustainment 

Support Centers

Under this initiative, the Army established Electronic Sustainment Support 

Centers to provide units with a single focal point for the maintenance and 

logistics support of communication equipment and systems. In turn, the 

centers work with the myriad of contractor and Army organizations that 

repair and provide logistics support for communication equipment and 

systems. The Army has regional centers at Fort Bragg, North Carolina, and 

Fort Hood, Texas, and plans to establish another center in Korea during the 
Appendix I

Summary of Army Initiatives

Page 19 GAO/NSIAD-99-217 Defense Inventory

third quarter of 1999. In its schedule, the Army described this initiative as 

ongoing, but the schedule did not provide for any further expansion beyond 

establishing a center in Korea. As a result, we could not determine if this 

initiative is planned to be completed within 5 years as required by the act.

Acquisition Initiatives The three acquisition initiatives are intended to reduce the time involved in 

ordering and receiving supplies to replenish inventory, enhance the 

performance of spare parts through technology insertion, and reduce the 

paperwork required when ordering supplies. 

Lead Time Reduction This initiative is the Army’s effort to reduce the time it takes to order and 

receive supplies to replenish inventory levels. By reducing lead time, the 

Army intends to reduce its inventory levels. This initiative began in fiscal 

year 1995, and it is planned to be completed in fiscal year 2001. 

Modernization Through 

Spares

This initiative is intended to reduce operation and support costs and to be 

accomplished through the spare parts acquisition process. Under this 

initiative, suppliers will be given greater design and manufacturing 

flexibility to incorporate technology that the commercial marketplace uses 

into the spare parts they manufacture for the Army. The Army believes that 

replacement parts will last longer if they are equipped with state-of-the-art 

technology. This initiative is an ongoing program, and there were 10 

projects underway as of June 1999. The projected completion date for this 

initiative, as indicated by the schedule, remains “to be determined.” 

Therefore, we were unable to determine when this initiative will be 

completed. 

Standard Retail Supply 

System Interface—

Paperless Contracting

The Army’s paperless contracting initiative is intended to reduce the 

amount of paperwork when local (Army units, installations, and depots) 

supply activities order items from local vendors. This project began in 

January 1999, and it is scheduled for completion in January 2000. 

Outsourcing Initiatives The Army included four outsourcing initiatives in its schedule. With two of 

the initiatives, Apache Prime Vendor Support and M109 Family of Vehicles 

Fleet Management, the Army hopes to outsource much of the weapon 

system logistics requirements for the Apache attack helicopter and the 
Appendix I

Summary of Army Initiatives

Page 20 GAO/NSIAD-99-217 Defense Inventory

Paladin mechanized field artillery. The Focused Sustainment initiative 

provides units with a means to obtain contractor logistics support for 

equipment ranging from tanks to rifles. The Army has outsourced logistics 

support for a large portion of its training equipment with the Consolidated 

Contractor Life Cycle Support initiative. We have reported on DOD efforts 

to outsource existing workloads.3

Apache Prime Vendor 

Support

This initiative is a contractor’s proposal to use commercial practices to 

reengineer logistics support, improve readiness, reduce life-cycle costs, 

and provide savings that can be used to modernize the Apache aircraft. 

The prime vendor program is intended to rely on private-sector capital to 

upgrade Apache components in conjunction with its management of the 

parts pipeline. The initiative is being studied by the Army to address 

unresolved issues. The Army does not know when a decision will be made 

on whether the program will go forward.4

 According to the schedule, the 

initiative’s projected completion date is fiscal year 2004. 

M109 Family of Vehicles 

Fleet Management

This initiative is similar to the Apache Prime Vendor Support initiative in 

that logistics support is to be reengineered for self-propelled artillery to 

improve readiness and reduce life-cycle costs (supply and maintenance 

expenditures). The schedule projects a December 1999 contract award; 

however, the Army is studying the initiative, and it is unknown when a 

decision will be made on whether the initiative will go forward. As a result, 

we were not able to determine when this initiative is planned to be 

completed. 

Focused Sustainment The Focused Sustainment initiative consists of a group of six contracts that 

provide sustainment services, such as maintenance, diagnostics, training, 

and parts supply, for all Tank and Automotive Command weapon systems. 

These services are available to all Army customers, anywhere in the world. 

The Command manages over 3,000 weapon systems, including tanks, 

3

 Defense Depot Maintenance: DOD Shifting More Workload for New Weapon Systems to Private Sector

(GAO/NSIAD-98-8, Mar. 31, 1998) and Outsourcing DOD Logistics: Savings Available but Defense

Science Board Projections Are Overstated (GAO/NSIAD-98-48, Dec. 8, 1997) cover a variety of 

outsourcing issues. 

4

 Army Logistics: Status of Proposed Support Plan for Apache Helicopter (GAO/NSIAD 99-140, July 1, 

1999) examines many of the issues the Army must address before the Apache Prime Vendor Support 

contract can be awarded. 
Appendix I

Summary of Army Initiatives

Page 21 GAO/NSIAD-99-217 Defense Inventory

trucks, trains, boats, rifles, and machine guns. Contracts were awarded in 

October 1998, and they will be in effect for 10 years. 

Consolidated Contractor 

Life Cycle Support—

Training Aids and 

Simulators

This initiative, which is completed, has resulted in the Army outsourcing 

95 percent of the life-cycle sustainment for its training aids, simulators, and 

simulations. The contracts awarded provide worldwide on-site supply and 

maintenance support for a variety of systems, such as flight simulators and 

battle simulation systems. According to Army documentation, these 

contracts have produced savings of 30 to 50 percent. The Army began this 

contracting practice in May 1990.

Other Initiatives The Army plans to implement several other initiatives to improve its 

logistics pipeline, integrate two separately managed levels of inventory, and 

share its excess inventory with the other services. 

Velocity Management In September 1995, the Army established its Velocity Management program 

to develop a faster, more flexible, and more efficient logistics pipeline. The 

program’s goals, concept, and top management support parallel 

improvement efforts in private sector companies. The program’s overall 

goal is to eliminate unnecessary steps in the logistics pipeline that delay the 

flow of supplies through the system. The program consists of Army-wide 

process improvement teams for the following four areas: ordering and 

shipping of supplies, repair cycle, inventory levels and locations (also 

known as stockage determination), and financial management. Velocity 

Management is an ongoing program. 

Single Stock Fund The Single Stock Fund initiative will integrate separately managed 

wholesale and installation inventories into a single entity. This initiative 

will improve the acquisition and distribution of supply items by eliminating 

numerous inefficiencies (e.g., multiple points of sale, multiple billing 

ledgers, and duplicative automated systems, all used to manage the same 

inventory). By October 2000, stock-funded supplies owned and managed 

by installations and corps are expected to become wholesale assets to be 

managed by the Army Materiel Command. In addition, division-level stock 

funded supplies are expected to become wholesale assets by October 2001. 

The Army projects completion of this program by September 2002.

Lert
Appendix I

Summary of Army Initiatives

Page 22 GAO/NSIAD-99-217 Defense Inventory

Lateral Redistribution DOD’s Lateral Redistribution Program improves national inventory 

managers’ stewardship of resources by providing the ability to redistribute 

assets within DOD, both intraservice and interservice, to fill backorders 

and offset repair and procurement decisions. These actions are 

accomplished through the transfer of assets from the Army’s, and other 

services’, retail and wholesale systems. As part of this program, the Army 

has automated the redistribution process for secondary items. With lateral 

redistribution, the Army and the other services expect to reduce excess 

inventories and the number of requisitions on the services’ wholesale 

systems. The program is an ongoing initiative that began in fiscal year 

1996. 
Page 23 GAO/NSIAD-99-217 Defense Inventory

Appendix II

Comments From the Department of Defense ApenxIdi
Appendix II

Comments From the Department of Defense

Page 24 GAO/NSIAD-99-217 Defense Inventory

Now on p. 9.

Now on p. 9.
Page 25 GAO/NSIAD-99-217 Defense Inventory

Appendix III

GAO Contacts and Staff Acknowledgments ApenxIdi

GAO Contacts Charles Patton, (202) 512-4412

Robert Repasky, (202) 512-9868

Acknowledgments In addition to those named above, Penney Harwell,

Robert Malpass, and William Woods made key contributions

to this report.
Page 26 GAO/NSIAD-99-217 Defense Inventory
Page 27 GAO/NSIAD-99-217 Defense Inventory
Page 28 GAO/NSIAD-99-217 Defense Inventory

Related GAO Products

Inventory Management: More Information Needed to Assess DLA’s

Best Practice Initiatives (GAO/NSIAD-98-218, Sept. 2, 1998).

Inventory Management: DOD Can Build on Progress by Using Best

Practices for Reparable Parts (GAO/NSIAD-98-97, Feb. 27, 1998).

Defense Inventory Management: Expanding Use of Best Practices for

Hardware Items Can Reduce Logistics Costs (GAO/NSIAD-98-47, 

Jan. 20, 1998). 

Inventory Management: Greater Use of Best Practices Could Reduce

DOD’s Logistics Costs (GAO/T-NSIAD-97-214, July 24, 1997).

Inventory Management: The Army Could Reduce Logistics Costs for

Aviation Parts by Adopting Best Practices (GAO/NSIAD-97-82, Apr. 15, 

1997).

Defense Inventory Management: Problems, Progress, and Additional

Actions Needed (GAO/T-NSIAD-97-109, Mar. 20, 1997).

Inventory Management: Adopting Best Practices Could Enhance Navy

Efforts to Achieve Efficiencies and Savings (GAO/NSIAD-96-156, July12, 

1996).

Best Management Practices: Reengineering the Air Force’s Logistics

System Can Yield Substantial Savings (GAO/NSIAD-96-5, Feb. 21, 1996).

Inventory Management: DOD Can Build on Progress in Using Best

Practices to Achieve Substantial Savings (GAO/NSIAD-95-142, Aug. 4, 

1995).

(709381) Letr
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