United States General Accounting Office

GAO Report to Congressional Requesters

May 1996 AMMUNITION

INDUSTRIAL BASE

Information on DOD’s

Assessment of

Requirements

G O A

years

1921 - 1996

GAO/NSIAD-96-133

GAO United States

General Accounting Office

Washington, D.C. 20548

National Security and

International Affairs Division

B-271468 

May 31, 1996

The Honorable Herbert H. Bateman

Chairman, Subcommittee on Military Readiness

The Honorable Duncan Hunter

Chairman, Subcommittee on Military Procurement

Committee on National Security

House of Representatives

In March 1995, you asked us to review the production facilities available to

support the military’s ammunition requirements and the status of the

ammunition stockpile. This report addresses your concerns about

industrial base production facilities. Our review focused on the

Department of Defense’s (DOD) assessment of the industrial base’s ability

to supply ammunition to meet requirements for peacetime and for two

major regional conflicts and to replenish the ammunition stockpile

following those conflicts. We are issuing a separate report addressing your

concerns about the status of the ammunition stockpile.1

Results in Brief According to DOD, the ammunition stockpile, which is to meet peacetime

needs and support two major regional conflicts, has no major shortages

due to the industrial base. However, there is no longer a requirement to

surge the industrial base during conflicts. In addition, the most lethal,

up-to-date, “preferred” munitions will be at a premium; some requisitions

will be filled with older “substitute” ammunition items, but these items are

considered adequate by DOD to defeat the threat that U.S. forces are

expected to encounter.

DOD’s position is based on a number of studies, including its 1994 and 1995

financial viability studies of the firms comprising the ammunition

industrial base, which concluded that the base is adequate to meet DOD’s

continued production and replenishment requirements. DOD is confident in

this position, even though it did not receive sufficient data to evaluate the

financial condition of all the firms in the industrial base. Although the

firms were not obligated to respond, the 57 firms that responded, and

which were fully evaluated in the 1994 study, held about 75 percent of the

production capacity in the industrial base. DOD assumed that the remaining

45 firms that did not respond were financially viable. DOD officials stated

that if the firms were having financial difficulties, they would be motivated

1

Defense Ammunition: Significant Problems Left Unattended Will Get Worse (GAO/NSIAD-96-129,

expected to be issued in June 1996).

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to respond. In their opinion, it would be in a firm’s best interests to

respond if it was having financial difficulties because that response would,

in effect, be a request for DOD to help the firm remain viable.

An assessment of whether the ammunition industrial base is adequate for

replenishment depends on the assumptions used. Because the underlying

assumptions concerning replenishment levels and time frames form the

basis of the services’ ammunition requirements, changes to the Defense

Planning Guidance could cause DOD’s industrial base assessment to change

even if production capacity within the industrial base remains stable. The

sensitivity of the assessment to changes in assumptions is illustrated by

other private studies that have concluded that the industrial base is

inadequate to meet replenishment requirements during and following a

national emergency. Those studies are based on underlying assumptions

that differ considerably from the assumptions in the current Defense

Planning Guidance.

Background The Army is DOD’s single manager for the military services’ conventional

ammunition and is responsible for ensuring that an adequate industrial

base is maintained to meet the services’ ammunition requirements. The

conventional ammunition requirements include about 250 end items and

500 components that are grouped into 14 different families. These

requirements are derived by adding the projected training, testing, and

pipeline requirements to the war reserve requirement that is needed for

combat. Since Operation Desert Storm, ammunition requirements have

decreased substantially, and the reduced threat and changing conflict

scenarios caused war reserve requirements to decline by more than

70 percent between 1992 and 1994.

In the past 20 years, DOD’s ammunition planning strategy has changed

dramatically.

• Before July 1976, the services stocked enough items to support combat

consumption from the day military operations begin to when the

production rate for an item equals combat consumption.

• Beginning in July 1976, the services were to stock enough items to meet

the first 6 months of combat consumption and the industrial base was

assumed to be able to take over supply at that time. If industry could

respond before the sixth month, then reserve item requirements were to

be reduced accordingly. However, if industry could not respond by the

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sixth month, industrial preparedness actions necessary to make such a

response possible were to be identified for funding.

• The 1978 Program Objective Memorandum (POM) guidance allowed sizing

of the industrial base to meet total mobilization requirements.

• The 1979 POM guidance reduced the allowable size of new facilities to

essentially that required to support an 180-day requirement.

• The 1980 POM guidance further reduced allowable sizing to a 90-day

requirement. This guidance was interpreted to limit sizing of new facilities

in support of new munitions to that which would support production for

the Five-Year Defense Plan. This guidance began the movement away from

surge planning.

After the collapse of the former Soviet Union and the end of the Cold War,

requirements dropped again. As the prospects for a long drawn out global

war declined, DOD continued to reduce its ammunition requirements. Surge

involved emphasis on expediting the completion of items already in

process rather than sustaining production because its only purpose was to

preclude serious depletion of war reserve stocks in a short, intense war.

The emphasis had shifted away from huge stockpiles and an industrial

base with a large surge capacity to a “come as you are” philosophy.

Stockpile requirements declined as DOD planned primarily for major

regional conflicts rather than a global war. Surge capacity lost its

importance because the conflicts were assumed to be so short in duration

that a surging base would not be able to make a significant difference. The

key measurement of the health of the industrial base became the length of

time required to replenish the stockpile after two major regional conflicts.

DOD’s war reserve requirements are now based on the need to fight two

nearly simultaneous major regional conflicts. Key assumptions in this new

plan are (1) each conflict will be intense and short in duration (60 to 

120 days); (2) the military will rely on existing stocks for the entire

duration of the conflicts; (3) there will not be a significant surge in

ammunition production during the conflicts; and (4) following the

conflicts, ammunition items will be replenished to a designated level

within a specified time frame, to prepare for the next conflict. Using the

two-conflict scenario, the military services compute war reserve

requirements based on target kill data from computer simulation models

and from logistics distribution figures.

After the Cold War, the Army Materiel Command studied the services’

ammunition industrial base needs in light of the diminished threat that had

led to force reductions and reduced ammunition requirements. In

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April 1991, the study results were published, and the Command concluded

that the base needed to be consolidated and reduced in size. The Army

used this study to develop its ammunition facility strategy for the 21st

century (AMMO-FAST-21), a strategy that supports reduced peacetime

ammunition requirements while maintaining the highest level of readiness

possible for future contingency operations.

In August 1993, an independent study team from the American Defense

Preparedness Association—two retired military officers and four

corporate managers with more than 30 years experience dealing with

ammunition—endorsed the Army’s AMMO-FAST-21 strategy. The strategy

prioritizes ammunition item families and identifies the facilities that

provide the most production flexibility. It attempts to minimize

expenditures by reshaping the industrial base to its minimum essential

size. Redundancy within the base is limited, and excess government

facilities are disposed of or leased to commercial firms. AMMO-FAST-21 also

attempts to preserve the balance between government and commercial

facilities and to maintain the critical equipment, processes, and skilled

personnel at both types of facilities. The strategy is being implemented

through government-owned, group technology centers and specified

mission facilities and through commercial facilities. AMMO-FAST-21

established a restricted specified base of privately owned facilities that

DOD can contract with directly for critical items and components.

The ammunition industrial base has experienced a dramatic drop in its

production capacities. The relative percentages of ammunition

procurement dollars going to government and commercial producers,

however, have remained relatively constant since 1987. In addition, recent

closures of production facilities have closely reflected those projected by

the Army when it submitted its 1991 Production Base Planning Study and

1993 update to Congress.

DOD’s primary means of maintaining the industrial base is through the

direct procurement of hardware—ammunition end items and

components—but it also procures services for the layaway of production

facilities, the maintenance of inactive facilities, and the demilitarization of

ammunition. This report uses the term procurement funding to refer to the

procurement of ammunition end items and components only.

Current Status of the

Industrial Base

The ammunition industrial base has experienced dramatic changes over

the last 17 years. Less than 50 percent of the production facilities that

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existed in 1978 still exist today, and production capacity is declining for all

14 families of ammunition. However, the mix of procurement funding

between government-owned and contractor-owned production facilities

has remained relatively stable since 1987, with contractor-owned facilities

receiving about 65 percent of the funding.

AMMO-FAST-21 Is

Proceeding as Planned

Decreased funding has led to reductions and consolidations in both the

government and private sectors of the industrial base. As shown in table 1,

the numbers of government-owned, government-operated (GOGO);

government-owned, contractor-operated (GOCO); and contractor-owned,

contractor-operated (COCO) ammunition plants have all declined

significantly since 1978. There also has been a corresponding decline in

the commercial subcontractors that supply parts to the ammunition

industry.

Table 1: Decline in Active Ammunition

Production Facilities

Facilities 1978 1995

Decline

(percentage)

GOGOs 6 3 50

GOCOs 26 6a 77

COCOs 286 52 82

aIn addition to the 6 active facilities, there are 10 inactive facilities that are laid away to meet

replenishment requirements after a major regional conflict.

As table 1 shows, commercially operated production facilities have

experienced more closures than government-operated production

facilities. However, the closures closely reflect those projected by the

Army when it submitted its 1991 Production Base Planning Study and 1993

update to Congress.

Production Capabilities

Have Declined

Since the end of Operation Desert Storm, ammunition production capacity

in the United States has steadily declined. According to both military and

industry projections, this trend will continue for several more years before

capacity stabilizes within a smaller industrial base. In fiscal year 1990, the

Army did production planning for 329 end items that were not

commercially available. By fiscal year 1995, the number had dropped to

163.

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Indirect fire munitions are used to suppress enemy fire in addition to

killing targets and have historically constituted a larger portion of the war

reserve inventory than direct fire munitions. Indirect fire munitions

continue to make up the largest portion of the war reserve inventory, but

as the war reserve requirements have decreased (from 2,500,000 short tons

in 1992 to 650,000 short tons in 1994), the percentage of direct fire

ammunition has increased. The indirect fire portion of the ammunition

stockpile is likely to continue its decline. Table 2 shows production

capacity for indirect fire systems, such as artillery,2

 is declining much

faster than production capacity for direct fire systems, such as tanks.

Table 2: Capacity Analysis for the 14

Ammunition Families Quantity per month

Ammunition families

Fiscal year

1992

Fiscal year 2001

projections

Percent

change

Small caliber 476,000,000 165,000,000 –65

Fuze 35,700,000 20,000,000 –44

Cannon caliber 18,600,000 8,100,000 –56

Grenade, mine, and

demolition charge 7,400,000 6,800,000 –8

Propelling charge 5,300,000 300,000 –94

Pyrotechnic 2,000,000 500,000 –75

Mortar 3,000,000 1,100,000 –63

Artillery 953,000 151,000 –84

Tank 136,000 104,000 –24

Rocket 136,000 135,000 –1

Scatterable mine 152,000 33,000 –78

Navy gun 86,000 60,000 –30

Dispenser 15,000 6,000 –60

Bomb 36,000 25,000 –31

Source: The Army’s March 10, 1995, Conventional Ammunition Functional Area Analysis.

Mix of Funding for

Government and Private

Facilities Remains Steady

The ammunition industrial base has downsized considerably since 1987 as

a result of significant reductions in ammunition procurement funding

(from about $4 billion in fiscal year 1986 to about $1.2 billion in fiscal year

1996). However, the funding split between government-owned and

contractor-owned facilities has remained fairly steady over these years. In

fiscal year 1987, government-owned facilities received 35 percent of the

2

See our report entitled Industrial Base: Inventory and Requirements for Artillery Projectiles

(GAO/NSIAD-95-89, Mar. 20, 1995).

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procurement funding and contractor-owned facilities received the

remaining 65 percent. In fiscal year 1994, the numbers were 32 percent and

68 percent, respectively (see table 3). DOD considers these percentages

“very reasonable” and expects them to remain steady in the future.

Likewise, in its May 1994 Conventional Munitions Assessment Report, the

Munitions Industrial Base Task Force3

 stated that “the public/private mix

of production work is approximately correct.”

Table 3: Ammunition Procurement

Funding for Government-Owned and

Contractor-Owned Production

Facilities

Year

GOGO/GOCOa

percentage

COCOb

percentage

1987 35 65

1988 31 69

1989 35 65

1990 35 65

1991 32 68

1992 42 58

1993 40 60

1994 32 68

1995 (partial data) 37 63

1987-94 average 35 65

aGOGO and GOCO plants are generally responsible for hazardous operations, such as

manufacturing explosives and final loading, assembling, and packing of ammunition. Loading

and packing are performed only at government-owned plants for 9 of the 14 ammunition families.

For the other five families, loading and packing are performed at both government and

commercial plants.

bCOCO plants generally produce nonlethal ammunition components or subsystems such as metal

parts, electronics, plastics, and composites. Although GOCO plants also manufacture major

components for all 14 ammunition families, GOGO plants produce major components for only 3

ammunition families.

In commenting on this report, DOD noted that the distinction between GOCO

and COCO facilities is blurring as the government leases inactive facilities to

commercial contractors.

Industrial Base

Considered Adequate

to Satisfy Defense

Planning Guidance

The key role of the ammunition industrial base is to replenish the

ammunition stockpile. In peacetime, the industrial base replenishes

ammunition that is used for military training and testing. It also makes up

shortages of war reserve items and supplies new types of ammunition to

the stockpile. Since the major regional conflicts envisioned in the Defense

Planning Guidance are short in duration, the ammunition industrial base is

3

This task force is a coalition of the leading commercial firms in the ammunition industrial base.

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not required to surge during the conflicts. However, according to the

Defense Planning Guidance, the key measure of the health of the base is

its ability to replenish the stockpile following two major regional conflicts.

Downsizing Has Not

Caused Any Serious

Peacetime Shortages

While the services have shortages of many ammunition items, very few of

these shortages appear to be due to inadequate production capacity. We

discussed a random sample of 152 of the 752 items that had shortages with

service officials to determine whether these shortages were attributable to

industrial base problems. In addition, we asked them if they knew of any

additional items that had shortages due to industrial base problems.

None of the 152 items had shortages that service officials considered

attributable to industrial base problems. However, Army officials

identified three other items as having shortages attributable to industrial

base issues, and Marine Corps officials identified four items. Most of these

shortages appear to be minor and can be quickly corrected in an

emergency by using substitute munitions or increasing production rates.

Most ammunition production lines currently operate for one or two 8-hour

shifts per day, 5 days per week. These production lines could run three

shifts per day, 5 days per week, but worker fatigue and required

maintenance of the equipment would prevent long-term continuous

operation of the production lines.

The first item with an industrial base-related shortage is the 155-mm

Copperhead projectile. According to DOD, the supplier base and the

technical ability to manufacture Copperhead parts have disappeared.

Several years ago, military industrial base planners decided not to

maintain a production capacity for the Copperhead because the round is

expensive, requirements are low, the cost of maintaining a production line

in layaway status would be prohibitive, and there are substitute items

being developed. One substitute is the 155-mm Sense and Destroy Armor

projectile, currently in low-rate initial production.

The second and third items are the M58A3 and M59 mine clearing charges.

These shortages result from an inadequate supply of the C-4 explosive that

is used in the charges. Because C-4 is used in four other types of

ammunition that require about 1 pound of C-4 for each round and the mine

clearing charges require about 500 pounds of C-4 for each charge, the

Army has allocated the available C-4 to the four other types of

ammunition. The Army has no plans to increase C-4 production capacity

because of cost. However, if an emergency arises, substitute explosives

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can be produced, and the Army can increase its production of C-4 by

adding shifts to its current production line or it can use the C-4 from the

other ammunition items.

The fourth item is the 120-mm M830A1 high explosive antitank round,

which is used by both the Army and the Marine Corps. The Army is

planning one more procurement for this round and will layaway the

production line after that procurement because it will have an adequate

supply of the ammunition. However, the Marine Corps currently has a

shortage of M830A1 rounds and is not scheduled to procure any more of

them due to funding priorities. According to the Army, the production line

for this round will be inactive after its final procurement, but the Army will

still be able to produce this ammunition on short notice for the next 

2 years. A quick production response is possible because the 120-mm tank

training rounds and the M829A2 kinetic energy round will remain in active

production through fiscal year 1998. In commenting on this report, DOD

said without future buys, the entire tank ammunition base would be

jeopardized, not just the M830A1 rounds.

The fifth item is the 81-mm infrared illumination round. The manufacturer

that developed this item declined further orders after supplying the Army

with a quantity sufficient for a year. The Army is working toward

establishing a production capability for this item at Crane Army

Ammunition Activity, and it plans to load, assemble, and pack the round at

Pine Bluff Arsenal.

The last two items are the M821 and M889 81-mm high explosive mortar

rounds. At the time of our review, the production line for these two rounds

was shut down while engineers corrected a problem with the propellant

charge. In addition, an engineering change proposal was pending that

could delay production. However, according to Army officials, a fully

automated production line that is presently in layaway status could be

restarted if necessary.

No Industrial Base

Problems to Prevent

Fighting Two Major

Regional Conflicts or

Replenishing the Stockpile

When we discussed the ammunition shortages caused by industrial base

problems with service officials and reviewed DOD’s industrial base studies,

we did not identify any industrial base problems that would keep the

military from fighting two major regional conflicts, as required by the

current Defense Planning Guidance, or from replenishing the stockpile.

However, ammunition shortages that result from funding problems will

not be filled by a surging industrial base because the current guidance

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does not require the base to have a surge capability, as in the past. DOD

officials stated that shortages of preferred munitions will be likely if two

major regional conflicts arise and that shortages will be met with

substitute munitions. This substitution is in accordance with the current

Defense Planning Guidance.

Army officials stated that although the industrial base is able to meet the

replenishment requirements following a major regional conflict,

replenishment is likely to be costly. Because production facilities for new

items are being built for efficient production at peacetime requirement

levels, funds will be required to expand some of these facilities to meet

replenishment requirements.

DOD’s Financial

Viability Studies of

Industrial Base Firms

DOD’s assessment of the adequacy of the industrial base is based on the

results of several studies, the annual functional area analysis, and ongoing

production planning efforts, including the single manager’s June 1995

Production Base Plan. Two of the key studies were DOD’s 1994 and 1995

studies that attempted to evaluate the financial viability of all the firms

comprising the industrial base. Although DOD did not receive responses

from all the firms in the base, between the two studies it captured

adequate financial data for the firms holding most of the base’s production

capacity. From the data, DOD concluded that the industrial base was

adequate to meet the services’ ammunition requirements.

In 1994, DOD attempted to evaluate the financial status of 102 key

commercial producers4

 and assess their projected financial viability during

the 1995 through 1997 time frame based on the firms’ profitability in 1992

and DOD’s planned future ammunition spending. DOD obtained some

financial data for about 80 firms but received enough financial data to

perform break-even analyses for only 57 companies. The 57 firms that

were fully evaluated held about 75 percent of the production capacity in

the ammunition industrial base, according to Army officials. DOD assumed

that the remaining 45 firms were financially viable, even though it did not

have enough financial data to perform break-even analyses. While the

validity of this assumption is open to question, it is important to note that

4

According to the DOD study, the ammunition sector was composed of 105 major producers (including

3 GOGO plants) and a large number of supporting commodity suppliers. Nine of the 102 commercial

producers manufactured ammunition or parts in government-owned facilities, while the remainder

produced ammunition or parts in commercial facilities.

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DOD could not compel the firms to provide the requested information and

none of the 45 firms were single or sole source producers.5

DOD’s break-even analyses revealed that 16 of the 57 firms needed more

detailed evaluations, based on their projected financial viability for 1995

through 1997. After further evaluation, DOD found that the production

capabilities of most of the 16 firms could be absorbed by the remaining

producers within the ammunition sector. However, three of the firms were

single source producers. DOD concluded that if these three firms went out

of business, their production capabilities could not be absorbed by the

remaining producers within the ammunition sector. Therefore, DOD is

continuing to monitor these firms to ensure it retains its necessary

production capacity.

In 1995, at the urging of the Munitions Industrial Base Task Force, DOD

conducted another financial viability study of the ammunition industrial

base. This study was broader in scope than the 1994 study, covering 154

firms that the task force had identified as part of the industrial base. DOD

sent out surveys requesting financial data to all 154 firms, but only 29 firms

responded in a timely manner.6 DOD officials attributed this low response

rate to two reasons. First, DOD did not pay the contractors for this

information. Second, many of the contractors had provided the same

information the year before, for DOD’s 1994 study. Once again, DOD

assumed firms that did not submit timely responses were financially

viable.

The 29 firms with timely responses comprised only about 35 percent of the

industrial base production capacity. Of the 29 respondents, 19 were

identified to be at financial risk. Secondary screenings that were done on

these firms from an industrial base perspective disclosed that none were

essential to the industrial base. Therefore, no detailed on-site reviews were

conducted.

During its two surveys of ammunition producers, DOD assumed that

nonresponding firms were financially viable. DOD said this was a

reasonable assumption because the purpose of the survey was to identify

firms that would exit the business without special DOD action. DOD stated

5

A single source is one in which DOD acquires goods or services from only one producer. There may

be other producers available. A sole source is one which DOD has identified as the only producer with

the capability required to produce the goods or services.

6

Although the deadline for submission of financial data was extended from March 15, 1995, to April 15,

1995, five firms still submitted data after the deadline. These five firms were not included in DOD’s

analysis.

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that firms facing financial difficulties would be inclined to complete the

financial viability surveys. Most of the firms that did not complete the

survey were the smaller firms in the industry.

Assessment of the

Adequacy of the

Industrial Base

Depends on

Assumptions Used

If the key assumptions in the Defense Planning Guidance and DOD’s

industrial base studies are correct, the industrial base will be capable of

simultaneously supplying peacetime ammunition needs and replenishing

the ammunition stockpile as required, following one or two major regional

conflicts. However, the ability of the industrial base to adequately respond

to the military’s replenishment requirements depends heavily on both the

amount of ammunition that must be replenished and the time period over

which the replenishment is to occur. Thus, if the response period is

shortened, or if the required replenishment level is raised from that stated

in current guidance, the industrial base may not be able to adequately

respond to replenishment requirements.

The Army’s annual functional area analyses help to illustrate the role

replenishment levels and time frames play in assessments of the industrial

base. The 1994 analysis painted a bleak picture of the industrial base’s

replenishment capability. However, in the 1995 analysis, the base’s

replenishment capability improved dramatically. While part of the

improvement was due to increased funding, much of the improvement was

caused by changes in the replenishment levels and time frames.

Army officials acknowledged that future changes in readiness

requirements could affect their assessment of the industrial base’s

viability. In addition, they pointed out that once the existing industrial

base is disposed of, there is a long time and a high cost involved in

reestablishing it.

Non-DOD Studies Use

More Pessimistic

Assumptions to Assess the

Adequacy of the Industrial

Base

In addition to the DOD industrial base studies, several private organizations

have studied the industrial base. However, most of the private studies have

concluded that the industrial base is inadequate to meet the services’

ammunition requirements. One such study was completed in June 1994 by

the Committee for the Common Defense, the national security arm of the

Alexis de Tocqueville Institution. The study concluded that the nation’s

ammunition industrial base was “rapidly-deteriorating.” The report based

this conclusion primarily on the Korean War experience, but it also

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pointed out that the 323,000 tons of preferred munitions7 in the current

U.S. stockpile represented less than the amount of ammunition sent to the

Persian Gulf region in 1990 and 1991 for Operation Desert Storm.8

 A

private study conducted for the Munitions Industrial Base Task Force also

found that the ammunition industrial base could not repeat the

performance of Operations Desert Shield and Desert Storm. It stated that

the industrial base could not support the demands of one major regional

conflict, much less two simultaneously. However, the task force study

assumed that the major regional conflicts would last 180 days, much

longer than DOD’s projected 60-120 days.

The private studies’ conclusions about the industrial base differed from

DOD’s conclusions largely because of differences in the studies’

methodologies and underlying assumptions. For example, the Munitions

Industrial Base Task Force study used three scenarios to compute

ammunition requirements: a global war, two major regional conflicts, and

operations other than war. In contrast, DOD’s ammunition requirements

were established based on two major regional conflicts. Also, the private

studies used information for 2 years, the budget year and the out-year,

while DOD’s studies took into account planned expenditures over its entire

5-year POM.

Agency Comments DOD reviewed a draft of this report and provided written comments that

concurred with the report. Some minor technical comments were received

earlier and incorporated into the final report. DOD’s comments are

reprinted in appendix I.

Scope and

Methodology

To determine the current status of the ammunition industrial base, we

examined statistics the Army, as the single manager, had gathered and met

with Army industrial readiness officials. Specifically, we reviewed

industrial base trend data concerning the number of production facilities,

the public/private mix of facilities, and the capacity of the production

facilities.

To determine the industrial base’s ability to meet current peacetime

ammunition requirements, we met first with military officials to determine

how requirements are established. Next, we obtained requirements data

7

The report did not use substitute munitions in these calculations. However, the Army has stated that

after using its preferred munitions it will rely on substitute munitions to meet any remaining

requirements.

8

Much of that ammunition was returned, unused at the conclusion of the war.

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and stockpile levels and determined which items had shortages and which

items had overages. (We relied on the data supplied by the services and

did not physically verify the ammunition stockpile levels or trace

requirements data back to the systems that generated the requirements.)

Then, we randomly selected 152 ammunition items that had shortages and

discussed these items with ammunition officials from the services. We also

asked them to identify any additional items that had shortages due to

industrial base problems. Finally, we investigated the causes of the

industrial base shortages and the Army’s plans to address these shortages,

as the single manager for conventional ammunition.

To determine whether the industrial base could respond as required, after

one or more major regional conflicts, we reviewed (1) the current Defense

Planning Guidance, (2) the Army’s 1992 strategy to maintain adequate

ammunition facilities into the 21st century and an independent assessment

of that strategy, (3) DOD’s 1994 and 1995 financial viability assessments,

and (4) reports from industry officials and other non-DOD sources that

addressed the industrial base’s ability to provide adequate ammunition

during a national emergency. We identified the differences in underlying

assumptions that caused wide differences in the reports’ conclusions.

DOD’s Defense Planning Guidance contains several assumptions that are

open to question. However, since that guidance establishes the framework

for all military actions, not just ammunition procurements, we used those

assumptions in forming our conclusions.

We conducted our review from July 1995 to March 1996 in accordance

with generally accepted government auditing standards.

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

each of the military services; the Commanding General, Army Materiel

Command; the Commanding General, Army Industrial Operations

Command; and other interested parties. We will also make copies

available to others upon request.

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B-271468 

Please contact me at (202) 512-5140 if you or your staffs have any

questions concerning this report. Major contributors to this report are

listed in appendix II.

Mark E. Gebicke

Director, Military Operations

 and Capabilities Issues

Page 15 GAO/NSIAD-96-133 Ammunition Industrial Base
Appendix I 

Comments From the Department of Defense

Page 16 GAO/NSIAD-96-133 Ammunition Industrial Base
Appendix II 

Major Contributors to This Report

National Security and

International Affairs

Division, Washington,

D.C.

Sharon A. Cekala, Associate Director

Joan B. Hawkins, Assistant Director

Raymond Dunham, Adviser

Michael J. Ferren, Evaluator

Chicago/Detroit Field

Office

Antanas Sabaliauskas, Evaluator-in-Charge

David A. Bothe, Evaluator

(703111) Page 17 GAO/NSIAD-96-133 Ammunition Industrial Base
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