a

GAO

United States Government Accountability Office

Report to Congressional Requesters

July 2006 DOD EXCESS 

PROPERTY

Control Breakdowns 

Present Significant 

Security Risk and 

Continuing Waste and 

Inefficiency

GAO-06-943
What GAO Found

United States Government Accountability Office

Why GAO Did This Study

Highlights

Accountability Integrity Reliability

July 2006

DOD EXCESS PROPERTY 

Control Breakdowns Present Significant 

Security Risk and Continuing Waste and 

Inefficiency 

Highlights of GAO-06-943, a report to 

congressional requesters 

GAO’s previous work found

problems in security controls over

sensitive excess military equipment 

that resulted in lost and stolen 

items, some of which were sold to

the public, and significant waste 

and inefficiency in the Department 

of Defense (DOD) excess property 

reutilization program. GAO was 

asked to perform follow-up

investigations to determine

whether (1) unauthorized parties 

could obtain sensitive excess 

military equipment that requires

demilitarization (destruction) when

no longer needed by DOD and (2) 

system and process improvements

are adequate to prevent sales of

new, unused excess items that 

DOD continues to buy or that are in

demand by the military services. 

What GAO Recommends

GAO briefed DOD and military

service management on the results

of its investigations and provided

perspectives on ways to resolve the 

control breakdowns that resulted 

in public sales of sensitive excess 

military equipment and new, 

unused excess items that the 

military services are continuing to 

use. In addition, GAO asked DOD 

to comment on a draft of its report. 

In its comments, DOD stated that

given the time allotted to comment, 

the department was not able to do 

a detailed review and has no

comments at this time. DOD also 

commented that it continues to 

implement changes to procedures

based on GAO’s May 2005 report 

(GAO-05-277). 

GAO investigators posing as private citizens to disguise their identity 

purchased several sensitive military equipment items from DOD’s liquidation 

sales contractor, indicating that DOD has not enforced security controls for 

preventing sensitive excess military equipment from release to the public. 

GAO investigators at liquidation sales purchased ceramic body armor inserts 

currently used by deployed troops, a cesium technology timing unit with 

global positioning capabilities, a universal frequency counter, 2 guided 

missile radar test sets, 12 digital microcircuits used in F-14 fighter aircraft, 

and numerous other items. GAO was able to purchase these items because

controls broke down at virtually every step in the excess property turn-in 

and disposal process. GAO determined that thousands of military items that 

should have been demilitarized (destroyed) were sold to the public. Further, 

in June 2006, GAO undercover investigators posing as DOD contractor 

employees entered two excess property warehouses and obtained about $1.1 

million in sensitive military equipment items, including 2 launcher mounts 

for shoulder-fired guided missiles, several types of body armor, a digital 

signal converter used in naval surveillance, an all-band antenna used to track 

aircraft, and 6 circuit cards used in computerized Navy systems. At no point 

during GAO’s warehouse security penetration were its investigators 

challenged on their identity and authority to obtain DOD military property. 

The table below shows examples of sensitive military equipment obtained 

during GAO’s undercover operations. 

Sensitive Military Equipment Obtained during GAO’s Undercover Tests 

Frag jacket Radar test sets Ceramic body armor plates

Antenna Guided missile mount Time selector unit

Source: GAO, Moog Corporation for antenna.

GAO investigators posing as private citizens also bought several new, unused 

items currently being purchased or in demand by the military services from 

DOD’s excess property liquidation sales contractor. Although military units 

paid full price for these items when they ordered them from supply 

inventory, GAO paid a fraction of this cost to purchase the same items,

demonstrating continuing waste and inefficiency. 

www.gao.gov/cgi-bin/getrpt?GAO-06-943.

To view the full product, including the scope 

and methodology, click on the link above. 

For more information, contact Gregory D. 

Kutz at (202) 512-7455 or kutzg@gao.gov. 
Page i GAO-06-943 DOD Excess Property Control Breakdowns

Contents

Letter 1

Summary of Investigation 3

Background 5

Undercover Acquisitions of Sensitive Excess Military Items 

Identifies National Security Risk 6

Waste Associated with Sales of A-Condition Excess Items that 

Military Services Are Continuing to Use in Operations 26

Corrective Action Briefing 35

Conclusions 36

Agency Comments and Our Evaluation 37

Appendixes

Appendix I: DOD Excess Property Demilitarization Codes 39

Appendix II: Excess Property Condition Codes 41

Appendix III: Comments from the Department of Defense 43

Appendix IV: GAO Contact and Staff Acknowledgments 44

Tables Table 1: DOD Excess Property Demilitarization Codes 39

Table 2: Excess Property Condition Codes 41

Figures Figure 1: Example of Small Arms Protective Inserts Purchased in 

March 2006 8

Figure 2: Excess DOD Time Selector Unit Purchased in March 2006 

9

Figure 3: Enlarged Photograph of One of the Excess DOD 

Microcircuits Purchased in April 2006 11

Figure 4: Guided Weapon Radar Test Sets Purchased in April 

2006 12

Figure 5: Example of the Universal Frequency Counter Purchased 

in April 2006 13

Figure 6: Optical Instrument Lenses Used in Fire Control 

Technology on the M-901A Anti-tank Vehicle Sold to the 

Public in January 2006 15

Figure 7: Example of Excess Body Armor Vest Sold to the Public in 

March 2006 16

Figure 8: Guided Missile Mount Obtained from DRMO A during the 

June 2006 Undercover Penetration 18
Contents

Page ii GAO-06-943 DOD Excess Property Control Breakdowns

Figure 9: One of the Kevlar Body Armor Fragmentation Vests 

Obtained from DRMO A during the June 2006 Undercover 

Penetration 19

Figure 10: Digital Signal Converter Obtained from DRMO A during 

the June 2006 Undercover Penetration 20

Figure 11: All-band Antenna Obtained from DRMO A during the June 

2006 Undercover Penetration 21

Figure 12: Body Armor Fragmentation Vest Obtained from DRMO B 

during the June 2006 Undercover Penetration 22

Figure 13: Throat and Groin Protection Armor Obtained from 

DRMO B during the June 2006 Undercover 

Penetration 23

Figure 14: Circuit Card Assemblies Obtained from DRMO B during 

the June 2006 Undercover Penetration 24

Figure 15: Example of Excess DOD Palm V Organizers and 

Accessories Obtained from DRMO B during the June 2006 

Undercover Penetration 25

Figure 16: Example of New, Unused Wet-Weather Parkas Purchased 

in March 2006 27

Figure 17: New, Unused Cold-Weather Parka Purchased by GAO in 

May 2006 28

Figure 18: New, Unused Portable Field X-ray Processing Enclosure 

Purchased in April 2006 29

Figure 19: New, Unused DOD High-Security Lock Purchased in April 

2006 30

Figure 20: New, Unused DOD Gasoline Engine Purchased in March 

2006 32

Figure 21: New, Unused Refrigerant Recovery System Purchased in 

April 2006 34

Abbreviations

CCLI Commerce Control List Item

C.F.R. Code of Federal Regulations

DAISY DRMS Automated Information System

DLA Defense Logistics Agency

DLIS Defense Logistics Information System

DOD Department of Defense

DRMO Defense Reutilization and Marketing Office

DRMS Defense Reutilization and Marketing Service

EUC End-Use Certificate
Contents

Page iii GAO-06-943 DOD Excess Property Control Breakdowns

FedLog Federal Logistics System

GSA General Services Administration

IT Information Technology

JSLIST Joint Service Lightweight Integrated Suit Technology

MLI Military List Item

NSN National stock number

OMB Office of Management and Budget

PDA Personal Digital Assistant

SAPI Small Arms Protective Inserts

U.S.C. United States Code

This is a work of the U.S. government and is not subject to copyright protection in the 

United States. It may be reproduced and distributed in its entirety without further 

permission from GAO. However, because this work may contain copyrighted images or 

other material, permission from the copyright holder may be necessary if you wish to 

reproduce this material separately.
Page 1 GAO-06-943 DOD Excess Property Control Breakdowns

United States Government Accountability Office

Washington, D.C. 20548

A

July 25, 2006 Letr

The Honorable Tom Davis

Chairman

Committee on Government Reform

House of Representatives

The Honorable Christopher Shays

Chairman

Subcommittee on National Security,

Emerging Threats and International Relations

Committee on Government Reform

House of Representatives

Our May 2005 report1 stated that the Department of Defense (DOD) 

reported $466 million in lost, damaged, and missing excess property from 

fiscal years 2002 through 2004, including property with demilitarization 

restrictions,2

 such as chemical and biological protective suits, body armor, 

and guided missile warheads. Some of the restricted items had been sold to 

the public. Further, our May 2005 report noted that during fiscal years 2002 

and 2003, the military services needlessly spent at least $400 million to 

purchase new items instead of reusing identical excess items in new and 

unused condition (A-condition).3

 As a result, the new, unused excess items 

were sold for pennies on the dollar. In response to our May 2005 report, at 

the June 2005 oversight hearing by the Subcommittee on National Security, 

Emerging Threats and International Relations, DOD officials stated that 

controls were adequate to prevent items requiring demilitarization from 

being released to unauthorized parties. In addition, DOD officials promised 

to have system enhancements in place in January 2006 to assure that 

excess items in new and unused condition that the military services are 

continuing to use are returned to inventory and reutilized within DOD to 

avoid unnecessary purchases.

1

 GAO, DOD Excess Property: Management Control Breakdowns Result in Substantial 

Waste and Inefficiency, GAO-05-277 (Washington, D.C.: May 13, 2005).

2

 DOD policy related to controls over items with significant military technology application, 

is defined in app. I.

3

 DOD condition codes are defined in app. II. 
Page 2 GAO-06-943 DOD Excess Property Control Breakdowns

This report responds to your request that we perform follow-up 

investigations to determine whether (1) unauthorized parties could obtain 

sensitive excess military equipment that requires demilitarization when no 

longer needed by DOD and (2) systems and process improvements are 

adequate to prevent liquidation sales of A-condition items that DOD is 

continuing to buy or that are in demand by the military services.

Using investigative techniques and acting in an undercover capacity to 

disguise our identity, we tested DOD systems and controls to see if we 

could obtain sensitive excess military equipment and technology items that 

require demilitarization and should not be available to the public. We used 

DOD’s Federal Logistics (FedLog) system information to identify and 

validate the population of military equipment and technology items that 

require demilitarization. We then identified public sales of excess military 

items that required demilitarization by total destruction when no longer 

needed by DOD to prevent these items from falling into the wrong hands. 

Next, we tested the systems and controls by making undercover purchases 

of military equipment and technology items from DOD’s liquidation sales 

contractor.4

 In making these purchases we used a fictitious identity to 

obtain End-Use Certificates (EUC)5 where this documentation was 

required as a condition of sale. For sales where we were outbid, we tracked 

the bid activity to identify the winning bidders. We are referring these 

purchases and numerous other public purchases of items that should have 

been demilitarized to federal law enforcement agencies for further 

investigation. In addition, we used publicly available information to 

develop undercover techniques to penetrate Defense Reutilization and 

Marketing Office (DRMO) excess property warehouses.

To determine whether DOD was continuing to sell A-condition items that 

were still being purchased or were in demand by the military services, we 

monitored DOD’s liquidation contractor sales to identify new, unused 

items. We targeted items for undercover purchases where our research 

identified ongoing or recent procurements and active supply inventory 

4

 In concert with the federal government’s E-government policy to use information 

technology (IT) investments to deliver services and information to citizens electronically, 

DOD’s excess property liquidation sales are conducted over the Internet. Office of 

Management and Budget, Implementation Guidance for the E-Government Act of 2002, M03-18, at att. A, ¶ B, 1 (Aug. 1, 2003).

5

 An EUC is a form used by DOD to document the intended destination and disposition of 

sensitive, controlled items released from the department. 
Page 3 GAO-06-943 DOD Excess Property Control Breakdowns

status of these items. We also monitored DOD actions to implement 

improvements in excess property systems, processes, and controls in 

response to our May 2005 audit recommendations. We analyzed Defense 

Reutilization and Marketing Service (DRMS) data to determine if 

reutilization rates of A-condition excess property increased during the first 

three quarters of fiscal year 2006. We conducted our investigations from 

November 2005 through June 2006 in accordance with quality standards for 

investigators as set forth by the President’s Council on Integrity and 

Efficiency.

Summary of 

Investigation

We used a fictitious identity posing as a private citizen to purchase 

numerous sensitive excess DOD military technology items that should have 

been demilitarized instead of being sold to the public. Sensitive excess 

military equipment purchased by our investigator at DOD liquidation sales 

auctions included ceramic body armor inserts currently used by deployed 

troops; a time selector unit used to ensure the accuracy of computer-based 

equipment, such as global positioning systems and system-level clocks; a 

universal frequency counter used to ensure that the frequency of 

communication gear is running at the expected rate; 2 guided missile radar 

test sets, at least 12 digital microcircuits used in F-14 fighter aircraft; and 

numerous other sensitive electronic parts. We were able to purchase these 

items because controls broke down at virtually every step in the excess 

property turn-in and disposal process.

In addition, posing as DOD contractor employees6 our undercover 

investigators were able to easily penetrate security at two separate excess 

property warehouses in June 2006. There, they were able to obtain, at no 

cost, numerous sensitive military equipment items valued at about $1.1 

million that should not have been released outside of DOD. The items we 

obtained included two launcher mounts for shoulder-fired guided missiles, 

several types of body armor, a digital signal converter used in naval 

electronic surveillance, an all-band antenna used to track aircraft, six 

circuit cards used in computerized Navy systems, and several other items 

in use by the military services. The body armor could be used in terrorist or 

other criminal activity. Many of the other military items have weapons 

applications that also would be useful to terrorists. Our undercover 

investigators were able to obtain these items because DRMO personnel did 

6

 Under DOD’s excess property reutilization program, DOD contractors are treated the same 

as DOD units and are not charged for excess property items they requisition for reuse. 
Page 4 GAO-06-943 DOD Excess Property Control Breakdowns

not confirm their identity and authorization to requisition excess DOD 

property items. The DRMO personnel even helped our undercover 

investigators load the items into our van.

We also made several undercover purchases of new, unused A-condition 

excess DOD items, including wet-weather parkas, cold-weather desert 

camouflage parkas, a portable field x-ray processing enclosure, highsecurity locks used to secure the back bay of trucks, a gasoline engine, and 

a refrigerant recovery system used for servicing automotive vehicles. The 

items we purchased at DOD liquidation sales were being ordered from 

supply inventory by military units at or near the time of our purchases. In 

the case of one supply-depot-stocked item—the portable x-ray enclosure—

no items were in stock at the time of our purchase. At the time we made 

our purchase, DOD’s liquidation contractor sold 40 of these x-ray 

enclosures with a total reported acquisition cost of $289,400 for a 

liquidation sales price of $2,914—about a penny on the dollar. In another 

example, we purchased a gasoline engine in March 2006 for $355. The 

Marine Corps ordered 4 of these gas engines from Defense Logistics 

Agency (DLA) supply inventory in June 2006 and paid $3,119 each for them. 

At the time of our undercover purchase, 20 identical gasoline engines with 

a reported acquisition cost of $62,380 were sold to the public for a total 

liquidation sales price of $6,221. Our investigation demonstrated that the 

problems we reported in May 2005 have not been fully resolved and that 

there is continuing waste and inefficiency in DOD’s excess property 

reutilization program.

Our May 2005 report included 13 recommendations to address problems in 

accountability over sensitive military items and the economy and efficiency 

of DOD’s excess property reutilization program. Thus, we are making no 

new recommendations in this report. We provided a corrective action 

briefing to DOD on June 28, 2006, and we provided a draft of our report to 

DOD for comment on July 10, 2006. The Deputy Under Secretary of 

Defense for Logistics and Materiel Readiness responded that given the time 

allotted to comment, the Department was not able to do a detailed review 

and has no comments at this time. DOD’s comment letter is reprinted in 

appendix III.
Page 5 GAO-06-943 DOD Excess Property Control Breakdowns

Background Over the past several years, we reported7

 that serious breakdowns in 

management processes, systems, and controls have resulted in substantial 

waste and inefficiency in DOD’s excess property reutilization program. Our 

June 2002 testimony and our November 2003 report documented instances 

where DOD sold to the public items such as Joint Service Lightweight 

Integrated Suit Technology (JSLIST)8

 and other chemical and biological 

protective suits and related gear that should have been restricted to DOD 

use only. Our November 2003 report also identified several examples that 

showed that at the same time DOD excessed biological equipment items in 

good or excellent condition and sold many of them to the public for 

pennies on the dollar, it was purchasing the same or similar items. Our May 

2005 report stated that DOD reported $466 million in lost, damaged, and 

missing excess property from fiscal years 2002 through 2004, including 

property with demilitarization restrictions, such as chemical and biological 

protective suits, body armor, and guided missile warheads. Some of the 

restricted items had been sold to the public. We also reported that during 

fiscal years 2002 and 2003, the military services purchased at least $400 

million of identical items instead of using available excess items in new and 

unused condition.

At the time of our May 2005 report, waste and inefficiency occurred 

because condition codes were assigned to excess property that incorrectly 

identified it as unusable and DOD lacked adequate systems and processes 

for assuring that excess items in A-condition were reused to avoid 

unnecessary purchases. We also found that DOD lacked adequate security 

over excess items requiring demilitarization, resulting in losses reported by 

DRMOs of nearly 150 chemical and biological protective suits, over 70 units 

of body armor, and 5 guided missile warheads. Losses reported by DLA 

7

 GAO, DOD Excess Property: Management Control Breakdowns Result in Substantial 

Waste and Inefficiency, GAO-05-277 (Washington, D.C.: May 13, 2005); DOD Excess 

Property: Risk Assessment Needed on Public Sales of Equipment That Could Be Used to 

Make Biological Agents, GAO-04-15NI (Washington, D.C.: Nov. 19, 2003); and DOD 

Management: Examples of Inefficient and Ineffective Business Processes, GAO-02-873T

(Washington, D.C.: June 25, 2002). 

8

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

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

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

to the warfighter against chemical and biological contaminants without negatively affecting 

the ability to perform mission tasks. JSLIST is the current model protective suit used by the 

military services. 
Page 6 GAO-06-943 DOD Excess Property Control Breakdowns

supply depots included thousands of sensitive military items, such as 

weapons system components and aircraft parts.

Undercover 

Acquisitions of 

Sensitive Excess 

Military Items 

Identifies National 

Security Risk

Our undercover investigators purchased several sensitive excess military 

equipment items that were improperly sold to the public at DOD liquidation 

sales. These items included 3 ceramic body armor inserts identified as 

small arms protective inserts (SAPI), which are the ceramic inserts 

currently in demand by soldiers in Iraq and Afghanistan; a time selector 

unit used to ensure the accuracy of computer-based equipment, such as 

global positioning systems and system-level clocks; 12 digital microcircuits 

used in F-14 Tomcat fighter aircraft; guided missile radar test sets used to 

check the operation of the data link antenna on the Navy’s Walleye (AGM62) air-to-ground guided missile; and numerous other electronic items. In 

instances where DOD required an EUC as a condition of sale, our 

undercover investigator was able to successfully defeat the screening 

process by submitting bogus documentation and providing plausible 

explanations for discrepancies in his documentation. We identified at least 

79 buyers for 216 sales transactions involving 2,669 sensitive military items 

that DOD’s liquidation contractor sold to the public between November 

2005 and June 2006. We are referring information on these sales to the 

appropriate federal law enforcement agencies for further investigation.

Posing as DOD contractor employees, our investigators also entered 

DRMOs in two east coast states, and obtained about $1.1 million in excess 

military items that required demilitarization as well several other items that 

are currently in use by the military services. DRMO personnel even helped 

us load the items into our van. These items included 2 launcher mounts for 

shoulder-fired guided missiles, an all-band antenna used to track aircraft, 

16 body armor vests, body armor throat and groin protectors, 6 circuit card 

assemblies used in computerized Navy systems, and 2 Palm V personal data 

assistant (PDA) organizers.

Sensitive Excess Military 

Items Purchased at DOD 

Excess Property Liquidation 

Sales

Using a fictitious identity as a private citizen, our undercover investigator 

applied for and received an account with DOD’s liquidation sales 

contractor. The undercover investigator was then able to purchase several 

sensitive excess military items that were being improperly sold to the 

public. During our undercover purchases, our investigator engaged in 

numerous conversations with liquidation sales contractor staff during 

warehouse inspections of items advertised for sale and DRMS and DLA 
Page 7 GAO-06-943 DOD Excess Property Control Breakdowns

Criminal Investigative Activity (DCIA) staff during the processing of our 

EUCs. On one occasion our undercover investigator was told by a DCIA 

official that information provided on his EUC application had no match to 

official data and that he had no credit history. Our investigator responded 

with a plausible story and submitted a bogus utility bill to confirm his 

mailing address. Following these screening procedures, the EUC was 

approved by DCIA and our undercover investigator was able to purchase 

targeted excess military items. Once our initial EUC was approved, our 

subsequent EUC applications were approved based on the information on 

file. The following discussion presents the case study details of our 

undercover purchases of sensitive excess military items that should have 

been destroyed when no longer needed by DOD and should not have been 

sold to the public. Although these items had a reported acquisition cost of 

$461,427, we paid a liquidation sales price of $914 for them—less than a 

penny on the dollar.

Small arms protective insert. In March 2006, our undercover 

investigator purchased 3 ceramic body armor inserts identified as small 

arms protective inserts (SAPI), which are the ceramic inserts currently in 

demand by soldiers in Iraq and Afghanistan. SAPI are designed to slide into 

pockets sewn into the front and back of military vests in order to protect 

the warfighter’s chest and back from small arms fire. The SAPI had been 

improperly included in a batch lot of items that did not require 

demilitarization. The batch lot reportedly contained 609 items, including 

shelter half-tents, canteens and canteen covers, small tools, first aid 

pouches, insect nets, barracks bags and waterproof bags, small arms cases, 

miscellaneous field gear, and the SAPI. We paid $129 for the batch lot, 

which had a reported acquisition cost of $1,471. The SAPI have a 

demilitarization code of D, which requires them to be destroyed when no 

longer needed by DOD rather than being sold to the public. Figure 1 shows 

a photograph of one of the SAPI that we purchased.
Page 8 GAO-06-943 DOD Excess Property Control Breakdowns

Figure 1: Example of Small Arms Protective Inserts Purchased in March 2006

Time selector unit. In March 2006, our undercover investigator purchased 

an excess DOD time selector unit used to ensure the accuracy of computerbased equipment, such as global positioning systems and system-level 

clocks. According to our Chief Technologist, this technology is important 

because it prevents users in the battlefield from exposing their position to 

get timing signals from outside sources. We paid $65 for the time selector 

unit, which had an original acquisition cost of $343,695. Also, although the 

unit was listed as being in F7 condition (unserviceable, reparable 

condition), it appeared to be in working order.

The time selector unit had a demilitarization code of D, which required it to 

be destroyed when no longer needed by DOD. The unit also had a FedLog 

controlled inventory item code (CIIC) of 7, which indicates it is a classified

Source: GAO.
Page 9 GAO-06-943 DOD Excess Property Control Breakdowns

item that requires protection in the interest of national security, in 

accordance with DOD 5200.1-R, Information Security Program.

9

Although the link on the national stock number (NSN)10 included on DOD’s 

liquidation contractor’s Internet sale Web site showed this item was 

assigned a demilitarization code of D, it was sold to the public as a trade 

security controlled item—demilitarization code B. As such, we were 

required to complete an application and obtain an approved EUC. Our 

undercover investigator submitted bogus information on his EUC 

application. A DCIA official contacted our undercover investigator and told 

him that the information on his application did not match official data and 

he had no credit history. After responding with a plausible story and 

submitting a bogus utility bill to document our mailing address, our EUC 

for the time selector unit was approved in April 2006. Figure 2 shows a 

photograph of the excess DOD time selector unit we purchased.

Figure 2: Excess DOD Time Selector Unit Purchased in March 2006 

9

 DOD 5200.1-R, Information Security Program (January 1997), established the DOD 

Information Security Program to promote proper and effective classification and protection 

in the interest of national security.

10 An NSN is a unique 13-digit number that identifies standard use inventory items.

Source: GAO.
Page 10 GAO-06-943 DOD Excess Property Control Breakdowns

Digital microcircuits. Our undercover investigator purchased a total of 82 

excess DOD digital microcircuits, including 12 microcircuits used on the F14 Tomcat fighter aircraft. Because of their sensitive technology, the 

microcircuits had a demilitarization code of D, which requires their total 

destruction when they are no longer needed by DOD. The 12 microcircuits 

also had a CIIC of 7, which indicates they are classified items that require 

protection in the interest of national security, in accordance with DOD 

5200.1-R. In violation of DOD demilitarization policy for D coded items, the 

microcircuits were improperly included in a batch lot with several other 

electronic items that did not require demilitarization. Further, only 12 of the 

82 demilitarization code D microcircuits that we purchased were listed on 

the liquidation sale advertisement. We paid approximately $58 for the 

entire batch lot, which included a total of 591 items with a reported 

acquisition cost of $112,700. Because several items in the batch lot had 

demilitarization codes that designated them as trade security control items 

restricted by the U.S. Munitions List or the Commerce Control List of the 

U.S. Department of Commerce, an EUC was required for approval of our 

purchase. Our EUC for the digital microcircuits was approved in May 2006 

based on our bogus information already on file. Figure 3 shows an enlarged 

photograph of one of the microcircuits that were improperly sold to our 

undercover investigator.
Page 11 GAO-06-943 DOD Excess Property Control Breakdowns

Figure 3: Enlarged Photograph of One of the Excess DOD Microcircuits Purchased 

in April 2006

Guided weapon radar test sets. Two guided weapon radar test sets were 

included in the batch lot with the digital microcircuits that our undercover 

investigator purchased from DOD’s liquidation sales contractor in April 

2006. The test sets, which were advertised for sale as radar test sets, are 

used to check the operation of the data link antenna on the Navy’s Walleye

(AGM-62) air-to-ground guided missile delivered by the F/A-18 Hornet 

fighter aircraft. The Walleye is designed to deliver a self-guided highexplosive weapon from an attack aircraft to a surface target. Because of 

their sensitive technology the test sets have a demilitarization code of B, 

which requires an EUC for trade security purposes. Figure 4 shows a 

photograph of the guided weapon test sets that we purchased and obtained 

using bogus EUC documentation.

Source: GAO.
Page 12 GAO-06-943 DOD Excess Property Control Breakdowns

Figure 4: Guided Weapon Radar Test Sets Purchased in April 2006

Universal frequency counter. The new, unused universal frequency 

counter purchased by our undercover investigator was manufactured 

(initially calibrated) in February 2003. DOD awarded a contract to Fluke 

Corporation in 2002 for 67 of these items, which are designed to count the 

speed at which an electrical system fluctuates. According to a 

manufacturer official, this item’s military application is to ensure the 

frequency of communication gear is running at the expected rate. The 

universal frequency counter has a demilitarization code of B, which 

requires trade security control under the U.S. Munitions List. We paid a 

total of $475 for this item, which had a reported acquisition cost of $1,685. 

In April 2006, when we purchased the universal frequency counter, DOD’s 

liquidation sales contractor sold a total of 15 of these items for $5,506, or 

about $367 per unit. The 15 items had a reported total acquisition value of 

$25,275, or $1,685 per unit. The bogus paperwork that we submitted with 

our EUC application was approved by DCIA in May 2006. Figure 5 shows a 

photograph of the unit that we purchased.

Source: GAO.
Page 13 GAO-06-943 DOD Excess Property Control Breakdowns

Figure 5: Example of the Universal Frequency Counter Purchased in April 2006

Directional coupler. In March 2006, our undercover investigator 

purchased an excess military item advertised as a directional coupler from 

DOD’s liquidation sales contractor. We paid $186 for the sales lot, which 

contained a total of 8 electronic equipment and supply items with a listed 

acquisition cost of $1,200. According to FedLog, the directional coupler 

advertised had an actual acquisition cost of $1,876. This directional coupler 

is used in the F-14 Tomcat fighter aircraft to monitor, measure, isolate, or 

combine electronic signals. Because of its technology, this directional 

coupler has a demilitarization designation code of D, which required it to 

be destroyed when no longer needed by DOD. The directional coupler also 

had a CIIC of 7, which indicates it is a classified item that requires 

protection in the interest of national security, in accordance with DOD 

5200.1-R. However, after receiving the item, we discovered that it was not 

the item identified by the national stock number in the sales advertisement. 

As a result, it appears that DOD not only lost accountability over the actual 

item identified in its excess property inventory, but advertised and 

recorded a public sale of a sensitive military item on the U.S. Munitions 

List, which was required to be disposed of by destruction in accordance 

with DOD demilitarization policy.11

11 DOD 4160.21-M-1, Defense Demilitarization Manual (1995), at Appx. 3, 

“Demilitarization Codes to Be Assigned to Federal Supply Items and Coding Guidance.”

Source: GAO.
Page 14 GAO-06-943 DOD Excess Property Control Breakdowns

Additional Sales of Sensitive 

Excess Military Items 

Targeted for Undercover 

Purchase

We observed numerous sales of additional excess sensitive military items 

that were improperly advertised for sale or sold to the public, including fire 

control components for weapon systems, body armor, and weapon system 

components. The demilitarization codes for these items required either key 

point or total destruction rather than disposal through public sale. 

Although we placed bids to purchase some of these items, we lost to higher 

bidders. We identified at least 79 buyers for 216 public liquidation sales 

transactions involving 2,669 sensitive military items. We are referring these 

sales to federal law enforcement agencies for further investigation and 

recovery of the sensitive military equipment. The following discussion 

highlights the details of sales of sensitive military equipment items that we 

observed or targeted for purchase but did not obtain because we were 

outbid during the respective sales auctions.

Optical fire control items. Our investigative team identified a January 

2006 sale of excess U.S. Army Armament Command optical instrument 

prisms and optical lenses. DOD data showed that these optical instruments 

are components of the fire control sighting mechanism used in the M-901A 

Improved Armored Anti-tank vehicle. The M-901A fires the TOW 2 series 

missiles. Our Chief Technologist advised us that both the prisms and lenses 

are high-quality optical sighting equipment used in the fire control system 

of the M-901A. We made an undercover visit to one of DOD’s liquidation 

contractor sales facilities to inspect the prisms in January 2006. Our 

inspection of the items listed for sale disclosed that the property label on 

the boxes listed 11 optical instrument prisms with an acquisition cost of 

$93,093. Although the demilitarization code of Q listed on the property label 

for the prisms identified them as requiring trade security control as an item 

on the Commerce Control List, the NSN listed for the prisms in fact related 

to a demilitarization code of D, which required their total destruction when 

no longer needed by DOD. Upon further inspection, we found that the 

items labeled as prisms were in sealed manufacturer packages that listed 

them as optical instrument lenses, not prisms. The NSN associated with the 

11 lenses indicated that they had a total acquisition cost of $1,859 and a 

demilitarization code of D, requiring their total destruction rather than 

disposal by public sale. The mislabeling of these items indicates that DOD 

may have lost accountability over both the prisms and the lenses. Both the 

prisms and the lenses have a controlled CIIC code of 7, which indicates 

they are classified items that require protection in the interest of national 

security, in accordance with DOD 5200.1-R. We bid $550 for the lenses and 

lost to a higher bidder, who paid $909 for them. Figure 6 is a photograph of 

one of the boxes labeled as containing prisms that actually contained 

lenses.
Page 15 GAO-06-943 DOD Excess Property Control Breakdowns

Figure 6: Optical Instrument Lenses Used in Fire Control Technology on the M-901A 

Anti-tank Vehicle Sold to the Public in January 2006

Body armor. Our investigative team also identified a March 2006 

liquidation sale of body armor fragmentation vests. Upon our visit to the 

sales warehouse, we identified a total of four body armor fragmentation 

protective vests in two separate sales lots. According to the NSN, all of the 

items sold had a demilitarization code of E, which required either key point 

or total destruction of the item when no longer needed by DOD. We did not 

bid on this sale, but have included it in our referrals to federal law 

enforcement agencies for follow-up investigations. Figure 7 shows a 

photograph of the actual body armor vest that that we observed for sale in 

March 2006.

Source: GAO.
Page 16 GAO-06-943 DOD Excess Property Control Breakdowns

Figure 7: Example of Excess Body Armor Vest Sold to the Public in March 2006

During our undercover operations, we also noted 13 advertised sales 

events, including 179 items that were subject to demilitarization controls, 

where the items were not sold. In 5 of these sales involving 113 sensitive 

military parts, it appears that DOD or its liquidation sales contractor caught 

the error in demilitarization codes and pulled the items from sale. One of 

these instances involved an F-14 fin panel assembly that we had targeted 

for an undercover purchase. During our undercover inspection of this item 

prior to sale, a contractor official told our investigator that the government 

was in the process of changing demilitarization codes on all F-14 parts and 

it was likely that the fin panel assembly would be removed from sale. Of the 

remaining 8 sales lots containing 66 sensitive military parts, we could not 

determine whether the items were not sold because DOD or its contractor 

caught the demilitarization coding errors or because minimum bids were 

not received during the respective sales events.

Source: GAO.
Page 17 GAO-06-943 DOD Excess Property Control Breakdowns

Sensitive Military Items 

Obtained Through Inside 

Penetrations of DRMO 

Security

Our investigators used publicly available information to develop fictitious 

identities as DOD contractor personnel and enter DRMO warehouses 

(referred to as DRMO A and DRMO B) in two east coast states on separate 

occasions in June 2006, to requisition excess sensitive military parts and 

equipment valued at about $1.1 million. Our investigators were able to 

search for and identify excess items without supervision. In addition, 

DRMO personnel assisted our investigators in locating other targeted items 

in the warehouse and loading these items into our van. At no point during 

either visit did DRMO personnel attempt to verify with the actual 

contractor that our investigators were, in fact, contractor employees.

During the undercover penetration, our investigators obtained numerous 

sensitive military items that were required to be destroyed when no longer 

needed by DOD to prevent them from falling into the wrong hands. These 

items included two guided missile launcher mounts for shoulder-fired 

missiles, several types of body armor, an all-band antenna used to track 

aircraft, six circuit card assemblies used in Navy computerized systems, a 

digital signal converter used in naval electronic surveillance, and two Palm 

V personal digital assistants (PDA) that were certified as having their hard 

drives removed.

Shortly after leaving the second DRMO, our investigators received a call 

from a contractor official whose employees they had impersonated. The 

official had been monitoring his company’s requisitions of excess DOD 

property and noticed transactions that did not appear to represent activity 

by his company. He contacted personnel at DRMO A, obtained the phone 

number on our excess property screening letter, and called us. Upon 

receiving the call from the contractor official, our lead investigative agent 

explained that he was with GAO and we had performed a government test.

DRMO A Penetration The following discussion presents the details of our case study requisitions 

of sensitive military items we obtained during our penetration of the first 

east coast DRMO.

Guided missile launcher mounts. Posing as DOD contractor employees, 

our undercover investigators entered DRMO A in June 2006 and 

requisitioned two excess DOD shoulder-fired guided missile launcher 

mounts with a total reported acquisition cost of $6,246. The missile 

launcher mounts provide the electrical connection between the round and 

the tracker and contain a remote firing mechanism for the wire-guided 

Dragon missiles. While the Dragon has been replaced by newer technology 
Page 18 GAO-06-943 DOD Excess Property Control Breakdowns

missiles, it is a man-portable, shoulder-fired, medium antitank weapon 

system that can defeat armored vehicles, fortified bunkers, concrete gun 

emplacements, and other hardened targets. Under department 

demilitarization policy, missile launcher mounts have a demilitarization 

code of C, which requires removal and/or demilitarization of installed key 

point(s) or lethal parts, components, and accessories to prevent them from 

falling into the wrong hands. The missile launcher mounts also have a CIIC 

code of 7, which indicates they are classified items that require protection 

in the interest of national security, in accordance with DOD 5200.1-R. 

Figure 8 shows a photograph of one of the guided missile launcher mounts 

obtained by GAO.

Figure 8: Guided Missile Mount Obtained from DRMO A during the June 2006 

Undercover Penetration 

Kevlar body armor fragmentation vests. Our undercover investigators 

obtained six Kevlar body armor fragmentation vests with a total reported 

acquisition cost of $2,049 from DRMO A during our June 2006 security 

penetration. This body armor has a woodland camouflage pattern and was 

designed for use by ground troops and parachutists. Although the Kevlar 

Source: GAO.
Page 19 GAO-06-943 DOD Excess Property Control Breakdowns

fragmentation vest has been replaced by newer technology, it is still 

considered a sensitive military item and has a demilitarization code of E, 

which identifies it as critical items/materiel determined to require 

demilitarization, either key point or total destruction. The Kevlar 

fragmentation vests also have a CIIC code of 7, which indicates they are 

classified items that require protection in the interest of national security, 

in accordance with DOD 5200.1-R. Figure 9 shows a photograph of one of 

the fragmentation vests obtained during our undercover penetration.

Figure 9: One of the Kevlar Body Armor Fragmentation Vests Obtained from DRMO 

A during the June 2006 Undercover Penetration 

Source: GAO.
Page 20 GAO-06-943 DOD Excess Property Control Breakdowns

Digital signal converter. During the undercover penetration at DRMO A, 

our investigators also obtained a DOD digital signal converter with a 

reported acquisition cost of $882,586. The digital signal converter is used as 

part of a larger surveillance system on the Navy’s E2C Hawkeye early 

warning and control aircraft. Under department demilitarization policy, this 

digital signal converter has a demilitarization code of D that requires it to 

be destroyed when no longer needed by DOD. This signal converter also 

has a CIIC code of 7, which indicates it is a classified item that requires 

protection in the interest of national security, in accordance with DOD 

5200.1-R. Figure 10 shows a photograph of the digital signal converter our 

investigators obtained from DRMO A.

Figure 10: Digital Signal Converter Obtained from DRMO A during the June 2006 

Undercover Penetration

All-band antenna. Our undercover investigators identified and 

requisitioned a new, unused all-band antenna during their June 2006 

security penetration at DRMO A. According to manufacturer information, 

the antenna is a high-powered portable unit that is used by the Air Force to 

track aircraft. The antenna can be tripod-mounted or mounted on a 

portable shelter. The new, unused all-band antenna, which was purchased 

by DOD in 2003, had a reported acquisition cost of $120,000. A 

manufacturer representative told our investigator that this antenna is 

currently in production. Under department demilitarization policy, this allband antenna has a demilitarization code of D that requires it to be 

destroyed when no longer needed by DOD. This antenna also has a CIIC 

Source: GAO.
Page 21 GAO-06-943 DOD Excess Property Control Breakdowns

code of 7, which indicates it is a classified item that requires protection in 

the interest of national security, in accordance with DOD 5200.1-R. Figure 

11 shows a photograph of the all-band antenna obtained during our 

undercover penetration of security at DRMO A.

Figure 11: All-band Antenna Obtained from DRMO A during the June 2006 

Undercover Penetration

DRMO B Penetration Posing as employees for the same DOD contractor identity used during our 

June 2006 penetration at DRMO A, our investigators entered DRMO B a day 

later for the purpose of testing security controls at that location. DRMO 

officials appeared to be unaware of our security penetration at DRMO A the 

previous day. During the DRMO B undercover penetration, our 

investigators obtained the following items, most of which had 

demilitarization requirements.

Body armor fragmentation vests. Our undercover investigators 

obtained 10 body armor fragmentation vests with a total reported 

acquisition cost of $290 from DRMO B. Although the protective capability 

of this body armor has been superseded by newer technology, it would still 

Source: GAO.
Page 22 GAO-06-943 DOD Excess Property Control Breakdowns

provide firearm protection to terrorists or criminals. These fragmentation 

vests have a demilitarization code of E, which identifies them as critical 

items/materiel determined to require demilitarization, either key point or 

total destruction. Figure 12 shows a photograph of one the 10 

fragmentation vests obtained during our undercover penetration.

Figure 12: Body Armor Fragmentation Vest Obtained from DRMO B during the June 

2006 Undercover Penetration

Throat and groin protection armor. Our undercover investigators also 

obtained a Kevlar throat protector related to the camouflage body armor. 

The throat protector had a reported acquisition cost of $3.35 and a 

demilitarization code of D, which requires it to be destroyed when no 

longer needed by DOD. The groin protector, which is designed to hold a 

ceramic insert, had a reported acquisition cost of $37.85 and a 

demilitarization code of D. Figure 13 shows a photograph of the throat and 

groin protection armor obtained during our undercover penetration at 

DRMO B.

Source: GAO.
Page 23 GAO-06-943 DOD Excess Property Control Breakdowns

Figure 13: Throat and Groin Protection Armor Obtained from DRMO B during the 

June 2006 Undercover Penetration

Circuit card assemblies. Our undercover investigators obtained six 

circuit card assemblies with a reported acquisition cost of $77,011 from 

DRMO B. The circuit card assemblies, which were turned in by the Naval 

Air Warfare Center, had a demilitarization code of D which requires them to 

be destroyed when no longer needed by DOD. A Lockheed Martin 

representative, who confirmed that his company manufactured the circuit 

cards we obtained, told our investigator that the circuit card assemblies are 

used in a variety of computerized Navy systems. The circuit cards also have 

a CIIC code of 7, which indicates they are classified items that require 

protection in the interest of national security, in accordance with DOD 

5200.1-R. Figure 14 shows a photograph of the circuit card assemblies 

obtained during our undercover penetration at DRMO B.

Source: GAO.
Page 24 GAO-06-943 DOD Excess Property Control Breakdowns

Figure 14: Circuit Card Assemblies Obtained from DRMO B during the June 2006 

Undercover Penetration

Palm V Organizer PDAs. During our undercover security penetration at 

DRMO B in June 2006, our investigators noticed two Palm V Organizer 

PDAs and accessories. The Palm PDAs had tags affixed to them which read 

“Certificate of Hard Drive Disposition/This certified hard drive was 

removed from CPU” and “Computer Casing Empty.” Because PDAs do not 

have hard drives, after successfully requisitioning them, we asked our 

information technology (IT) security expert to test them to confirm that all 

sensitive information had been properly removed. Our IT expert used 

National Institute of Standards and Technology (NIST) utilities

Source: GAO.
Page 25 GAO-06-943 DOD Excess Property Control Breakdowns

recommended for forensic analysis to run the tests.12 Based on the tests, 

our IT expert determined that the RAM on both devices had been wiped 

clean of any trace of residual data, leaving only the normal information that 

a user would expect to find on an unused Palm V PDA. Figure 15 shows a 

photograph of one of the Palm V PDAs and related accessories obtained 

from DRMO B.

Figure 15: Example of Excess DOD Palm V Organizers and Accessories Obtained 

from DRMO B during the June 2006 Undercover Penetration 

12 NIST Pub. 800-72, Guidelines on PDA Forensics (November 2004).

Source: GAO.
Page 26 GAO-06-943 DOD Excess Property Control Breakdowns

Waste Associated with 

Sales of A-Condition 

Excess Items that 

Military Services Are 

Continuing to Use in 

Operations

Because significant numbers of new, unused A-condition excess items still 

being purchased or in use by the military services are being disposed of 

through liquidation sales, it was easy for our undercover investigator to 

pose as a liquidation sales customer and purchase several of these items for 

a fraction of what the military services are paying to obtain these same 

items from DLA supply depots. For example, we paid $1,146 for several wet 

weather and cold weather parkas, a portable field x-ray enclosure, highsecurity locks, a gasoline engine that can be used as part of a generator 

system or as a compressor, and a refrigerant recovery system used to 

service air conditioning systems on automobiles. The military services 

would have paid a total acquisition cost of $16,300 for these items if 

ordered from supply inventory, plus a charge for processing their order.13 It 

was easy for us to purchase new, unused items that are in demand by the 

military services because of the limited scope of DOD’s actions to address 

this problem.

Undercover Purchases of 

New, Unused Items that 

DOD Is Continuing to Buy 

or that Are in Demand by 

Military Units

Our undercover investigator used a fictitious identity to obtain a DOD 

liquidation sales customer account and purchase several new, unused 

excess DOD items that the military services are continuing to order from 

supply inventory or use in operations. The following discussion describes 

examples of the new, unused excess DOD items that we purchased.

Wet-weather parkas. In March 2006, our undercover investigator 

purchased 10 new, unused excess DOD wet-weather parkas with the 

manufacturer’s tags still attached from DOD’s liquidation sales contractor. 

Although Army combat units have begun using an upgraded version of the 

parkas, they are a nondeteriorative item, and Army training units and other 

military services are continuing to use them in military operations. 

However, after the New Jersey Army National Guard turned in the unused 

items as excess to their needs, the parkas were transferred to DOD’s 

liquidation contractor for sale instead of being returned to supply inventory 

for reissue. We paid $87 for the 10 wet-weather parkas, which had a total 

reported acquisition cost of a $359. Figure 16 shows a photograph of one of 

the wet-weather parkas our undercover investigator purchased at the 

public liquidation sale.

13 As noted in our May 2005 report, the weighted average cost for warehousing and shipping 

all supply items was 20.7 percent in fiscal year 2003.
Page 27 GAO-06-943 DOD Excess Property Control Breakdowns

Figure 16: Example of New, Unused Wet-Weather Parkas Purchased in March 2006

Cold-weather parkas. In May 2006, our undercover investigator 

purchased 10 excess DOD cold-weather desert camouflage parkas from 

DOD’s liquidation sales contractor. Although the parkas were listed as 

being in H condition (unserviceable, condemned condition), they were 

advertised as new. We paid a total of $373 for these 10 parkas, which had a 

total reported acquisition cost of $1,468. After receiving the parkas, we 

noted that all of them appeared to be unused and 7 of them still had the 

manufacturer’s tags attached. According to a Defense Supply Center, 

Philadelphia official, these cold-weather parkas are nondeteriorative and 

are currently stocked and issued to the military services. The cold-weather 

parkas, which were ordered in support of Operation Enduring Freedom, 

were turned in as excess by the Al Udeid Air Base, in Qatar. Instead of 

being returned to inventory for reissue, the new, unused parkas were 

transferred to DOD’s liquidation sales contractor. Figure 17 shows a 

photograph of one of the excess new, unused parkas that we purchased.

Source: GAO.
Page 28 GAO-06-943 DOD Excess Property Control Breakdowns

Figure 17: New, Unused Cold-Weather Parka Purchased by GAO in May 2006

Portable field x-ray processing enclosure. In April 2006, our 

undercover investigator purchased a portable field x-ray processing 

enclosure with a reported acquisition cost of $7,235. We paid $87 for this 

item. We received the x-ray enclosure in May 2006, after approval of our 

bogus Food and Drug Administration (FDA) certificate. DOD’s liquidation 

sales contractor requires buyers of medical and laboratory equipment 

items that are subject to federal regulation to submit FDA certificates as a 

condition of sale. On the FDA certificate, the buyer certifies that he or she 

is a licensed medical practitioner or person regularly and lawfully engaged 

in the manufacture or refurbishing of the medical device listed and agrees 

to assure that items resold will not be adulterated or misbranded within the 

meaning of those terms in the Federal Food, Drug and Cosmetic Act 

(codified at 21 U.S.C. Ch. 9). A manufacturer official told our undercover 

investigator that the x-ray enclosure that we purchased is manufactured 

and sold to DOD on an as-needed basis. The official stated that there is no 

shelf-life issue associated with this product. In addition, a Defense Supply 

Center, Philadelphia official assigned to the X-ray Equipment and 

Supplies/Biomedical Systems Office of the Technical, Quality, and 

Packaging Staff responsible for x-ray equipment and supply items advised 

Source: GAO.
Page 29 GAO-06-943 DOD Excess Property Control Breakdowns

us that the x-ray enclosure is currently used by the military services, and 

the Army is the primary user. The supply center official noted that the 

enclosure is a depot-stocked item. However, after checking the inventory 

system, the official told us that there were currently none of these items in 

stock. The supply center official confirmed that the enclosure has no shelflife issues.

At the time we purchased the x-ray enclosure, 40 identical x-ray enclosures 

with a reported acquisition cost of $289,400 were sold for a total liquidation 

sales price of $2,914. Figure 18 is a photograph of the excess DOD portable 

x-ray enclosure that we purchased over the Internet. The enclosure is 

stored in an oversized foot-locker-type container approximately 5 feet in 

length.

Figure 18: New, Unused Portable Field X-ray Processing Enclosure Purchased in 

April 2006

High-security locks. Our undercover investigator purchased 20 new, 

unused high-security locks from the DOD liquidation sales contractor in 

April 2006. The locks, which were in the original manufacturer’s boxes, had 

a total reported acquisition cost of $1,675, and we paid a total of $59 for 

Source: GAO.
Page 30 GAO-06-943 DOD Excess Property Control Breakdowns

them. We contacted the manufacturer, whose representative told us that his 

company sold DLA 100 of these locks in September 2005. The 

representative explained that the locks are used to secure the back bay of 

logistics trucks. He said that his company was not aware of any problems 

with the locks. A U.S. Marine Corps unit in Albany, Georgia, turned the 

locks in as excess, and they were not returned to inventory for reissue. At 

the time we purchased the 20 locks, DOD’s liquidation sales contractor had 

advertised a total of 19 lots consisting of 480 locks for sale. Six of the 19 

lots, with a reported total acquisition cost of $18,423, sold for $365. Figure 

19 shows a photograph of one of the excess DOD high-security locks that 

we purchased in April 2006.

Figure 19: New, Unused DOD High-Security Lock Purchased in April 2006

Source: GAO.
Page 31 GAO-06-943 DOD Excess Property Control Breakdowns

Gasoline engine. Our undercover investigator purchased a new, unused 

Teledyne 4-cylinder gasoline engine in March 2006. The engine, which was 

manufactured in the 1990s, is part of a generator unit. It can also be used 

with a compressor. According to FedLog data, the engines are required to 

be issued until current supplies are exhausted. The item manager for this 

engine told our undercover investigator that DLA currently has about 1,500 

of these engines in stock and they are still being issued, primarily to Army 

National Guard and Reserve units. He said that the Air Force and the 

Marine Corps also use them. He noted that the Marine Corps ordered 4 of 

these engines in June 2006. We paid $355 for the gasoline engine, which had 

a reported acquisition cost of $3,119—the amount the Marine Corp paid for 

each item, plus a service charge. At the time we purchased this unit, a total 

of 20 identical gasoline engines with a total reported acquisition cost of 

$62,380 were sold for a total liquidation sales price of $6,221. Figure 20 

shows a photograph of the gasoline engine that we purchased.
Page 32 GAO-06-943 DOD Excess Property Control Breakdowns

Figure 20: New, Unused DOD Gasoline Engine Purchased in March 2006

Refrigerant recovery system. In April 2006, our undercover investigator 

purchased a new, unused excess DOD refrigerant recovery system Model 

ST-100A. This is a portable system designed to recover and recycle R-12, R22, R-500, and R-502 refrigerants at the rate of 2 to 3 pounds per minute. 

According to a manufacturer representative, the unit that we purchased is 

designed to recover refrigerants from small systems, such as those in 

automotive vehicles. We paid a total of $185 for the new, unused refrigerant 

recovery system, which had a reported acquisition cost of $2,445. 

According to a Refrigerant Recovery Systems, Inc., representative, this 

item is still being purchased and used by DOD. The refrigerant recovery 

system that we purchased was likely turned in as excess by the Army Risk 

Assessment Modeling System (ARAMS) Project Office located in 

Source: GAO.
Page 33 GAO-06-943 DOD Excess Property Control Breakdowns

Chesapeake, Virginia. ARAMS turned in nine identical excess recovery 

systems in January 2006 that appeared to have been sold during the 

liquidation sales event at which we made our undercover purchase. These 9 

refrigerant recovery systems, which had a listed acquisition cost of $22,004, 

sold for a total liquidation sale price of $1,140.

When our undercover investigator went to pick up the refrigerant recovery 

system that we purchased, he found that it was stored outside and exposed 

to weather. As a result, the box the unit was stored in had become wet and 

the filters included with the unit had become soaked. Figure 21 is a 

photograph of the excess DOD refrigerant recovery system that we 

purchased.
Page 34 GAO-06-943 DOD Excess Property Control Breakdowns

Figure 21: New, Unused Refrigerant Recovery System Purchased in April 2006

Limited DOD Actions to 

Assure Reutilization of New, 

Unused Items

Although DLA and DRMS implemented several initiatives to improve the 

overall reutilization rate for excess A-condition items, our analysis of 

DRMS data found that the reported reutilization rate as of June 30, 2006,

Source: GAO.
Page 35 GAO-06-943 DOD Excess Property Control Breakdowns

remained the same as we had previously reported—about 12 percent.14

This is primarily because DLA reutilization initiatives are limited to using 

available excess A-condition items to fill customer orders and to maintain 

established supply inventory retention levels. As a result, excess Acondition items that are not needed to fill orders or replenish supply 

inventory are disposed of outside of DOD through transfers, donations, and 

public sales, which made it easy for us to purchase excess new, unused 

DOD items. The disposal of items that exceed customer orders and 

inventory retention levels is an indication that DOD bought more items 

than it needed. In addition, several of the items we purchased at liquidation 

sales events were being ordered from supply inventory by military units at 

or near the time of our purchase, and for one supply-depot-stocked item—

the portable field x-ray enclosure—no items were in stock at the time we 

made our undercover purchase, indicating continued waste and 

inefficiency.

DLA and DRMS initiatives resulted in a reported $38.1 million in excess 

property reutilization savings through June 2006. According to DLA data as 

of June 30, 2006, interim supply system initiatives using the Automated 

Asset Recoupment Program, which is part of an old legacy system, 

achieved reutilization savings of nearly $2.3 million since July 2005, while 

Business System Modernization supply system initiatives, implemented in 

January 2006 as promised at the June 2005 hearing, have resulted in 

reutilization savings of nearly $1.1 million. In addition, DRMS reported that 

excess property marketing initiatives implemented in late March 2006 have 

resulted in reutilization savings of a little over $34.8 million through June 

2006. These initiatives include marketing techniques using Web 

photographs of high-dollar items and e-mail notices to repeat customers 

about the availability of A-condition items that they had previously selected 

for reutilization.

Corrective Action 

Briefing

On June 28, 2006, we briefed DOD, DLA, DRMS, and military service 

management on the results of our investigations. We discussed the causes 

of the control breakdowns we identified with regard to security of sensitive 

excess military equipment and provided our perspectives on ways to 

address the following problems.

14 GAO-05-277 and GAO-05-729T.
Page 36 GAO-06-943 DOD Excess Property Control Breakdowns

• Some military units and DLA supply depots recorded incorrect 

demilitarization codes to excess military property items and in some 

cases improperly included these items in batch lots before sending these 

items to DRMOs.

• DRMO personnel failed to verify the recorded demilitarization codes 

when they processed receipts of excess military property.

• The limited scope of DLA and DRMS compliance reviews is not 

sufficient to detect problems with incorrect demilitarization codes.

• DOD’s excess property liquidation sales contractor failed to verify 

demilitarization codes of items received and return items requiring 

mutilation or destruction to the DRMO for proper disposal.

The managers told us that they shared our concern about the breakdowns 

in security controls that allowed sensitive military items requiring 

demilitarization to be sold to the public. They asked us for pertinent 

documentation obtained during our investigations to support their followup inquiries and corrective action plans. We have provided this 

information. In addition, the managers told us that the DRMOs rely on 

access controls executed by the DOD installations at which the DRMOs are 

located to preclude access by unauthorized parties. During our briefing, we 

also pointed out that because the reutilization and marketing program 

permits public access to DRMOs and liquidation sales locations, it is most 

important to confirm the identities and requisitioning authority of the 

individuals who enter the DRMOs to screen and requisition excess 

property. With regard to reutilization program economy and efficiency 

issues, the DOD managers maintained that forecasting the correct 

inventory level is difficult and that some amount of excess purchasing is 

necessary to assure that inventory is available when needed. They also 

stated that there is a cost associated with retaining excess inventory for 

extended periods of time. We provided DOD documentation to show that 

the excess A-condition items that we purchased were continuing to be 

ordered and used by the military services at the time of our undercover 

purchases.

Conclusions Our security tests clearly show that sensitive military equipment items are 

still being improperly released by DOD and sold to the public, thus posing a 

national security risk. The sensitive nature of these items requires 

particularly stringent internal security controls. Our tests, which were 
Page 37 GAO-06-943 DOD Excess Property Control Breakdowns

performed over a short duration, were limited to our observations, meaning 

that the problem may likely be more significant than what we identified. 

Although we have referred the sales of items identified during our 

investigation to federal law enforcement agencies for follow-up, the 

solution to this problem is to enforce controls for preventing improper 

release of these items outside DOD. Further, liquidation sales of items that 

military units are continuing to purchase at full cost from supply inventory 

demonstrates continuing waste and inefficiency in DOD’s excess property 

reutilization program.

Agency Comments and 

Our Evaluation

We provided a draft of our report to DOD for comment on July 10, 2006. 

The Deputy Under Secretary of Defense for Logistics and Materiel 

Readiness responded that given the time allotted to comment, the 

Department was not able to do a detailed review and has no comments at 

this time. However, the Deputy Under Secretary also stated that the 

department continues to implement changes to our procedures based on 

recommendations in our May 13, 2005, report.15

We are sending copies of this letter to interested congressional committees, 

the Secretary of Defense, the Deputy Under Secretary of Defense for 

Logistics and Personnel Readiness, the Under Secretary of Defense 

Comptroller, the Secretary of the Army, the Secretary of the Navy, the 

Secretary of the Air Force, the Director of the Defense Logistics Agency, 

the Director of the Defense Reutilization and Marketing Service, and the 

Director of the Office of Management and Budget. We will make copies 

available to others upon request. In addition this report will be available at 

no charge on the GAO Web site at http://www.gao.gov.

15 GAO-05-277.
Page 38 GAO-06-943 DOD Excess Property Control Breakdowns

Please contact me at (202) 512-7455 or kutzg@gao.gov, if you or your staffs 

have any questions concerning this report. Contact points for our Offices of 

Congressional Relations and Public Affairs may be found on the last page 

of this report. Major contributors to this report are acknowledged in 

appendix IV.

Gregory D. Kutz

Managing Director

Forensic Audits and Special Investigations
Page 39 GAO-06-943 DOD Excess Property Control Breakdowns

Appendix I

DOD Excess Property Demilitarization Codes AAppenednxidexiIs

Department of Defense (DOD) property is assigned a demilitarization code 

to identify the required disposition of items when they are no longer 

needed by DOD. Demilitarization codes are contained in the Defense 

Demilitarization Manual, DOD 4160.21-M-1 (1995), which implements DOD 

policy to apply appropriate controls (e.g., restrictions to use by authorized 

parties, destruction when no longer needed by DOD) over items that have a 

significant military technology application to prevent improper use or 

release of these items outside of DOD. These items include materiel that 

the Secretary of Defense has designated as requiring demilitarization, 

articles on the U.S. Munitions List (22 C.F.R. pt. 121), and certain articles 

subject to export controls because they are on the Commerce Control List 

establish by the U.S. Department of Commerce (15 C.F.R. § 774, Supp. 1). 

Appendix 3 of the Manual provides the demilitarization codes to be 

assigned to federal supply items and coding guidance. The codes indicate 

whether property is available for reuse without restriction or whether 

specific restrictions apply, such as removal of classified components, 

destruction of sensitive military technology, or trade security control. The 

table below defines the DOD demilitarization codes.

Table 1: DOD Excess Property Demilitarization Codes

Demilitarization code Required disposal action 

A Demilitarization not required

B Military List Item (MLI) Non—Significant Military Equipment 

(SME) Demilitarization not required. Trade Security Controls 

required at disposition.

C MLI (SME) – Remove and/or demilitarize installed key 

point(s) as prescribed in the Defense Demilitarization 

Manual, or lethal parts, components, and accessories.

D MLI (SME) – Total destruction of item and components so as 

to preclude restoration or repair to a useable condition by 

melting, cutting, tearing, scratching, crushing, breaking, 

punching, neutralizing, etc. (As an alternate, burial or deep 

water dumping may be used when coordinated with the DOD 

Demilitarization Program Office.)

E MLI (Non SME) – Additional critical items/materiel 

determined to require demilitarization, either key point or total 

destruction. Demilitarization instructions to be furnished by 

the DOD Demilitarization Program Office.

F MLI (SME) – Demilitarization instructions to be furnished by 

the Item/Technical Manager.
Appendix I

DOD Excess Property Demilitarization Codes

Page 40 GAO-06-943 DOD Excess Property Control Breakdowns

Source: DRMS Automated Information System (DAISY) C-A-T (Codes and Terms) reference guide (12th ed. 2006), DRMS-I 4160.14, 

vol. IV, Supp. 1, “Codes Index” (November 2004), and DOD-4160.21-M-1, Defense Demilitarization Manual (1995).

G MLI (SME) – Demilitarization required – Ammunition, 

Explosives, and Dangerous Articles (AEDA). Demilitarization, 

and if required, declassification and/or removal of sensitive 

markings or information, will be accomplished prior to 

physical transfer to a DRMO. This code will be used for all 

AEDA items, including those which also require 

declassification and/or removal of sensitive markings or 

information. 

P MLI (SME) – Security Classified Item – Declassification and 

any additional demilitarization and removal of any sensitive 

markings or information will be accomplished prior to 

accountability or physical transfer to a DRMO. This code will 

not be assigned to AEDA items. Items received at a DRMO 

with Demilitarization code P will not be processed for 

disposal without the required certificate of declassification 

and a certificate of demilitarization. 

Q CCLI – Commerce Control List Item. Demilitarization not 

required. CCLI are non-MLI and are dual-use (military, 

commercial, and other strategic uses) items under the 

jurisdiction of the Bureau of Industry and Security, U.S. 

Department of Commerce, through Export Administration 

Regulations (codified at 15 C.F.R., Ch. VII, Sub Ch C). 

X Indicates that demilitarization requirements of MLI 

applicability not determined by the Inventory Control Point. 

Local determination of demilitarization requirement is 

necessary prior to disposal action. 

(Continued From Previous Page)

Demilitarization code Required disposal action 
Page 41 GAO-06-943 DOD Excess Property Control Breakdowns

Appendix II

Excess Property Condition Codes ApendxiI

The Department of Defense’s (DOD) condition code is a two-digit 

alphanumeric code used to denote the condition of excess property from 

the supply and the disposal perspective. The DOD supply condition code is 

the alpha character in the first position and shows the condition of 

property in the Defense Logistics Agency supply depot inventory, or is 

assigned by the unit turning in the excess property. The General Services 

Administration (GSA) disposal condition code, in the second position, 

shows whether the property is in new, used, or repairable condition, 

salvageable, or should be scrapped.

Table 2: Excess Property Condition Codes

DOD Codes DOD Supply Condition Code GSA Disposal Condition Code

Serviceable property

A1, A4

B1, B4

C1, C4

D1, D4, D7

A – Issuable without qualification – New, used, repaired or 

reconditioned property which is issuable without restriction, including 

material with a shelf life of more than 6 months.

B - Issuable with qualification – New, used, repaired or reconditioned 

property which is issuable, but is restricted from issue to specific units, 

activities, or geographical areas by reason of its limited usefulness or 

short service life expectancy, including materials with a shelf life of 3 

through 6 months.

C - Priority issue – Property is issuable to selected customers but 

must be issued before Condition A and B material to avoid loss as a 

usable asset, including materials with less than 3 months shelf life.

D - Test/Modification required – Property is in serviceable condition 

but requires test, alteration, modification, or conversion or disassembly.

1 – Excellent – Property is in new or unused 

condition and can be used immediately 

without repairs.

4 – Usable – Property shows some wear, but 

can be used without significant repair.

7 – Repairable – Property is unusable in its 

current condition, but can be economically 

repaired. 

Unserviceable property

E7

F7

G7

H7

E - Limited restoration required – Property requires only a limited 

expense or effort to restore to serviceable condition.

F – Reparable – Property is economically reparable but requires 

repairs, overhaul, or reconditioning to make it serviceable property.

G – Incomplete – Property requires additional parts or materials to 

complete the item prior to issue.

H - Condemned – Property has been determined to be unserviceable 

and does not meet repair criteria, including items whose shelf life has 

expired and cannot be extended.

7 – Repairable – Property is unusable in its 

current condition, but can be economically 

repaired.

Salvage property

FX, GX, HX

(VX- Salvaged 

military 

munitions)

F – Reparable; G – Incomplete; H – Condemned X - Salvage – Property has value in excess of 

its basic materiel content but repair is 

impractical and/or uneconomical. 
Appendix II

Excess Property Condition Codes

Page 42 GAO-06-943 DOD Excess Property Control Breakdowns

Source: DRMS Automated Information System (DAISY) C-A-T (Codes and Terms) reference guide (12th ed. 2006), DRMS-I 4160.14, 

vol. IV, Supp. 1, “Codes Index” (November 2004).

Scrap property

FS, GS, HS F – Reparable; G – Incomplete; H – Condemned S - Scrap – Property has no value except for 

its basic materiel content

(Continued From Previous Page)

DOD Codes DOD Supply Condition Code GSA Disposal Condition Code
Page 43 GAO-06-943 DOD Excess Property Control Breakdowns

Appendix III

Comments from the Department of Defense ApendxiI
Page 44 GAO-06-943 DOD Excess Property Control Breakdowns

Appendix IV

GAO Contact and Staff Acknowledgments ApendxiIV

GAO Contact Gregory D. Kutz, 202-512-7455

Acknowledgments Staff making key contributions to this report include Mario Artesiano, 

Donald L. Bumgardner, Matthew S. Brown, Paul R. Desaulniers, Stephen P. 

Donahue, Lauren S. Fassler, Gayle L. Fischer, Cinnimon Glozer, Jason Kelly, 

John Ledford, Barbara C. Lewis, Richard C. Newbold, John P. Ryan, Lori B. 

Ryza, Lisa Warde, and Emily C. Wold.

Technical expertise was provided by Keith A. Rhodes, Chief Technologist, 

and Harold Lewis, Assistant Director, Information Technology Security, 

Applied Research and Methods.

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