Report to the Chairman, Subcommittee

on Readiness and Management

Support, Committee on Armed

Services, U.S. Senate

United States General Accounting Office

GAO

April 2001 DEFENSE

INVENTORY

Steps the Army Can

Take to Improve the

Management and

Oversight of Excess

Ammunition

GAO-01-372
Page i GAO-01-372 Defense Inventory

Letter 1

Appendix I Scope and Methodology 19

Appendix II Comments From the Department of Defense 21

Appendix III GAO Contacts and Staff Acknowledgments 28

Tables

Table 1: Comparison of Recovery and Reuse Demilitarization

Capacity to Demilitarization Planned in Fiscal Year 2001 13

Table 2: Examples of Purchases of Ammunition for Training in

Fiscal Year 2000 When the Same Items Were in the

Demilitarization Stockpile 15

Figures

Figure 1: Government-owned Excess Ammunition Demilitarization

Sites 6

Figure 2: Actual and Projected Growth of Demilitarization

Stockpile in Thousands of Tons, Fiscal Years 1993

Through 2004 8

Contents
Page 1 GAO-01-372 Defense Inventory

April 12, 2001

The Honorable James M. Inhofe

Chairman, Subcommittee on Readiness

 and Management Support

Committee on Armed Services

United States Senate

Dear Mr. Chairman:

The Operations Support Command, a subordinate command of the Army

Materiel Command, is responsible for the day-to-day operations of the

Department of Defense’s (DOD) single manager for conventional

ammunition, including storing, managing, inspecting, and testing

ammunition.1

 It is also responsible for demilitarizing2 excess ammunition

for all of the services. With the end of the Cold War, the services’ need for

conventional ammunition was significantly reduced, and by 1993 the

Command reported a backlog of excess ammunition awaiting

demilitarization that amounted to 354,000 tons. Concerned that the

quantities of excess ammunition being stored could impede access to

needed ammunition and hinder the Army’s ability to effectively support

contingency operations, the Command set a goal of reducing the backlog

to 100,000 tons by fiscal year 2004.

The Army operates ammunition facilities that use open burning and

detonating processes as well as other more environmentally friendly

processes to demilitarize excess ammunition. Open burning and

detonating processes have been the subject of public concern regarding

possible health risks to civilian populations believed to be associated with

airborne gases, particles, and other contaminants carried downwind of the

demilitarization sites. Environmentally friendly processes use

demilitarization technologies that do not release contaminants into the

 1

 The Commander, U.S. Army Materiel Command, as designated by the Secretary of the

Army, acts as the single manager for conventional ammunition for the Department of

Defense.

2

 The Army defines demilitarization as the act of removing the military offensive or

defensive characteristics from munitions or otherwise rendering munitions innocuous or

ineffectual for military use. Demilitarization includes but is not limited to processes

involving resource recovery, recycling, reutilization, disassembly, conversion, melt

out/steam out/wash out, incineration, open burning, and open detonation to name a few.

United States General Accounting Office

Washington, DC 20548
Page 2 GAO-01-372 Defense Inventory

atmosphere. In recent years, the Senate Appropriations Committee has

encouraged the use of contractors to facilitate the demilitarization of

excess ammunition using environmentally friendly demilitarization

processes. To ensure ready access to needed ammunition by reducing the

amount of excess ammunition being stored, Congress increased the

amount of funding for ammunition demilitarization from $35 million in

fiscal year 1993 to about $71 million in fiscal year 1994, with funding

averaging about $92 million annually for fiscal years 1995-2000. At the

same time the Department of Defense is reporting a stockpile of excess

ammunition, it is also reporting a shortage of ammunition for training,

raising the question of whether excess ammunition could be used for

training.

This report reviews the Department’s management practices for

demilitarizing excess ammunition. Specifically, we evaluated (1) the extent

to which the excess ammunition stockpile has been reduced and whether

the liability associated with excess ammunition has been fully identified;

(2) the Army’s reliance on contracted demilitarization and the impact of

doing so on government facilities that use similar environmentally friendly

processes; and (3) the feasibility of using excess ammunition for U.S.

training needs. The scope and methodology of our work are described in

appendix I. This is the third and final report in response to your request

that we evaluate the Department of Defense’s ammunition management

practices.3

The Department of Defense’s reported stockpile of excess ammunition has

grown rather than decreased, rising from about 354,000 tons in 1993 to

493,000 tons at the end of 2000; moreover, the reported stockpile does not

include all excess ammunition, which understates the Department’s

ultimate liability for demilitarizing ammunition. Although the Operations

Support Command demilitarized 745,000 tons of ammunition from the

stockpile during this 8-year period, the stockpile grew for a number of

reasons beyond the Command’s control. For example, the military services

reduced force structure and, consequently, needed less ammunition;

introduced new weapon systems that made some ammunition obsolete;

replaced older ammunition with newer and better versions; and the

 3

 See our reports Defense Management: Army Could Achieve Efficiencies by

Consolidating Ammunition Management (GAO/NSIAD-99-230, Sept. 30, 1999) and

Defense Logistics: Unfinished Actions Limit Reliability of the Munitions Requirement

Determination Process (GAO-01-18, Apr. 5, 2001).

Results in Brief
Page 3 GAO-01-372 Defense Inventory

Operations Support Command decreased use of open burning and

detonating methods of demilitarizing ammunition and increased use of

environmentally friendly methods (which demilitarize less ammunition).

As a result of these factors, in 1998 the Operations Support Command

extended its goal to reduce the stockpile of excess ammunition to 100,000

tons from 2004 to the year 2010. In addition, all excess ammunition

needing demilitarization has not been included in the stockpile because,

for planning and budgeting reasons, the Command considers only the

ammunition under its control along with forecasts of quantities to be

added to the stockpile over several years. We found excess ammunition

recorded in other inventory records; for example, excess ammunition held

overseas was not included in the stockpile. According to the Army, if all

known and forecasted excess ammunition were recognized, the

demilitarization liability for the Department of Defense could be as much

as $3 billion. However, this liability is not reflected in the Department’s

financial statement, even though federal financial accounting standards4

require recognition and reporting of liabilities associated with disposal.

In recent years, the Army Materiel Command has required the Operations

Support Command to devote 50 percent of its excess ammunition

demilitarization budget to contractors that use environmentally friendly

demilitarization processes. While a greater emphasis on contractor

demilitarization came about as a result of congressional direction, the

Army initiated and subsequently expanded this effort without considering

the effect it would have on government facilities. With increased

contracted demilitarization, the Army has retained and underutilized

environmentally friendly demilitarization capabilities in government

facilities. These government facilities’ environmentally friendly

demilitarization processes are projected to operate at only 20 percent of

their demilitarization capacity in fiscal year 2001. With increased reliance

on contracted demilitarization, the Army has incurred additional costs in

some instances that would not have been required if the demilitarization

had been performed in government facilities. We visited one government

facility that shipped ammunition to a contractor site for demilitarization

and found that the facility could have used its environmentally friendly

demilitarization processes to demilitarize the ammunition and avoided

$50,000 in shipping costs. We also identified one instance where additional

costs were incurred when a contractor undertook ammunition

 4

 Statements of Federal Financial Accounting Standards No. 5, Accounting for Liabilities

of the Federal Government and No. 6 Accounting for Property, Plant, and Equipment.
Page 4 GAO-01-372 Defense Inventory

demilitarization for the Command, then contracted a portion of the work

to three government facilities. According to information obtained from the

contractor and one of the three government facilities involved, the

Command could have demilitarized the ammunition for less had it

overseen the work itself.

We found indications that some excess ammunition potentially could be

used to meet training needs, but further analysis by the Army is needed to

fully evaluate the potential. Our analysis showed that the Army has

recently purchased 10 types of ammunition, particularly small caliber

ammunition, when quantities of the same items were also in the stockpile

and identified in the Army’s records as being of sufficient quality (either

new or in like-new condition) for training purposes. For example,

inventory records showed that the stockpile included over 400,000 usable

60-millimeter cartridges that the Army uses in training exercises with the

M2 and M19 mortar cannons. In fiscal year 2000, the Army bought over

9,000 60-millimeter cartridges without checking the stockpile for these

items. According to the Department of Defense, its policy is to require the

military services to routinely check all potential alternative sources,

including excess ammunition awaiting demilitarization before purchasing

ammunition. Presently, the Command checks the stockpile for usable

ammunition only when a critical shortage occurs or if needed ammunition

cannot be purchased. The Command believes it is unnecessary to routinely

compare planned purchases to the stockpile because, when the excess

ammunition has been offered to the active and reserve forces before it was

placed in the stockpile, they have declined to take it. However, our work

showed that the services’ needs may change over time and usable excess

ammunition potentially could be recalled from the stockpile to prevent

concurrent procurement and demilitarization.

This report includes recommendations that the Secretary of Defense

require the Secretary of the Army to (1) identify and include the liability

associated with demilitarizing excess ammunition in financial statements;

(2) develop a plan in consultation with Congress that includes procedures

for assessing the appropriate mix of public/private sector capacity needed

to demilitarize excess ammunition and the cost-effectiveness of using

contractors versus government facilities to demilitarize excess

ammunition; and (3) comply with DOD’s policy to routinely compare

planned purchases of ammunition for training with usable ammunition in

the stockpile and require the single manager for conventional ammunition

to prepare periodic reports to the Office of the Under Secretary of Defense

for Acquisition, Technology and Logistics, showing the quantities and

types of ammunition reclaimed from the stockpile. DOD generally agreed
Page 5 GAO-01-372 Defense Inventory

with the recommendations and indicated actions planned that it believed

would address them. However, additional actions will likely be needed to

fully address the recommendations.

Under the national military strategy, the military services are required to

maintain enough ammunition for wartime needs and for peacetime needs,

such as training. The Defense Planning Guidance5

 lays out general

guidelines for the services to determine how much ammunition they need

to conduct operations under the strategy. Ammunition that exceeds these

requirements is to be shared among the services or disposed of through

sale to other nations, recycling, or demilitarization. In 1977, the Army,

through its Operations Support Command (formerly Industrial Operations

Command), assumed single manager responsibility for managing, storing,

and disposing of the services’ ammunition. The Command’s Defense

Ammunition Center provides the Command and the military services a

variety of ammunition related services, including training, technical

assistance, and logistics support. The Army demilitarizes excess

ammunition at its ammunition depots, plants, and centers. The Army has

used open burning and detonating processes as well as the more

environmentally friendly processes to demilitarize excess ammunition.

Open burning and detonating processes, which may release airborne

gases, particles, and other contaminants that are carried downwind of the

demilitarization sites, have been the topic of public concerns regarding

possible health risks to civilian populations. Environmentally friendly

processes use demilitarization technologies that do not release

contaminants into the atmosphere. The government-owned locations that

demilitarize excess ammunition using environmentally friendly processes

are shown in figure 1.

 5

 The Secretary of Defense and his staff prepare the Defense Planning Guidance that sets

forth policy, articulates strategic objectives, and reflects the national military strategy. It

includes the Secretary of Defense’s force and resource guidance to the military

departments, other combat support agencies, and the unified commands.

Background
Page 6 GAO-01-372 Defense Inventory

Figure 1: Government-owned Excess Ammunition Demilitarization Sites

Source: Defense Ammunition Center.

During the 1980s, the amount of excess ammunition needing to be

demilitarized was generally stable, holding at about 100,000 tons.

However, in the early 1990s, with the end of the Cold War and other

worldwide changes, a general reshaping of military resources and budgets

began as the United States shifted from a strategy of preparing for a global

war to a strategy of preparing for regional conflicts and crises. As a

consequence, the services’ ammunition requirements were significantly

reduced, and by 1993 the Operation Support Command’s reported backlog

of ammunition awaiting demilitarization was 354,000 tons. Because excess

and needed ammunition were being stored together, the Command was

concerned that the excess ammunition could impede access to needed

ammunition and hinder the Command’s ability to effectively support

contingency operations. To address this concern, Congress increased the

amount of funding available for ammunition demilitarization from

$35 million in fiscal year 1993 to almost $71 million in fiscal year 1994 and

to an average of nearly $92 million annually in fiscal years 1995-2000. In

addition, the Command set a goal of reducing the backlog to 100,000 tons

by 2004. In October 1998, the Army extended its goal to reduce the

demilitarization stockpile to less than 100,000 tons in fiscal year 2004 to

the end of fiscal year 2010.

Letterkenny Sierra

Hawthorne

Tooele

Crane

Blue Grass

Anniston

Red River

McAlester

Milan

Iowa

Pine Bluff

Lone Star
Page 7 GAO-01-372 Defense Inventory

On May 10, 1993, the Chairman of the Senate Appropriations

Subcommittee on Defense requested that DOD increase its use of

environmentally safe destruction processes and technologies and phase

out its use of open burning and detonating destruction processes as soon

as possible. The Chairman also requested that DOD look to the private

sector for environmentally friendly processes that could be used to help

demilitarize excess ammunition. In 1994, the Senate Appropriations

Committee directed the Army to accelerate, where possible, the award of

contracts that make use of environmentally friendly demilitarization

processes. The Operations Support Command enacted a variety of

initiatives to help the demilitarization program respond to the

congressional requests. These initiatives included optimizing work

assigned to government facilities; increasing the use of environmentally

friendly technology at government facilities to recover, recycle, and

reclaim usable elements of ammunition; and awarding contracts to

commercial firms that used environmentally friendly processes to

demilitarize portions of the stockpile.

DOD’s reported stockpile of excess ammunition has grown, and it does not

include all excess ammunition; as a result, the government’s financial

liability for demilitarizing excess ammunition is understated. To reduce

the stockpile, the Operations Support Command enacted a variety of

initiatives, and for fiscal years 1993 through 2000, it demilitarized 745,000

tons of excess ammunition from the stockpile. Despite these efforts, the

reported stockpile grew from 354,000 tons in 1993 to 493,000 tons at the

end of 2000 and is projected to be at 403,000 tons in 2004 (see fig. 2).

Excess Ammunition

Stockpile Has Grown

and Does Not Include

All Excess

Ammunition
Page 8 GAO-01-372 Defense Inventory

Figure 2: Actual and Projected Growth of Demilitarization Stockpile in Thousands of

Tons, Fiscal Years 1993 Through 2004

Note: Includes only reported stockpile amounts.

Source: Operations Support Command, updated on March 27, 2001.

According to the Operations Support Command, there are multiple factors

that affect the number of tons in the reported stockpile from year to year.

These factors include transferring ammunition from the stockpile to meet

critical needs of the military services, the amount of demilitarization

funding received from Congress, and the amount of excess ammunition

that gets turned in to the stockpile. For example, the increase in the

stockpile in fiscal year 1999 was largely due to the 289,000 tons entering

the stockpile that year. According to the Command, the downward trend

for fiscal years 2001 through 2004 is due to a combination of forecasted

increases in demilitarization funding and forecasted decreases in

quantities of ammunition becoming excess. Several factors outside the

Command’s control contributed to the growth of the stockpile:

• downsizing of forces, which resulted in the need for less ammunition;

• replacing weapon delivery systems, which created obsolete ammunition;

• replacing older ammunition with newer, better versions, which created

obsolete ammunition;

354

413

355

375

396 415

518

493

465 449 433

403

0

100

200

300

400

500

600

1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004

Fiscal year
Page 9 GAO-01-372 Defense Inventory

• transferring certain ammunition that was not planned for the stockpile

(such as non-self-destruct antipersonnel land mines) to the stockpile; and

• reducing reliance on open burning and detonating processes to

demilitarize ammunition in conjunction with public pressure to use more

environmentally friendly methods.

The Operations Support Command recognized that these factors would

prevent it from meeting its goal of reducing the stockpile to 100,000 tons

by 2004. Current Command projections show that the stockpile will

instead be at about 403,000 tons by 2004. In October 1998, the Army

extended its goal to reduce the demilitarization stockpile to less than

100,000 tons in fiscal year 2004 to the end of fiscal year 2010.

In addition, the Operations Support Command’s reported stockpile does

not include all excess ammunition needing demilitarization. The reported

stockpile only includes excess ammunition located at storage sites

belonging to the Command (see fig. 1). Our analysis of the services’

inventory records showed that there are additional quantities of excess

ammunition needing demilitarization that were not included in the

demilitarization stockpile. Specifically, we identified additional

demilitarization liabilities associated with 94,030 tons of ammunition

located overseas and 54,770 tons of unusable or unneeded ammunition at

other military storage sites in the United States.

Army Materiel Command officials explained that, in managing the

demilitarization program, the Army estimates what ammunition is

expected to require demilitarization in a reasonable time. Therefore, to

plan and budget, it uses the quantities in the reported demilitarization

stockpile plus forecasts of excess ammunition it expects the services to

turn in to the stockpile. The officials agreed that the services’ inventory

records showed additional quantities of excess ammunition needing

demilitarization that were not included in the demilitarization stockpile

and estimated that if all known and forecasted excess ammunition were

recognized, the demilitarization liability for the Army could be as much as

2.9 million tons. The Command estimates the cost to demilitarize a ton of

ammunition to be about $1,034. Using this estimate, the disposal liability

could potentially be as great as $3 billion, but DOD’s financial statement

does not reflect any demilitarization liability even though federal financial

accounting standards6

 require recognition and reporting of liabilities

 6

 Statements of Federal Financial Accounting Standards No. 5, Accounting for Liabilities

of the Federal Government and No. 6 Accounting for Property, Plant, and Equipment.
Page 10 GAO-01-372 Defense Inventory

associated with disposal. DOD’s omission of its demilitarization liability is

representative of the needed financial management reforms on which we

testified before the Government Management, Information, and

Technology Subcommittee of the House Committee on Government

Reform, stating that DOD still faces significant challenges to implement

the federal accounting standards requiring recognition and reporting of

liabilities associated with disposal.7

In recent years, the Operations Support Command has worked to allocate

50 percent of its excess ammunition demilitarization budget to contractors

that used environmentally friendly demilitarization processes. However, at

the same time the Command retained and underutilized environmentally

friendly demilitarization capabilities at government facilities. The Army

could have benefited from examining whether it was maximizing its

demilitarization capabilities with the most cost-effective mix of public and

private environmentally friendly capabilities. We noted that in some

instances the Army incurred additional costs in contracting with the

private sector for ammunition demilitarization and retained underutilized

environmentally friendly demilitarization processes at its facilities.

From 1993 to 1996 the Operations Support Command awarded 18

demilitarization contracts to private firms to demilitarize 76,527 tons of

ammunition at a cost of about $48.2 million. During this 4-year period, the

private sector received about 16 percent of the Command’s

demilitarization budget. Although congressional instructions did not

specify how much demilitarization work should go to the private sector, in

February 1996, the Army Materiel Command required that the

demilitarization budget for 1997 be split 50/50 between government

facilities and private companies. Army Materiel Command officials said

the directive was issued to force the Operations Support Command to

move a larger portion of its demilitarization workload to private firms and

that the 50/50 split seemed appropriate (even though the government

facilities having environmentally friendly processes were being underused

at the time). The Operations Support Command adopted this policy for

fiscal year 1997 and subsequent years. While the actual ratio varied each

year, over time the Command planned to spend its ammunition

demilitarization funds equally between government facilities and private

 7 Department of Defense: Progress in Financial Management Reform

(GAO/T-AIMD/NSIAD-00-163, May 9, 2000).

The Army Increased

Its Reliance on

Contracted

Demilitarization

Without Assessing

Impact on

Government Facilities
Page 11 GAO-01-372 Defense Inventory

firms.8 For fiscal years 1997 and 1998, the Command awarded 21 contracts

to private companies to demilitarize 56,739 tons of ammunition at a cost of

about $45.8 million. During this 2-year period, the private sector received

about 25 percent of the Command’s demilitarization budget.

To eliminate the administrative burden associated with awarding and

monitoring 21 contracts, beginning in fiscal year 2000 the Operations

Support Command awarded two 5-year contracts, potentially worth an

estimated total of $300 million, to General Dynamics Armament Systems

and PB/Nammo Demil LLC. Subsequently, General Dynamics Armament

Systems was awarded a task order under the contract to demilitarize

12,000 tons of ammunition at a price of $34.8 million for the first year and

PB/Nammo Demil LLC was awarded a task order under the contract to

demilitarize 12,000 tons of ammunition at a price of $25.9 million for the

first year.9

 PB/Nammo Demil LLC entered into agreements with three

government facilities for a portion of this work. In addition, the firm

subcontracted with other companies in the United States and overseas for

the remainder of the work.

According to Army Materiel Command and Operations Support Command

officials, when implementing congressional direction to involve the private

sector in environmentally friendly demilitarization of excess ammunition,

the Army did not emphasize cost-effectiveness in terms of dollars saved

and costs avoided. As a result, the Army incurred additional costs in

contracting with the private sector for ammunition demilitarization. For

example, according to the contracts, the Command is required to pay for

packaging, crating, handling, and transportation costs to move

ammunition from a government facility to the contractor demilitarization

site. The Command considers these costs necessary to doing business with

contractors.

Since 1997 the Operations Support Command paid from $8 million to

$14 million a year for packaging, crating, and handling excess ammunition

and for transporting the ammunition, mostly from government facilities to

contractor sites for demilitarization using environmentally friendly

demilitarization processes. According to Command officials, a small

 8

 The Army Materiel Command further required that 10 percent of its ammunition

demilitarization budget be allocated for demilitarizing ammunition located overseas.

9

 Modifications to the order increased its total potential value for the first year to

$28.6 million.
Page 12 GAO-01-372 Defense Inventory

percentage was spent to move excess ammunition from one government

facility to another, but the majority of these expenditures were for moving

ammunition from government sites to contractor sites. In some cases,

government facilities with excess ammunition in storage had

environmentally friendly demilitarization processes and facilities that

could have been used to demilitarize the ammunition without incurring the

shipping cost, leaving the funds available to demilitarize additional

ammunition. For example, at one facility we visited, the Command paid

$50,000 during fiscal year 2000 to ship excess ammunition from a storage

site at the McAlester Army Ammunition Plant to contractor

demilitarization sites when the McAlester plant had environmentally

friendly capabilities to demilitarize the ammunition. The Command could

have avoided $50,000 in shipping costs by allocating this work to

McAlester.

Other costs were incurred under the Operations Support Command’s two

contracts awarded in May 1999 that could have been avoided had the work

been assigned to a government facility. For example, in one instance

where the Command contracted for ammunition demilitarization, the

contractor, in turn, entered into agreements with three government

facilities to have them perform the demilitarization work. In essence, the

government paid a contractor to have the ammunition demilitarized by

government employees. This occurred when the contractor entered into

three separate agreements for demilitarization services with government

facilities at McAlester, Oklahoma; Crane, Indiana; and Tooele, Utah. The

total value of the agreements for the first year was $8.6 million (including

about $1.9 million to upgrade the demilitarization capabilities at the three

government facilities). In addition, information provided by the contractor

and by one government facility indicates that one government facility

could have demilitarized the ammunition for less cost than was incurred

by the Command’s contract with this firm.

The Operations Support Command attributed the decision not to use the

available environmentally friendly capacity at government facilities for

demilitarization purposes to the Army Materiel Command’s interpretation

of congressional instructions to use the private sector to destroy excess

ammunition and the Materiel Command’s mandate that 50 percent of the

demilitarization budget go to private firms. While increasing reliance on

contracted demilitarization, the Operations Support Command has

retained environmentally friendly processes that are not being fully

utilized. Projections for fiscal year 2001 show that 16,550 tons of

incineration capacity at four government facilities will not be used. These

same projections show that government facilities will operate at only
Page 13 GAO-01-372 Defense Inventory

20 percent of their overall capacity to recover and reuse 81,100 tons of

excess ammunition (see table 1).

Table 1: Comparison of Recovery and Reuse Demilitarization Capacity to

Demilitarization Planned in Fiscal Year 2001

Location

Recovery and

reuse capacity

(tons)

Recovery and

reuse

demilitarization

planned (tons)

Percent of capacity

to be used

Anniston 1,000 0 0

Blue Grass 4,000 26 1

Crane 13,300 2,765 21

Hawthorne 13,500 5,725 42

Iowa 5,000 772 15

Letterkenny 1,000 115 12

Lone Star 2,000 1,158 58

Milan 1,800 0 0

McAlester 9,300 4,248 46

Pine Bluff 3,500 0 0

Red River 1,000 0 0

Sierra 24,000 1,099 5

Tooele 1,700 274 16

Total 81,100 16,182 20

 Source: Operations Support Command.

Currently, the Army is conducting a congressionally mandated study of

potential alternative disposal methods that do not release contaminants

into the atmosphere. The study will address the possibility of phasing out

open burning and detonating processes in favor of environmentally

friendly processes, technologies currently in existence and under

development, and the cost and feasibility of constructing facilities

employing these technologies. According to Operations Support Command

officials, the results of this study, which will not be available until

September 2001, could potentially lead to expanding the government’s

environmentally friendly capabilities.
Page 14 GAO-01-372 Defense Inventory

DOD’s conventional ammunition policies and procedures require the

military services to routinely check excess ammunition awaiting

demilitarization before purchasing new ammunition. Available information

indicates that the stockpile may contain ammunition that may be usable

for training purposes, but more analysis is required to evaluate the

condition of the ammunition. Although neither the services nor the

Operations Support Command systematically compares the contents of

the excess ammunition stockpile to the training needs of the active and

reserve forces, the Command checks the stockpile for such items if a

critical shortage occurs or if the needed ammunition cannot be purchased.

For example, in the last 2 years quantities of 155-millimeter,

105-millimeter, and 30-millimeter ammunition have been pulled from the

stockpile and given to the active forces.

The Department of Defense Single Manager of Conventional Ammunition

(Implementing Joint Conventional Ammunition Policies and Procedures)

5160.65-M requires the military services to routinely check all alternative

sources before purchasing ammunition for its weapon systems. Excess

ammunition awaiting demilitarization in the stockpile is an alternative

source. However, the Command believes that a routine comparison of

planned purchases to the stockpile is unnecessary because (1) when the

excess ammunition has been offered to these groups before it was placed

in the stockpile, they declined it, and (2) it would have to spend money to

conduct an evaluation of the condition of the excess ammunition. Also, a

Command official responsible for managing the stockpile stated that a

1996 Army analysis of the excess ammunition in the stockpile found that

there were no items in the stockpile that could be used for training.

According to a Defense Ammunition Center official, the services’ needs

may change over time and usable excess ammunition potentially could be

recalled from the stockpile to prevent concurrent procurement and

demilitarization. Our analysis showed that the Army has recently

purchased 10 types of ammunition, particularly small caliber ammunition,

when quantities of the same items were also in the stockpile and identified

in the Army’s records as being of sufficient quality (either new or in

like-new condition) for training purposes. Examples of excess ammunition

that the Army purchased in fiscal year 2000 for training exercises at the

same time there were quantities in the stockpile reported to be in usable

condition are shown in table 2.

Further Analysis

Needed to Determine

Usability of Excess

Ammunition for

Training Purposes
Page 15 GAO-01-372 Defense Inventory

Table 2: Examples of Purchases of Ammunition for Training in Fiscal Year 2000

When the Same Items Were in the Demilitarization Stockpile

Description of item

Quantity in stockpile

in usable condition

Quantity

purchased in fiscal

year 2000

7.62mm cartridges used in M60 or M73

machine guns

8,676 27,163,329

.30 caliber cartridges used in various

rifles and guns

 9,600 16,154

.45 caliber cartridges used in automatic

pistols and submachine guns

20,855 240,413

.50 caliber cartridges used in machine

guns

1,083,282 11,100

60 mm cartridges used in mortar M2 and

mortar M19

421,781 9,161

105mm cartridges used in gun, cannon

M68

92,776 6,148

105mm cartridges used in gun, cannon

M68

132,456 10,957

155mm propellant charges 428,249 2,951

M228 fuze hand grenades 5,020 1,298,064

M18 red smoke hand grenades 1,050 16,067

Source: GAO analysis of stockpile data provided by the Defense Ammunition Center and purchases

provided by Operations Support Command.

A disposal liability of potentially up to $3 billion is not reflected in DOD’s

financial statements. If all excess ammunition is not accurately reflected in

DOD’s financial statements and made available for congressional budget

deliberations, then DOD and Congress cannot clearly understand the

present and future financial liability associated with demilitarizing the

excess ammunition. Additionally, indications are that the allocation of 50

percent of the excess ammunition demilitarization budget to contractors

may have increased the cost of demilitarizing excess ammunition. Also,

excess capacity involving environmentally friendly demilitarization

processes exists at government facilities. While it may be appropriate to

rely on the private sector to enhance demilitarization capabilities, the

continued use of the private sector to demilitarize excess ammunition at

the same time the government facilities have excess capacity raises the

question of whether the Army is sponsoring too much capacity. At the

same time, an on-going study effort examining the potential to expand

environmentally friendly demilitarization capabilities at government

facilities raises additional questions about the appropriate mix of

public/private sector capacity needed to demilitarize excess ammunition.

Whether excess ammunition in the demilitarization stockpile could be

used for training needs is unclear because the Command does not

Conclusions
Page 16 GAO-01-372 Defense Inventory

systematically compare the contents of its stockpile to the training needs

of the active and reserve forces. DOD requires such a comparison before

purchasing ammunition. Records indicate that the Army is buying

ammunition when potentially usable ammunition is available in the

stockpile, suggesting that checking the stockpile could be cost-effective by

avoiding concurrent procurement and demilitarization and could put the

Army in a better position of buying what it actually needs.

To improve the financial reporting, economy, and efficiency of

demilitarizing excess ammunition, we recommend that the Secretary of

Defense require the Secretary of the Army to

1. identify and include the total liability (domestic and overseas)

associated with demilitarizing excess ammunition in the Department’s

annual consolidated balance sheet;

2. develop a plan in consultation with Congress that includes procedures

for assessing the appropriate mix of public/private sector capacity

needed to demilitarize excess ammunition and the cost-effectiveness

of using contractors versus government facilities to demilitarize excess

ammunition, with specific actions identified for addressing the

capacity issue; and

3. comply with DOD’s policy to routinely compare planned purchases of

ammunition for training with usable ammunition in the stockpile and

require the single manager for conventional ammunition to prepare

periodic reports to the Office of the Under Secretary of Defense for

Acquisition, Technology and Logistics, documenting such comparisons

and showing the quantities and types of ammunition reclaimed from

the stockpile.

The Director of Strategic and Tactical Systems in the Office of the Under

Secretary of Defense for Acquisition, Technology and Logistics provided

written comments to a draft of this report. DOD’s comments are reprinted

in appendix II. DOD also provided separate technical comments that we

have incorporated in this report where appropriate. DOD generally agreed

with our recommendations and pointed out that it is taking actions that it

believes will address our recommendations. However, additional actions

will likely be needed to fully address the recommendations.

Recommendations for

Executive Action

Agency Comments

and Our Evaluation
Page 17 GAO-01-372 Defense Inventory

In commenting on our recommendation for dealing with the liability

associated with demilitarizing excess ammunition, DOD stated that

determining an accurate demilitarization liability is a difficult task and that

it believes that a reasonable estimate of the demilitarization stockpile plus

the forecast of new generations expected to be added to the stockpile for

the next 5 years should meet the intent of our recommendation. However,

this proposal does not recognize a liability for excess ammunition

overseas (even though a portion of the demilitarization budget each year is

used to demilitarize ammunition overseas) nor does the proposal

recognize any demilitarization liability for excess Army-owned war reserve

ammunition, excess retail ammunition, and excess ammunition not stored

at an Army installation. Therefore, we believe DOD should recognize the

total liability associated with demilitarizing excess ammunition rather than

its proposal to recognize only a portion of its demilitarization liability and

have revised our recommendation accordingly.

In commenting on our recommendation for a plan and procedures for

assessing the public/private sector mix of demilitarization capacity, DOD

stated that the Army is preparing a report to Congress, due September 30,

2001, on the feasibility of replacing open burning and detonation with

closed disposal technologies. DOD said that this report could also be used

to address the mix of public/private sector capacity needed to demilitarize

excess ammunition. DOD also stated that the Army has a

computer-modeling tool that can be used to identify the costs associated

with changing the public/private sector percentages. We recognize that the

report and computer-modeling tool can provide information that the Army

can use to determine the mix of public/private sector capacity needed to

demilitarize excess ammunition, but DOD’s response does not address the

substance of our recommendation which is to state how it plans to

rationalize the public/private mix and minimize excess capacity at

government facilities. Accordingly, we have made no change to our

recommendation.

Our draft report included a recommendation that DOD determine the

feasibility of establishing a process to periodically compare planned

purchases of ammunition for training with usable ammunition in the

stockpile. DOD stated that an existing regulation and procedures require

the Army to screen excess ammunition for use prior to procurement.10

 10 According to DOD, this action is directed in DOD 4160.21-M, DOD 5160.65M, and

AMC-R-755-8.
Page 18 GAO-01-372 Defense Inventory

However, our work showed that the Operations Support Command checks

the stockpile for ammunition only if a critical shortage occurs or if the

needed ammunition cannot be purchased. This suggests the need for

additional oversight to ensure such assessments occur on a more frequent

basis. Therefore, we have revised our recommendation to require the

Army to comply with DOD’s policy to routinely compare planned

purchases of ammunition for training with usable ammunition in the

stockpile and to require the single manager for conventional ammunition

to prepare periodic reports documenting such analyses and showing the

quantities and types of ammunition reclaimed from the stockpile.

We are sending copies of this report to the appropriate congressional

committees; the Honorable Donald H. Rumsfield, Secretary of Defense; the

Acting Secretary of the Army, Joseph W. Westphal; the Acting Secretary of

the Navy, Robert B. Pirie, Jr.; the Acting Secretary of the Air Force,

Lawrence J. Delaney; and the Director, Office of Management and Budget

Mitchell E. Daniels, Jr.

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

concerning this report. Major contributors to this report are listed in

appendix III.

Sincerely yours,

Barry W. Holman, Director

Defense Capabilities and Management
Appendix I: Scope and Methodology

Page 19 GAO-01-372 Defense Inventory

To determine the extent to which the excess ammunition stockpile has

been reduced and whether the liability associated with excess ammunition

has been fully identified, we reviewed the composition of the Army’s

reported stockpile of excess ammunition and obtained inventory records

showing the condition and location of the services’ ammunition. We also

reviewed policies and procedures governing the demilitarization of excess

ammunition and the requirements for reporting the financial liability of

ammunition awaiting demilitarization. We met with officials and

performed work at the U.S. Army Operations Support Command, Rock

Island Arsenal, Rock Island, Illinois; the U.S. Army Defense Ammunition

Center, McAlester, Oklahoma; Army, Navy, Marine Corps, and Air Force

Headquarters, Washington, D.C.; and the Office of the Under Secretary of

Defense (Acquisition and Technology), Washington, D.C.

To assess the extent that the Army used contractors to demilitarize excess

ammunition and its impact on the utilization of environmentally friendly

demilitarization processes at government facilities, we met with officials at

the Operations Support Command; McAlester Army Ammunition Plant,

McAlester, Oklahoma; and PB Nammo Demil LLC, New York, N.Y. We

selected the McAlester plant because it was one of three government

facilities having an agreement with PB Nammo Demil LLC to perform

demilitarization work. We reviewed the Command’s contracts with private

firms and assessed packaging, crating, and handling expenses associated

with transporting ammunition to contractor sites. We also obtained and

reviewed contractor agreements with government facilities to have them

perform the demilitarization work and evaluated information provided by

the contractor and by one government facility to determine if the

government facility could have demilitarized the ammunition for less cost

than was incurred by the Command’s contract with this firm. We obtained

Army data on the government facilities’ capabilities to demilitarize excess

ammunition and compared the Army’s demilitarization plans to these

capabilities. This allowed us to identify and calculate excess capacity

situations. We also obtained information from the Army Materiel

Command and the Operations Support Command involving an on-going

study of the possibility of phasing out open burning and detonating

processes in favor of environmentally friendly processes, technologies

currently in existence and under development, and the cost and feasibility

of constructing facilities employing these technologies.

To determine the feasibility of using excess ammunition for training needs,

we met with officials at the U.S. Defense Ammunition Center and

discussed the Center’s capability to compare the contents of the excess

ammunition stockpile to the services’ needs for ammunition to perform

Appendix I: Scope and Methodology
Appendix I: Scope and Methodology

Page 20 GAO-01-372 Defense Inventory

training operations. We compared the services’ fiscal year 2000 training

ammunition purchases to ammunition awaiting disposal to verify that

ammunition matching the services’ training needs is located in the

stockpile. We did not look at opportunities to dispose of excess

ammunition in the stockpile through sale to other nations.

We used the same computer programs, reports, records, and statistics that

DOD and the military services had used to manage excess ammunition.

For example, we used Operations Support Command’s inventory records

to show the reported amounts of excess ammunition in the stockpile. We

did not independently determine the reliability of all these sources. For

historical perspective and illustrations of past problems, we reviewed the

results of prior Defense studies and audit reports.

We performed our review from August 2000 through February 2001 in

accordance with generally accepted government auditing standards.
Appendix II: Comments From the Department

of Defense

Page 21 GAO-01-372 Defense Inventory

Appendix II: Comments From the

Department of Defense

Note: GAO comments

supplementing those in

the report text appear at

the end of this appendix.

See comment 1.
Appendix II: Comments From the Department

of Defense

Page 22 GAO-01-372 Defense Inventory

See comment 1.

See comment 1.
Appendix II: Comments From the Department

of Defense

Page 23 GAO-01-372 Defense Inventory

See comment 3.

Now on p. 12.

See comment 2.

See comment 1.
Appendix II: Comments From the Department

of Defense

Page 24 GAO-01-372 Defense Inventory

See comment 7.

See comment 6.

See comment 5.

Now on p. 15.

See comment 4.

Now on p. 13.
Appendix II: Comments From the Department

of Defense

Page 25 GAO-01-372 Defense Inventory

See comment 9.

Now on p. 15.

See comment 8.

See comment 1.
Appendix II: Comments From the Department

of Defense

Page 26 GAO-01-372 Defense Inventory

The following are GAO’s comments on the Department of Defense’s

(DOD) letter dated March 26, 2001.

1. DOD’s comment and our evaluation are included in the body of the

report.

2. The examples of costs that could have been avoided that we cite in our

report relate to contracts awarded for fiscal year 2000. The examples

illustrate the need for DOD to develop a plan that includes procedures

for assessing the appropriate mix of public/private sector capacity by

considering the cost-effectiveness of using contractors versus

government facilities to demilitarize excess ammunition. Such a plan

would help better ensure that cost-effective decisions are made. Our

report also recognized that factors beyond the Army’s control have

affected its efforts to demilitarize excess ammunition. Further, our

recommendation states that the plan should be developed in

consultation with Congress.

3. Our analysis suggests the Army has excess environmentally friendly

demilitarization capacity considering the capacity available at

government facilities and under contract. This suggests the need to

rationalize the capacity being supported by DOD.

4. The example cited by DOD illustrates the need for it to examine why

the Army continues to incur costs to maintain 24,000 tons of capacity

at this site with only 2,200 tons of ammunition available on site to be

demilitarized.

5. Our analysis indicates that in recent years DOD’s funding plan for

ammunition demilitarization has significantly exceeded its funding

level. The intent behind the plan called for in our recommendation is

not to arbitrarily restrict use of the private sector percentages. Rather,

we believe there is a need for DOD to develop a plan and business case

analysis of the appropriate mix of public/private sector capacity by

considering the cost-effectiveness of using contractors versus

government facilities to demilitarize excess ammunition.

6. Our report focuses on excess capacity involving environmentally

friendly demilitarization process that exists at government facilities

and highlights that the Army has not determined the most

cost-effective mix of public/private sector capacity for environmentally

GAO Comments
Appendix II: Comments From the Department

of Defense

Page 27 GAO-01-372 Defense Inventory

friendly demilitarization methods. Our report recognizes DOD’s efforts

to decrease emphasis on open burning and detonating methods.

7. Our report does not state that there is no apparent benefit to using

private industry. Our report stresses the need for a greater emphasis

on cost effectiveness in deciding the appropriate mix of public and

private environmentally friendly capabilities instead of assigning a

predetermined amount of demilitarization funds to the private sector

as the Army presently does.

8. The applicable section of the report was modified to include DOD’s

position that its regulations and procedures require the Army to screen

excess ammunition for use prior to procurement.

9. Our analysis was based upon data from the Army’s Defense

Ammunition Center, which we shared with the Army during the course

of our review. Our report emphasized that potentially usable

ammunition was available in the stockpile and recognized that further

analysis was needed to determine the usability of the excess

ammunition.
Appendix III: GAO Contacts and Staff

Acknowledgments

Page 28 GAO-01-372 Defense Inventory

Ronald L. Berteotti (214) 777-5702

Roger L. Tomlinson (214) 777-5777

In addition to those named above, Jimmy Palmer, Joanna McFarland, and

John Brosnan made key contributions to this report.

Appendix III: GAO Contacts and Staff

Acknowledgments

GAO Contacts

Acknowledgments

(709541)
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