United States General Accounting Office

GAO Report to the Chairman, Committee on

National Security, House of

Representatives

October 1997 DEFENSE

INVENTORY

Management of

Surplus Usable Aircraft

Parts Can Be Improved

GAO/NSIAD-98-7

GAO United States

General Accounting Office

Washington, D.C. 20548

National Security and

International Affairs Division

B-276828 

October 2, 1997

The Honorable Floyd D. Spence

Chairman, Committee on National Security

House of Representatives

Dear Mr. Chairman:

As requested, we reviewed selected aspects of the Department of

Defense’s (DOD) disposal process. When the military services no longer

need aircraft parts, they turn them over to the Defense Logistics Agency,

which manages DOD’s disposal process. As one option within the disposal

process, the Agency can either sell the parts intact to the public or destroy

the parts and sell them as scrap. Also, if for some reason a military service

later determines there is a new need for parts still in the disposal process,

it can request their return. This report addresses whether (1) DOD

destroyed usable aircraft parts during the disposal process that did not

have military technology and flight safety implications and (2) the military

services recalled aircraft parts from the disposal process to preclude

unnecessary purchases or repairs. We will report separately on whether

DOD properly destroyed aircraft parts with military technology and safety

implications.

In fiscal year 1996, DOD sold about 3.3 million usable aircraft parts to the

public through the disposal process’ surplus sales program. These parts

had an acquisition value of over $2.3 billion. Our review focused on a

judgmentally selected sample of 271 surplus items at three disposal

offices. These offices handle some of the largest volumes of surplus

aircraft parts within the disposal process. The scope and methodology of

our work are described in appendix I.

Background The Federal Property and Administrative Services Act of 1949, as amended

(40 U.S.C. 471-486), places responsibility for the disposition of government

real and personal property with the General Services Administration. The

General Services Administration delegated disposal of DOD personal

property to the Secretary of Defense, who in turn delegated it to the

Defense Logistics Agency. The Defense Reutilization and Marketing

Service, a component of the Defense Logistics Agency, carries out the

disposal function. The complexity of DOD’s disposal process is

characterized by the massive volumes of surplus property. In fiscal year

1996, DOD disposed of millions of items with a reported acquisition value

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(the amount originally paid for the items) of almost $24 billion. The focus

of this report, aircraft parts, represents $2.3 billion of this total.

Aircraft Parts Disposal

Process

DOD provides overall guidance for determining if aircraft parts should be

disposed of. The military services and the Defense Logistics Agency

determine if specific parts for which they have management responsibility

are excess to their needs. Once the military services or the Defense

Logistics Agency declares aircraft parts excess to their needs, they enter

the disposal process. These parts are sent to one of 170 worldwide

Defense Reutilization and Marketing Offices (DRMO), or disposal yards.

Upon receipt, DRMO personnel inspect the parts for condition, acquisition

value, and special handling requirements such as those for military

sensitive items. DRMOs, consistent with legislative requirements, have

disposition priorities to make the excess parts available for reutilization

within DOD or transfer to other federal agencies. Parts that remain are

designated as surplus and can be donated to eligible entities such as state

and local governments, among many others. After these priorities have

been served, parts that remain may be sold to the general public. Figure 1

shows the usual process for disposing of aircraft parts.

Figure 1: Usual Process for Disposing of Aircraft Parts

Other

defense

activities

Other

federal

agencies

Public

sale

Excess Surplus

Donations

to state

and local

governments

Surplus aircraft parts can generally be divided into four categories of

condition: (1) new; (2) worn, but still working; (3) broken, but repairable;

and (4) scrap. In this report, we refer to the first three categories of parts

as potentially usable, since they can be repaired or used as is. The fourth

category—scrap—refers to those parts that DOD does not intend to reuse

and sells for their basic material content value.

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Military Technology and

Flight Safety

Considerations

Because of concerns about safeguarding military technology and

maintaining flight safety, DOD has specific policies and procedures relating

to the disposal of aircraft parts. For parts that have military technology

involving weapons, national security, or military advantages inherent in

them, DOD requires the parts to be demilitarized so that the technology

remains within DOD. Demilitarization makes the parts unfit for their

originally intended purpose, either by partial or total destruction, before or

as a condition of sale to the public. For parts that could cause an aircraft

to crash if the parts fail during a flight, DOD components have local policies

requiring the destruction of certain used parts with flight safety

implications to prevent the parts from reentering the DOD supply system or

being made available to the civil aviation industry. In our 1994 report,1

 we

cited concerns from the Federal Aviation Administration and the

Department of Transportation’s Inspector General that DOD aircraft parts,

sold as scrap, reentered civil aviation as usable. As a result, in July 1995,

DOD initiated a departmentwide program to identify and prevent parts with

potential flight safety risks from being sold intact through DRMOs. The

services and the Defense Logistics Agency began identifying parts with

flight safety characteristics so they could destroy the parts before they

were sold.

Some usable aircraft parts DOD sells as surplus fit only on military aircraft

but have no military technology implications. These parts are called

“nonsignificant military unique” parts. Examples include bolts, fuel

controls, engine parts, and airframe parts that have been strengthened to

withstand rigorous military use. Companies buy military unique parts on

the speculation that DOD may need these parts at a future date. Other

usable aircraft parts DOD sells as surplus have applications to aircraft used

in civil aviation or by other government agencies and foreign countries.

These parts are called commercial-type parts. Examples include the Air

Force’s KC-135 air refueling tanker that has many of the same parts as a

commercial Boeing 707 aircraft; the Air Force’s C-130 cargo plane that has

many of the same parts as a Lockheed 382 Hercules aircraft used by 49

foreign countries; and the Army’s UH-1 Huey utility helicopter that has

many of the same parts as a commercial Bell 205 helicopter. Companies

buy commercial-type parts on the speculation that they can resell the parts

to civil aviation, foreign countries, or DOD.

1

Commercial Practices: Opportunities Exist to Enhance DOD’s Sales of Surplus Aircraft Parts

(GAO/NSIAD-94-189, Sept. 23, 1994).

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Results in Brief Management of the aircraft parts disposal process can be improved. DOD

destroyed some usable aircraft parts and sold them as scrap. These parts

were in new or repairable condition and did not have military technology

or flight safety implications. The parts could possibly have been sold intact

at higher than scrap prices. This situation occurred for several reasons.

For example, disposal offices destroyed parts because the demilitarization

codes the military services had assigned to the parts were inaccurate. The

codes indicated the parts contained military technology when they did not.

Our work showed that the Oklahoma City disposal office destroyed 62 of

71 sample items, even though they did not have technology implications,

because the assigned codes required their destruction. Personnel

responsible for assigning and reviewing the codes had not been

sufficiently trained and guidance was not adequate. In addition, policies

and practices designed to prevent the inadvertent or unauthorized release

of parts with military technology and flight safety implications did not

distinguish between parts with or without such implications. Parts without

military technology and flight safety concerns were destroyed along with

parts that had these characteristics.

Our work also showed that DOD could have purchased or repaired fewer

aircraft parts if it would have recalled the needed parts from the disposal

process. For example, the Army could have reduced current and planned

purchases by about $200,000 by using Cobra helicopter parts scheduled for

destruction. DOD regulations require the military services to know which

parts they have placed in the disposal process. However, interface

problems between service and disposal office computer systems

precluded the services from knowing what parts were at the disposal

offices. The military services had not instituted alternative ways to obtain

this information on a routine basis.

Problems with the disposal process are likely not unique to the three

disposal yards we visited because DOD, military service, and Defense

Logistics Agency policies and procedures generally apply to activities

being performed at all locations. Our past reviews and DOD internal studies

have identified similar problems at these and other locations over the past

10 years and earlier.

Management of

Surplus Aircraft Parts

Can Be Improved

DOD could have avoided destroying certain usable aircraft parts that were

in the disposal process. The parts were destroyed because (1) the military

services improperly coded parts without military technology as having

military technology implications and (2) policies and practices intended to

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B-276828 

prevent an inadvertent sale of military technology or flight safety items did

not adequately exclude parts without military technology or flight safety

implications. Until DOD improves the accuracy of assigned demilitarization

codes, adopts better management policies and practices, and moves to use

private sector techniques, such as identifying highly marketable parts,

some usable parts will be unnecessarily destroyed during the disposal

process.

Assigned Demilitarization

Codes Are Not Accurate

The three DRMOs we visited destroyed usable parts because the

demilitarization codes the military services had assigned were inaccurate.

For example, we evaluated 71 sample items at the Oklahoma City DRMO.

We selected these items because they were commercial-type items but, at

the time of selection, the military services had coded the parts as having

military technology implications. We found usable quantities for 10 of our

sample items that were marked for destruction at the DRMO. Records

showed that the DRMO had previously destroyed quantities of the other 61

sample items.

We met with Air Force and Navy equipment specialists and policy officials

and questioned the demilitarization codes assigned to each of the 71 items.

The policy officials told us that they require equipment specialists to

periodically review the demilitarization codes for accuracy and that

equipment specialists had recently corrected the codes on nine items. The

equipment specialists did not agree on the need to change the codes on the

remaining 62 items until we pointed out that these were commercial-type

parts. The equipment specialists confirmed that the assigned

demilitarization codes—requiring the parts to be destroyed due to military

technology content—were incorrect for each of the 62 sample items. The

specialists revised each of the demilitarization codes to identify the parts

as having no military technology implications.

At the San Antonio DRMO, the assigned demilitarization codes were

inaccurate for 22 of 27 sample items because the parts had no military

technology implications. Similarly, at the Corpus Christi DRMO, the

assigned demilitarization codes were inaccurate for 13 of 17 sample items.

Each of the military services and the Defense Logistics Agency were

responsible for sample items with assigned codes that were inaccurate.

Examples of parts destroyed because the assigned codes were wrong can

be found in appendix II.

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Inaccurate Coding Is a

Long-standing Problem

DOD has had problems with the accuracy of assigned demilitarization

codes for many years. In 1987, the Deputy Secretary of Defense directed

the military services and the Defense Logistics Agency to review the

assignment of demilitarization codes. The Deputy Secretary was

concerned because a partial audit of seven weapon systems revealed that

43 percent of the items checked had been coded incorrectly. In 1994, the

Defense Logistics Agency found that 28 percent of the assigned

demilitarization codes it reviewed were incorrect. DOD officials told us that

historically they assigned demilitarization codes to parts the first time the

parts were purchased for a new weapon system. They said that for

expediency purposes, they often assigned codes that showed military

technology content for all parts on new weapon systems rather than

evaluating individual items.

Recognizing the need for trained personnel to assign proper codes, DOD

developed a course on demilitarization. Despite such efforts to correct the

erroneous codes, in April 1997, the DOD Inspector General reported2

 that

52 percent of the demilitarization codes assigned to parts for new weapon

systems it reviewed were incorrect. The Inspector General reported that

training was not adequate for personnel responsible for assigning and

reviewing demilitarization codes and that documentation showing the

rationale for their decisions did not exist. According to the Inspector

General, DOD’s training course provided only general awareness of the

demilitarization program and did not provide the specific details necessary

to make decisions on selecting the appropriate demilitarization codes.

Guidance Could Be Improved Our review shows that DOD could improve the accuracy of assigned

demilitarization codes by providing its personnel with guidance on how to

make prudent decisions on selecting the appropriate codes. For our

sample items at Oklahoma City, the Air Force equipment specialists

completed a demilitarization code assignment worksheet. The worksheet

is a draft document the Air Force is developing for the equipment

specialists to follow to identify the proper code and to document the

rationale they use in assigning the code. We found that the draft worksheet

was a useful tool that provided a step-by-step process in determining the

correct demilitarization code. The worksheet also provided

documentation supporting how the equipment specialist arrived at the

demilitarization code. Moreover, the worksheet proved useful to

equipment specialists that had not received recent training. Until DOD

provides its personnel with the specific details necessary to make prudent

decisions on selecting the appropriate demilitarization codes, inaccurate

2

Coding Munitions List Items (DOD Inspector General Audit Report No. 97-130, April 16, 1997).

Page 6 GAO/NSIAD-98-7 Defense Inventory
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codes will continue to cause the unnecessary destruction of usable aircraft

parts.

Policies and Practices Are

Not Adequate

Policies and practices intended to prevent an inadvertent sale of military

technology or flight safety items did not adequately exclude parts without

military technology or flight safety implications. The policies and practices

in question dealt with the destruction of usable parts categorized as

(1) scrap when the parts were usable, (2) sensitive items when the parts

were not sensitive, (3) flight safety items when the parts had no flight

safety implications, and (4) causing a storage space problem when there

was no storage space shortage.

Some Scrap Parts Are Usable In 1994, the Defense Reutilization and Marketing Service directed the

DRMOs to destroy all parts categorized as scrap or downgraded to scrap.

The reason usable parts were destroyed involved DOD’s categorization of

parts as scrap. DOD defines scrap parts as material that has no value except

for its basic material content, whereas DOD defines usable parts as material

that has value greater than its basic material content and has potential to

be used for the originally intended purpose. Commercial company officials

told us that some parts that DOD considers scrap have value beyond basic

material content and are repairable and reusable in the commercial sector.

For the most part, this situation occurs because DOD labels containers of

parts it does not want to repair for economic reasons as scrap. On the

basis of their experience and independent analyses, commercial

companies frequently did not agree with DOD’s economic determinations.

In such cases, the companies wanted to buy the used parts, repair them,

and resell them for a profit.

For example, DOD pays the manufacturer $866 each for first stage turbine

vanes used on the T-56 engine. Because DOD’s cost to repair a turbine vane

is $750, or 87 percent of the cost of a new vane, DOD considers the vane

uneconomical to repair and categorizes it as scrap when worn or broken.

However, the manufacturer sells the same first stage turbine vane to

commercial customers for $2,020 each. Because of the higher commercial

acquisition cost, commercial users can justify the repair cost, which is

37 percent of the commercial acquisition cost.

DRMO officials told us that usable parts without military technology were

destroyed because of the policy to destroy items categorized as scrap.

After receiving complaints from potential buyers and DRMOs that usable

parts were needlessly destroyed, the Defense Reutilization and Marketing

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Service revised its policy in June 1996 to state that only those items

categorized both as scrap and as sensitive items are to be destroyed. The

Service considers aircraft parts to be sensitive items if the assigned stock

number corresponds to 1 of 18 federal supply classes or groups that

frequently contain military technology. The classes or groups include

weapons, rocket engines, and communication equipment. DRMOs destroyed

items considered sensitive property when the items were received as scrap

or downgraded to scrap, irrespective of whether the assigned

demilitarization codes indicated the parts had military technology

implications.

DOD officials stated that due to the time and resources required to destroy

and document the destruction of material, it is not in DRMOs’ best interest

to destroy parts that do not contain military technology. However, the

officials said destruction was necessary to prevent an inadvertent release

of parts with military technology implications. We recognize the need for

DOD to prevent the inadvertent sale of parts with military technology

implications. However, DOD management policies and practices resulted in

the destruction of commercial-type parts and nonsignificant military

unique parts that did not have technology and safety implications.

We previously reported3

 that DOD could increase proceeds from the sale of

surplus aircraft parts—not by destroying them—but by adopting private

sector practices. Specifically, we stated that DOD should use techniques to

enhance the marketability of its aircraft parts, including identifying highly

marketable commercial-type parts that would yield the greatest benefits at

the minimum cost. We pointed out that some commercial airlines identify

parts that have a high demand or command a high price and place them on

a special listing for marketing purposes. This review shows that DOD has

not implemented similar procedures.

Parts Not on the Sensitive

Items List

DRMO personnel also destroyed parts, even though they were not on the

sensitive items list. According to DRMO officials, the personnel did this to

increase sales proceeds. They explained that historically DRMOs received

scrap value for usable parts. They stated that by destroying usable parts,

surplus parts dealers would get what they paid for and nothing more. The

officials reasoned that once surplus dealers realized that DRMOs destroyed

the parts, they would be willing to buy the usable parts before they were

destroyed and would pay higher than scrap value for them. As a result,

sales proceeds would increase.

3

Commercial Practices: Opportunities Exist to Enhance DOD’s Sales of Surplus Aircraft Parts

(GAO/NSIAD-94-189, Sept. 23, 1994).

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B-276828 

We reviewed 83 sample items at the San Antonio DRMO that were not on

the sensitive items list and that the disposal histories showed were

categorized as scrap or downgraded to scrap after receipt. Our analysis

identified instances where the DRMO offered usable parts for sale but did

not sell them because bids did not exceed scrap value. The DRMO

subsequently destroyed the parts and sold them as scrap. Some of the

parts were worth more than scrap value and should have been held for

another sale as usable parts. An example of parts destroyed because of the

DRMO practice of destroying scrap not on the sensitive items list can be

found in appendix II.

Flight Safety Parts As a result of our 1994 report, DOD initiated a departmentwide program to

identify and prevent parts with potential flight safety risks from being sold

intact through DRMOs. The military services and the Defense Logistics

Agency began identifying parts with flight safety characteristics so they

could destroy the parts before they were sold. However, our review

showed that aircraft parts were destroyed as flight safety risks when the

parts had no flight safety implications. This destruction occurred because

DRMO practices intended to prevent the inadvertent sale of parts with flight

safety implications also caused the planned destruction of parts without

these implications.

For example, in response to a potential buyer’s complaint on

September 20, 1996, that the San Antonio DRMO was destroying usable

blades for the T-56 engine, the San Antonio Air Logistics Center

investigated. The Center found 7,018 blades, originally costing

$1.06 million, that the Air Force had incorrectly categorized as scrap

because of a breakdown in inspection procedures and had sent them to

the DRMO. San Antonio DRMO officials said the destruction was to prevent

an inadvertent sale of flight safety items. However, Center officials said

that these parts were incorrectly sent to the DRMO and did not have to be

destroyed for flight safety reasons. DRMO officials said they preferred to err

on the side of safety. We recognize the need for DRMOs to prevent the

inadvertent sale of parts with flight safety implications. However, DRMO

practices resulted in the planned destruction of commercial-type parts and

nonsignificant military unique parts that did not have flight safety

implications. An additional example of parts being unnecessarily

destroyed as flight safety risks is in appendix II.

An interim Army Aviation and Troop Command instruction to destroy all

parts with flight safety implications also resulted in the destruction of

some helicopter parts without such implications. According to DRMO and

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Army records, for example, on February 5, 1997, a potential buyer

witnessed the destruction of between 200 and 300 UH-1 helicopter gear

shafts and 10 turbine rotors at the Texarkana, Texas, DRMO. The destroyed

parts were new, were in the original equipment manufacturer’s boxes, had

a manufacturer’s list price totaling about $1 million, and were categorized

as flight safety critical parts. After the buyer complained, the Army agreed

that the parts were new and should not have been destroyed.

According to DRMO officials, the interim instruction resulted in the

destruction of large quantities of new, unused parts that had no flight

safety risks. After receiving complaints from DRMOs and potential buyers

that new parts were being destroyed, the Command revised its

instructions and authorized the sale of flight safety critical parts under

certain conditions, such as when the parts are new and unused. To

determine if the procedural change was working, we reviewed a sample of

73 items at the Corpus Christi DRMO that the Army had identified as having

flight safety implications and that DRMO records indicated were new. Our

analyses showed that the DRMO either offered each sample item for sale or

had already sold it. We concluded that no unnecessary destruction of new

parts occurred on the transactions we reviewed. Examples of flight safety

items properly sold can be found in appendix II.

Storage Space At the Corpus Christi DRMO, we observed quantities of 157 different usable

parts for the AH-1 Cobra helicopter scheduled for destruction (see fig. 2).

Specifically, we noted that there was a total of 1,972 usable, mostly new,

helicopter parts in a DRMO warehouse. The parts originally cost

$6.9 million. According to the DRMO Chief, these parts were to be destroyed

beginning May 3, 1997, to free up storage space. We contacted the Defense

Reutilization and Marketing Service and advised it of our concern with the

scheduled destruction because the assigned demilitarization codes

indicated no military technology was associated with 155 of the 157

different parts and because there were sufficient amounts of warehouse

storage space for the parts.

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Figure 2: Cobra Helicopter Parts

Stored at Corpus Christi DRMO

Defense Reutilization and Marketing Service officials said that in

February 1996, they placed a prohibition against selling Cobra parts at

DRMOs because the Army-assigned demilitarization codes were inaccurate.

The property disposal specialist responsible for the prohibition said the

Army planned to review and validate the demilitarization codes for the

Cobra helicopter parts and he wanted to be sure the codes were accurate

before proceeding with a sale or destruction action. He said the Army had

not completed its demilitarization code review. The specialist said he also

instructed the DRMOs to destroy the parts if they started experiencing a

storage impact. After a meeting with the Chief of the Corpus Christi DRMO,

the Defense Reutilization and Marketing Service issued a memorandum

directing the DRMOs not to destroy any Cobra parts unless they are in a

scrap condition and to hold usable parts in storage until the Army

completes the demilitarization code review.

Army Aviation and Troop Command officials who are responsible for

reviewing and validating demilitarization codes for Cobra helicopter parts

told us they were waiting to complete the demilitarization code review

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until after Army headquarters makes a decision on whether or not to sell

disarmed, surplus Cobra helicopters to the public for use in such purposes

as fighting forest fires. In our opinion, accurate code assignments are

required regardless of whether the helicopters are sold to the public.

DOD Components

Needed Some Surplus

Parts

The military services’ inventory managers did not have adequate

information on aircraft parts located in DRMOs. DOD Materiel Management

Regulation 4140.1-R requires inventory managers to have information on

parts transferred to DRMOs, to recall parts for reutilization to prevent

concurrent procurement and disposal, and to prevent the repair of

unserviceable items when serviceable items are available. However, we

found that they did not have the needed information and that DRMOs

destroyed quantities of parts DOD components needed.

For example, at the Corpus Christi DRMO, we compared the 157 different

usable Cobra helicopter parts scheduled to be destroyed by the DRMO with

Army budget and procurement records. The records showed that the Army

needed quantities for 22 of the 157 parts, totaling $196,500. We discussed

our findings with the Defense Reutilization and Marketing Service, which

notified the Army Aviation and Troop Command of the need to return the

parts to the DOD supply system. The Command had not responded to this

notification at the time our field work was completed. Additional

examples of parts needed by DOD components can be found in appendix II.

Air Force and Army officials said that, despite the requirements of the DOD

regulation, they did not have adequate visibility over parts in DRMOs. They

stated that interface problems between military service and DRMO

computer systems precluded the services from knowing what parts were

in DRMOs. Since the services did not have adequate visibility over parts in

DRMOs, the DRMOs were destroying the same parts the services were

purchasing or repairing. DOD headquarters officials commented that DOD

was working to correct the computer interface problem as part of a Total

Asset Visibility program, but it would be several years before the problem

is fixed. The officials stated that DOD had neither established milestones

for correcting the computer interface problem nor instituted alternative

ways to obtain the needed information on a routine basis. For example,

aircraft parts available at DRMOs can be identified by telephone calls, the

Internet, or physical inspections.

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Conclusions and

Recommendations

The conditions described in this report result in an unnecessary

expenditure of resources to destroy parts that do not actually require

destruction. In some instances, the government also loses the increased

revenue that could be derived from the sale of usable parts to prospective

buyers and the opportunity to return usable parts to the DOD supply system

to avoid unnecessary procurements or repairs. Accordingly, we

recommend that the Secretary of Defense take the following actions to

prevent the destruction of usable aircraft parts.

• Provide guidance on selecting appropriate demilitarization codes that

includes the specific details necessary to make appropriate decisions. The

guidance could take the form of the draft demilitarization code assignment

worksheet being used by the Air Force.

• Exclude commercial-type parts and nonsignificant military unique parts

that do not have military technology and flight safety implications from

policies and practices intended to prevent an inadvertent sale of parts with

these implications. Work closely with the private sector to identify and list

commercial-type aircraft parts and nonsignificant military unique parts the

private sector needs and require the DRMOs to check this list before

destroying parts.

• Require the Army to complete its validation of the demilitarization codes

assigned to Cobra helicopter parts so commercial-type parts and

nonsignificant military unique parts can be sold.

• Establish milestones for correcting computer interface problems that

preclude the military services from having visibility of parts located in

DRMOs and from following regulations that require parts to be returned to

the supply system when needed to prevent unnecessary procurements or

repairs. In the interim, institute alternative ways to obtain this information

on a routine basis. For example, aircraft parts available at DRMOs can be

identified by telephone calls, the Internet, or physical inspection.

Agency Comments

and Our Evaluation

DOD generally agreed with the report and stated that the concepts

presented appear to be beneficial to the disposal of aircraft parts (see 

app. III). Concerning our first recommendation, DOD agreed that a code

assignment sheet may be useful in assigning demilitarization codes and

stated that it would work with the military services and the Defense

Logistics Agency to determine the feasibility of departmentwide use of the

Air Force, or a similar, worksheet. In response to our second

recommendation, DOD agreed that, when properly coded by item

managers, usable parts that do not have military technology and flight

safety implications do not have to be destroyed. DOD noted that challenge

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programs are available if parts are miscoded. With regard to our

recommendation that the Army complete its validation of the

demilitarization codes assigned to Cobra helicopter parts, DOD stated that

it is monitoring the Army’s validation process. The validation, which will

determine which parts are commercially available and can be sold, is

expected in November 1997.

DOD partially agreed with our recommendation that it work closely with

the private sector to identify and list parts the private sector needs and

require the DRMOs to check this list before destroying parts. DOD stated that

it previously attempted to obtain private sector input but the response was

minimal. DOD also stated that the identification of commercial-type aircraft

parts should be incorporated into an existing database rather than utilizing

a separate list. DOD added that, although it is DOD policy that DRMOs destroy

parts only when demilitarization is required or they are identified as

having flight safety implications, inaccurate information does occur and

use of all available data to reduce unnecessary destruction should be used

by the DRMOs.

We continue to believe that DOD should work closely with the private

sector because DOD’s previous inquiries were limited to the original

equipment manufacturers. Officials from the companies we contacted,

including the National Association of Aircraft and Communication

Suppliers, told us that, although they are buyers of large quantities of

aircraft parts at DRMO sales, DOD had not asked them for input to identify

commercial-type aircraft parts. Our report documents examples where

DRMOs destroyed usable parts that did not have military technology or

safety implications. Because the current system for identifying

commercial-type and nonsignificant military unique parts the private

sector needs is not working, we also continue to believe that DOD needs to

list these parts separately.

DOD also partially agreed with our recommendation that it establish

milestones for correcting the computer interface problems that preclude

the military services from having visibility of parts located in DRMOs and, in

the interim, institute alternative ways to obtain this information on a

routine basis. DOD stated that the interface problems are addressed as they

arise and that a joint Total Asset Visibility office is working with the

military services to finalize a functional description for automated

visibility of disposal assets to prevent unnecessary buys and repairs. Once

finalized, milestones for implementation will be developed based on the

complexity of the information system changes required. DOD stated that

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the earliest projected date for development of milestones is the first

quarter of fiscal year 1998. DOD also stated that, in the interim, many other

sources are available to the military services that provide visibility of parts

at the DRMOs, including the Internet, an Interrogation Requirements

Information System, and formal and informal contacts between DRMOs and

item managers.

While we agree that the long-term solution rests with implementation of

the Total Asset Visibility program, we continue to be concerned that

routine interim procedures do not exist. Although DOD acknowledges that

many other sources are available to the military services that provide

visibility of parts in DRMOs, our report shows that DOD guidance is needed

because the military services are not routinely checking with these

sources.

We are sending copies of this report to the appropriate congressional

committees; the Secretaries of Defense, the Army, the Navy, and the Air

Force; the Director, Defense Logistics Agency; and the Director, Office of

Management and Budget.

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

concerning this report. The major contributors to this report are listed in

appendix IV.

Sincerely yours,

David R. Warren

Director, Defense Management Issues

Page 15 GAO/NSIAD-98-7 Defense Inventory
Contents

Letter 1

Appendix I 

Scope and

Methodology

18

Appendix II 

Examples of Selected

Aircraft Parts

20

Parts Assigned Inaccurate Demilitarization Codes 20

Parts That Are Not Sensitive 23

Parts Without Flight Safety Implications 23

Flight Safety Parts Properly Sold 23

Parts Needed by DOD Components 25

Appendix III 

Comments From the

Department of

Defense

26

Appendix IV 

Major Contributors to

This Report

30

Figures Figure 1: Usual Process for Disposing of Aircraft Parts 2

Figure 2: Cobra Helicopter Parts Stored at Corpus Christi DRMO 11

Figure II.1: Engine Combustion Chamber 20

Figure II.2: Nozzle Rings 22

Figure II.3: Turbine Rotor Blades in Manufacturer’s Original

Packaging

24

Abbreviations

DOD Department of Defense

DRMO Defense Reutilization and Marketing Office

Page 16 GAO/NSIAD-98-7 Defense Inventory
Page 17 GAO/NSIAD-98-7 Defense Inventory
Appendix I 

Scope and Methodology

We reviewed policies, procedures, disposal histories, transaction histories

and related records obtained from the Defense Reutilization and

Marketing Offices (DRMO) and item managers and documented disposal

practices. We interviewed policy officials, disposal office personnel, item

managers, and equipment specialists. To determine the Department of

Defense’s (DOD) policies and practices for destroying aircraft parts during

the disposal process, we held discussions and performed work at the

Office of the Deputy Under Secretary of Defense (Logistics), Washington,

D.C.; the Army, the Navy, and the Air Force Headquarters, Washington,

D.C.; the Defense Logistics Agency, Fort Belvoir, Virginia; and the DOD

Inspector General, Washington, D.C. and Columbus, Ohio.

To obtain information on how surplus parts are received and processed

for sale, we documented procedures and practices at three DRMOs located

in Oklahoma City, Oklahoma; San Antonio, Texas; and Corpus Christi,

Texas. According to DOD officials, the Oklahoma City and San Antonio

DRMOs handle the largest volumes of surplus aircraft parts. Since these

DRMOs handle surplus parts used mostly on Air Force and Navy aircraft, we

also selected the Corpus Christi DRMO, which handles large quantities of

surplus parts used mostly on Army aircraft. We also collected budget,

procurement, inventory, weapon system application, and disposal

information from item managers, equipment specialists, and policy

officials at the Oklahoma City Air Logistics Center, Tinker Air Force Base,

Oklahoma; the San Antonio Air Logistics Center, Kelly Air Force Base,

Texas; the Corpus Christi Army Depot, Corpus Christi, Texas; the Army’s

Aviation and Troop Command, St. Louis, Missouri; and the Naval

Inventory Control Point, Philadelphia, Pennsylvania.

We also visited and collected data from members of the National

Association of Aircraft and Communication Suppliers, Inc., Alamo Aircraft

Supply, Inc., and Dixie Air Parts Supply, Inc., San Antonio, Texas; Jet

Reclamation, Inc., Bulverde, Texas; and Rick’s Mfg. and Supply, Choctaw,

Oklahoma to identify specific problems they were having with DOD’s

disposal practices.

We judgmentally selected 271 surplus items for review to determine the

adequacy of DOD’s policies and procedures for ensuring that aircraft parts

without military technology and flight safety implications are not

unnecessarily destroyed. We selected 83 items at the San Antonio DRMO

involving the disposal of usable parts as scrap material and 27 items

involving the accuracy of assigned demilitarization codes; 73 items at the

Corpus Christi DRMO involving flight safety and 17 items involving the

Page 18 GAO/NSIAD-98-7 Defense Inventory
Appendix I 

Scope and Methodology

accuracy of assigned demilitarization codes; and 71 items at the Oklahoma

City DRMO involving the accuracy of assigned demilitarization codes. We

selected these items because they were commercial-type parts or

nonsignificant military unique parts that were either coded for destruction

due to military technology content or alleged by the Association to have

been unnecessarily destroyed. We also reviewed the results of prior DOD

internal studies.

To determine whether parts being destroyed at the three DRMOs were

needed by the military services, we compared selected sample items with

the services’ budget stratification databases and requirements

computations. We checked to see if there were current or future buy and

repair requirements for the items. We informed the military services of any

sample items that had current or planned requirements so the parts could

be recalled from the DRMOs.

We performed our review between January 1997 and June 1997 in

accordance with generally accepted government auditing standards.

Page 19 GAO/NSIAD-98-7 Defense Inventory
Appendix II 

Examples of Selected Aircraft Parts

Parts Assigned

Inaccurate

Demilitarization

Codes

The Air Force decided that 184 TF-33 engine combustion chambers (Stock

No. 2840008285214RV) (see fig. II.1) used on the KC-135 aircraft were

surplus and sent them to the Oklahoma City DRMO. The parts originally

cost $452,352. On April 15, 1997, the DRMO destroyed the 184 parts,

although the parts were repairable. The DRMO destroyed the parts because

the Air Force had assigned a demilitarization code to the parts requiring

total destruction to protect military technology. The DRMO estimated that it

spent $211 to destroy the parts and sold them as scrap for $3,450. After we

pointed out that this was a commercial-type item, the Air Force equipment

specialist said the assigned demilitarization code was incorrect because

the parts contained no military technology. As a result, the DRMO destroyed

parts that the private sector could have used. The equipment specialist

corrected the demilitarization code.

Figure II.1: Engine Combustion

Chamber

Page 20 GAO/NSIAD-98-7 Defense Inventory
Appendix II 

Examples of Selected Aircraft Parts

On April 9, 1997, we observed the destruction with a cutting torch of 20

nozzle rings (Stock No. 2840011611133RV) (see fig. II.2) used on the

KC-135 aircraft engine. These parts originally cost $94,400. The Oklahoma

City DRMO destroyed the parts because the Air Force had assigned a

demilitarization code that required total destruction to protect military

technology. According to the equipment specialist, the Air Force replaced

the parts with a newer version. He said that the parts sent to the DRMO,

although usable, were no longer needed by the Air Force. After we pointed

out that this was a commercial-type item, the equipment specialist said the

assigned demilitarization code was incorrect because the part contained

no military technology. He also said the destroyed parts were usable on

commercial Boeing 707 aircraft in the private sector. As a result, the DRMO

destroyed parts that the private sector could have purchased. The

equipment specialist corrected the demilitarization code.

Page 21 GAO/NSIAD-98-7 Defense Inventory
Appendix II 

Examples of Selected Aircraft Parts

Figure II.2: Nozzle Rings

On April 14, 1997, the Corpus Christi DRMO destroyed 53 circuit card

assemblies (Stock No. 5998013370963) used on the UH-60 helicopter. The

parts originally cost $54,392. The DRMO destroyed the parts because the

Army had assigned a demilitarization code to the parts requiring total

destruction to protect military technology. After we questioned if military

technology was involved with this part, the Army equipment specialist said

the assigned demilitarization code was incorrect because the part,

although military unique, was nonsignificant and contained no military

technology that needed to be protected. As a result, the DRMO destroyed

Page 22 GAO/NSIAD-98-7 Defense Inventory
Appendix II 

Examples of Selected Aircraft Parts

parts that the private sector could have purchased. The equipment

specialist corrected the demilitarization code.

During fiscal year 1996, the San Antonio Air Logistics Center sent six

usable support assemblies (Stock No. 2840011932157RW) used on the

C-130 aircraft engine to the DRMO because the parts were no longer needed.

The parts originally cost $19,660. The San Antonio DRMO destroyed the six

parts because the Navy had assigned a demilitarization code to the part

requiring total destruction to protect military technology. After we pointed

out that this was a commercial-type item, the Navy equipment specialist

said that the assigned demilitarization code was incorrect because the part

contained no military technology. He said the destroyed parts were usable

on commercial aircraft in the private sector. As a result, the DRMO

destroyed parts that the private sector could have purchased. The

equipment specialist corrected the demilitarization code.

Parts That Are Not

Sensitive

On February 26, 1996, the San Antonio DRMO downgraded to scrap 13

nozzle assemblies (Stock No. 2840010668071RW) used on the T-56 engine

and destroyed them. The parts were destroyed to prevent surplus dealers

from buying usable parts at scrap prices. The parts originally cost $15,953.

These parts did not appear on the Defense Logistics Agency’s sensitive

item list and had no military technology or safety implications. The

destroyed parts sold for about $2 each. By contrast, on August 20, 1996,

the DRMO sold 24 usable nozzle assemblies intact for $1,183, or over $49

each.

Parts Without Flight

Safety Implications

The San Antonio Air Logistics Center considered 72 turbine vanes (Stock

No. 2840004262571RW) for the T-56 engine not usable because they were

worn and cracked and sent them to the DRMO for disposal. These parts

originally cost $200,000. The San Antonio DRMO Chief said that he decided

to destroy these parts at his own management discretion strictly for flight

safety reasons. He said that he would not want parts in such poor

condition to be refurbished and installed on an aircraft that he or anyone

else was a passenger on. However, Center officials said these parts had no

safety implications. After reviewing this matter, the Center’s Commander

told the DRMO to sell the parts intact.

Flight Safety Parts

Properly Sold

On October 7, 1996, the Corpus Christi DRMO received 1,101 turbine rotor

blades (Stock No. 2840001523806) (see fig. II.3) used on the CH-47

Page 23 GAO/NSIAD-98-7 Defense Inventory
Appendix II 

Examples of Selected Aircraft Parts

helicopter for disposal. Since the Army had assigned demilitarization 

code F to the parts, indicating that they had flight safety implications, the

DRMO requested disposition instructions from the Army Aviation and Troop

Command. The Command instructed the DRMO to destroy the part unless it

was (1) unused, (2) in serviceable condition, (3) physically marked with

the manufacturer’s code, and (4) in the manufacturer’s original packaging.

The DRMO decided that the parts met this exception and offered them for

sale. DRMO records showed that the turbine rotor blades were sold in a lot

with another turbine rotor blade for $13,796.

Figure II.3: Turbine Rotor Blades in

Manufacturer’s Original Packaging

On September 29, 1996, the Corpus Christi DRMO received notice that six

transmission cartridge assemblies (Stock No. 1615011167083) used on the

UH-1 helicopter were no longer needed by the Army. These parts originally

cost $36,774. Since the Army had assigned demilitarization code F to the

parts, the DRMO requested disposition instructions from the Army Aviation

and Troop Command. On December 12, 1996, the Command instructed the

DRMO to destroy the part unless it was (1) unused, (2) in serviceable

condition, (3) physically marked with the manufacturer’s code, and (4) in

Page 24 GAO/NSIAD-98-7 Defense Inventory
Appendix II 

Examples of Selected Aircraft Parts

the manufacturer’s original packaging. The DRMO determined that these

parts met this exception and on May 29, 1997, prepared a notice for the

assemblies to be listed for sale in the International Sales Office catalog. At

the completion of our fieldwork, the sales office had not set the date of

sale.

Parts Needed by DOD

Components

At the Oklahoma City DRMO, we observed two nozzle rings (Stock 

No. 2840009911048RV) for the TF-33 engine being destroyed with a cutting

torch. The two nozzle rings, originally costing $7,000, were being

destroyed at the discretion of a DRMO employee. We obtained documents

that showed these parts were in usable condition and that the Air Force

needed the parts and had recently placed orders to buy 107 new nozzle

rings. After we pointed this situation out to the Oklahoma City Air

Logistics Center, the Center implemented new procedures to prevent

usable engine nozzle rings and other needed parts from being destroyed.

The procedures require equipment specialists to periodically inspect parts

sent to the DRMO. Within a month, the Center identified and prevented the

destruction of 200 additional usable parts that were at the DRMO.

In response to a potential buyer’s complaint on September 20, 1996, that

the San Antonio DRMO was destroying usable blades (Stock 

No. 2840011123776RW) for the T-56 engine, the San Antonio Air Logistics

Center investigated. The Center found 7,018 blades, originally costing

$1.06 million, that the Air Force had incorrectly categorized as scrap

because of a breakdown in inspection procedures and sent them to the

DRMO. San Antonio DRMO officials said the destruction was to prevent an

inadvertent sale of flight safety items. However, Center officials said that

these parts did not have to be destroyed for flight safety reasons and were

needed to satisfy depot maintenance requirements. The DRMO returned the

blades to the Air Force.

Page 25 GAO/NSIAD-98-7 Defense Inventory
Appendix III 

Comments From the Department of Defense

Page 26 GAO/NSIAD-98-7 Defense Inventory
Appendix III 

Comments From the Department of Defense

Now on p. 13.

Now on p. 13.

Page 27 GAO/NSIAD-98-7 Defense Inventory
Appendix III 

Comments From the Department of Defense

Now on p. 13.

Now on p. 13.

Now on p. 13.

Page 28 GAO/NSIAD-98-7 Defense Inventory
Appendix III 

Comments From the Department of Defense

Page 29 GAO/NSIAD-98-7 Defense Inventory
Appendix IV 

Major Contributors to This Report

National Security and

International Affairs

Division, Washington,

D.C.

Charles Patton

James Murphy

Dallas Field Office Roger Tomlinson

Jackie Kreithe

Bonnie Carter

Frederick Lyles

(709234) Page 30 GAO/NSIAD-98-7 Defense Inventory
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