Testimony 

Before the Subcommittee on Oversight of Government 

Management, the Federal Workforce, and the District 

of Columbia, Committee on Homeland Security and 

Governmental Affairs, U.S. Senate 

United States Government Accountability Office

GAO

For Release on Delivery 

Expected at 2:30 p.m. EST 

Thursday, October 6, 2005 DOD’S HIGH-RISK AREAS

High-Level Commitment 

and Oversight Needed for 

DOD Supply Chain Plan to 

Succeed 

Statement of William M. Solis, Director 

Defense Capabilities and Management 

GAO-06-113T 
What GAO Found

United States Government Accountability Office

Why GAO Did This Study

Highlights

Accountability Integrity Reliability

www.gao.gov/cgi-bin/getrpt?GAO-06-113T.

To view the full product, including the scope 

and methodology, click on the link above. 

For more information, contact William Solis at 

202 512-8365 or solisw@gao.gov. 

Highlights of GAO-06-113T, testimony 

before the Subcommittee on Oversight of 

Government Management, the Federal 

Workforce, and the District of Columbia, 

Committee on Homeland Security and 

Governmental Affairs, U.S. Senate 

October 6, 2005

DOD’S HIGH-RISK AREAS 

High-Level Commitment and Oversight 

Needed for DOD Supply Chain Plan to 

Succeed 

It is important for DOD to have effective supply chain management because 

of (1) its impact on military readiness and operations and (2) the substantial 

investment in inventory. While DOD maintains military forces with 

unparalleled capabilities, timely supply support is critical to sustaining them. 

For example, to support Operation Iraqi Freedom, DOD moved more than 2 

million tons of cargo, but shortages of items such as vehicle track shoes and 

tires hampered operations. In addition, DOD spends billions on supplies. 

For example, its supply inventory levels have grown in recent years from 

$62.3 billion in fiscal year 2001 to $77.4 billion in fiscal year 2004. DOD 

expects to spend approximately $50 billion in fiscal year 2005 for such items 

and associated operations. 

In 1990, we identified DOD’s inventory management processes as “high risk” 

because of long-standing problems such as excess inventory levels, 

inadequate controls, and cost overruns. Since then, GAO’s work has shown 

that the problems adversely affecting supply support to the warfighter 

involved the entire supply chain. As a first step toward removing supply 

chain management from GAO’s high-risk list, DOD in cooperation with OMB 

prepared a plan to address weaknesses in three key areas: accuracy of 

supply requirements forecasts, distribution of material, and asset visibility. 

DOD’s plan to improve supply chain management provides a good start and 

framework for addressing long-term systemic weaknesses and in focusing 

the multiyear effort to improve supply support to the warfighter. However, 

successful resolution of DOD’s supply chain management problems will 

require continued efforts to complete and successfully implement the plan. 

Based on GAO’s criteria for removing programs from the high-risk 

designation, it is important for DOD to sustain top leadership commitment 

and long-term institutional support for the plan; obtain necessary resource 

commitments from the military services, the Defense Logistics Agency, and 

other organizations; implement proposed improvement initiatives across the 

department to address root causes; identify performance metrics and valid 

data to use in monitoring the initiatives; and demonstrate progress toward 

meeting performance targets. 

As part of GAO’s periodic reassessment of high-risk areas across the federal 

government, GAO will be assessing DOD’s progress in resolving supply chain 

management and its other high-risk areas. GAO plans to follow up on DOD’s 

actions to improve supply chain management in three ways. First, GAO will 

assess DOD’s progress in implementing recommendations made in prior 

GAO reports. Second, GAO anticipates evaluating several of DOD’s supply 

management activities as part of our planned engagements over the next 2 

years. Third, GAO expects to work with other audit agencies,, as well as 

DOD and OMB, to coordinate audit coverage of the initiatives, metrics, and 

data system validity. 

Since 1990 the Department of 

Defense’s (DOD) supply chain 

management processes have been 

on GAO’s list of high-risk areas 

needing urgent attention and 

fundamental transformation to 

ensure that they function in the 

most economical, efficient, and 

effective manner possible. 

Recently in collaboration with the 

Office of Management and Budget 

(OMB), DOD developed a plan to 

address some of the systemic 

weaknesses as a first step toward 

removing supply chain 

management from the list. DOD’s 

plan focuses on three areas for 

improvement: accuracy of supply 

requirements forecasts, 

distribution of material, and asset 

visibility. 

GAO was asked to provide its 

views on (1) the importance of 

supply chain management in DOD, 

(2) why GAO listed it as a high-risk 

area, (3) GAO’s assessment of 

DOD’s plan to improve supply 

chain processes, and (4) GAO’s 

plans to follow up on DOD’s 

efforts. 

This testimony contains GAO’s 

views on what remains to be done 

to improve DOD’s supply chain 

management and bring about 

lasting solutions. Continued efforts 

to complete and implement DOD’s 

plan as well as continued oversight 

by Congress are essential. 
Page 1 GAO-06-113T 

Mr. Chairman and Members of the Subcommittee: 

I appreciate the opportunity to be here today to discuss GAO’s list of 

“high-risk” areas within the Department of Defense (DOD) and, more 

specifically, DOD’s plan to show to progress toward the long-term goal of 

resolving problems and removing supply chain management from our list. 

At the onset, I would like to thank the Subcommittee for its continued 

encouragement of the Office of Management and Budget’s (OMB) effort to 

work with agencies over the next several years to reduce risk in each of 

the 25 high-risk areas we reported in January 2005. The active involvement 

of this Subcommittee is essential to ultimately ensuring DOD’s continued 

progress in addressing and resolving its high-risk areas, while enhancing 

public confidence in DOD’s stewardship of the hundreds of billions of 

taxpayer funds it receives each year. 

Briefly, our high-risk list focuses on major government programs and 

operations that either need urgent attention and transformation to ensure 

that the U.S. government functions in the most economical, efficient, and 

effective manner possible, or that are at high risk because of their greater 

vulnerability to fraud, waste, abuse, and mismanagement. DOD is 

responsible for 14 of the 25 high-risk areas, including 8 that are specific to 

DOD and 6 others that are government-wide in scope. This year we added 

DOD’s approach to business transformation to our list of high-risk areas 

because of our concerns over the department’s lack of adequate 

management responsibility and accountability, as well as other concerns. 

Business transformation efforts are critical if DOD is to successfully 

address systemic management problems related to other high-risk areas, 

including supply chain management. In our view, an essential element to 

business transformation is strong and sustained executive leadership. As 

you know, we have recommended a chief management official or similar 

official be created by statute within the department of oversee DOD’s 

business transformation efforts. We believe that two other essential 

elements of DOD’s business transformation are (1) an integrated strategic 

plan coupled with a well-defined blueprint—referred to as a business 

enterprise architecture—to guide and constrain implementation of such a 

plan and (2) central control of investments in business systems 

modernization. 

DOD’s business transformation efforts are likely to have a profound 

impact across many areas of the department, including supply chain 

management. For 15 years, DOD’s supply chain management processes 

have been on our list of high-risk areas needing urgent attention and 

fundamental transformation to ensure that they function in the most 
Page 2 GAO-06-113T 

economical, efficient, and effective manner possible. Senior 

administration leaders and advisors—including the Secretary of Defense, 

the nominee for Deputy Secretary of Defense, and the Deputy Director of 

the Office of Management and Budget—have recently demonstrated a 

commitment to addressing DOD’s management challenges. To his credit, 

OMB’s Deputy Director for Management and his staff have been steadfast 

in their message to DOD about the need for meaningful action and followthrough on resolving problems associated with all 14 of DOD’s high-risk 

areas. For supply chain management, OMB has worked with the Under 

Secretary of Defense for Acquisition, Technology and Logistics and his 

staff to help DOD develop an action plan for improving supply chain 

management that could reduce its vulnerability to fraud, waste, abuse, and 

mismanagement and place it on the path toward removal from our list of 

high-risk areas. OMB has proposed using DOD’s plan describing how it 

expects to address one of its high-risk areas as a template for other areas 

on our high-risk list. 

During the development of DOD’s plan, we were frequently consulted by 

OMB and DOD. Based on our analysis of prior reports, we suggested three 

areas to DOD that would be critical to addressing our supply chain 

management concerns. After consultation with OMB, DOD identified these 

three as focus areas for the plan. They are 

• improving material requirements forecasts, 

• improving distribution of material, and 

• improving asset visibility. 

In response to DOD’s request for our thoughts on its draft plan, we 

focused on key elements that needed to be in the plan based on work we 

have done, recommendations we have made, and our criteria for removal 

from our list of high-risk areas. We provided OMB and DOD with GAO and 

DOD reports citing deficiencies in these areas. As guidance for formulating 

the supply chain management improvement plan, we also provided OMB 

and DOD with reports containing our criteria for assessing agencies’ 

progress toward resolving a high-risk problem and determining whether to 

remove the high-risk designation. We also provided examples where other 

agencies have succeeded in having the high-risk designation removed. 

Today, I would like to provide our perspectives on (1) the importance of 

supply chain management in DOD; (2) why we have listed it as a high-risk 

area; (3) our assessment of DOD’s plan to improve supply chain processes; 

and (4) our plans to follow up on DOD’s efforts. 
Page 3 GAO-06-113T 

In summary, Mr. Chairman, DOD’s plan is a good first step in improving 

supply chain management in support of the warfighter. Notwithstanding 

this positive first step, the department faces challenges and risks in 

successfully implementing its proposed changes across the department 

and measuring progress. 

My statement is based on previous GAO reports and analysis. Our work 

was performed in accordance with generally accepted government 

auditing standards. 

DOD is one of the largest and most complex organizations in the world to 

manage effectively. While DOD maintains military forces with unparalleled 

capabilities, it continues to confront pervasive, decades-old management 

problems related to its business operations—which include outdated 

systems and processes—that support these forces. These management 

weaknesses cut across all of DOD’s major business areas, such as human 

capital management, including the department’s national security 

personnel system initiative; the personnel security clearance program; 

support infrastructure management; business systems modernization; 

financial management; weapon systems acquisition; contract management; 

and last, but not least, supply chain management. All of these areas are on 

our high-risk list for DOD. 

DOD relies on a number of individual processes and activities, known 

collectively as supply chain management, to purchase, produce, and 

deliver items and services to the warfighter. Its goal for supply chain 

management is to deliver the “right items to the right place at the right 

time” for the warfighter in support of deploying and sustaining military 

capabilities as described in the National Military Strategy. The department 

relies on working capital (revolving) funds maintained by the defense and 

service logistics agencies to finance the flow of these items to the forces. 

Working capital funds allow these agencies to purchase needed items from 

suppliers. Military units then order items from the logistics agencies and 

pay for them with annually appropriated operations and maintenance 

funds when the requested items—either from inventory or 

manufacturers—are delivered to the units. 

Background 
Page 4 GAO-06-113T 

There are two primary reasons why it is important for DOD to have 

effective supply chain management. First, supply support to the warfighter 

affects readiness and military operations. In fact, the supply chain can be 

the critical link in determining whether our front-line military forces win 

or lose on the battlefield. Second, given the scope of the supply 

requirements to support U.S. military operations, the investment of 

resources in the supply chain is substantial. 

While DOD maintains military forces with unparalleled capabilities, timely 

supply support is critical to sustaining these forces as they are trained and 

deployed to protect our national security. For example, to support 

Operation Iraqi Freedom (OIF), DOD moved more than 2 million tons of 

cargo—including equipment, spare parts, supplies, and other items—

thousands of miles to the Persian Gulf. Conversely, supply shortages can 

adversely affect the readiness of weapon systems. During OIF, for 

example, shortages of items such as track shoes prevented large numbers 

of Abrams tanks and Bradley Fighting Vehicles from operating during the 

summer of 2003. In another case, tire shortages caused units to strip and 

leave otherwise good vehicles as well as supplies behind. 

Shortages of supply items also could hurt the morale of those who employ 

the weapon systems and raise concerns about forces’ safety with their 

families. 

Furthermore, DOD has a significant investment in inventory and spends 

billions for supplies each year. For example, at the end of fiscal year 2004, 

DOD had approximately $77.4 billion worth of items in its inventory, an 

increase of over $15 billion since fiscal year 2001, when DOD had 

approximately $62.3 billion worth. DOD estimates that the annual costs of 

supplies and associated operations for fiscal year 2005 are expected to be 

$51.4 billion, or about 12 percent of DOD’s $419 billion requested budget. 

Unless the department has a sound management plan and acts to invest 

resources to buy and provide supplies to units, improve the supply system, 

as well as invest in essential information systems, the risk of fraud, waste, 

abuse, and mismanagement remains high at a time when DOD is 

challenged to maintain a high level of military operations while competing 

for resources in an increasingly fiscally constrained environment. We 

recognize that improving DOD’s supply chain management may not save 

money in the near term because of necessary investments in information 

technology and other enablers. However, improved systems with timely 

and reliable data should lead to more effective investment of resources in 

the future and thereby avoid future costs. 

Effective Supply 

Chain Management Is 

Important to 

Supporting the 

Warfighter and 

Ensuring Effective 

Investment of 

Resources 
Page 5 GAO-06-113T 

For 15 years, DOD’s supply chain management processes have been on our 

list of high-risk areas needing urgent attention because of long-standing 

systemic weaknesses that we have identified in our reports. In 1990, we 

began a program to report on government operations that we identified at 

high risk for fraud, waste, abuse, and mismanagement. This program 

serves to identify and help resolve serious weaknesses in areas that 

involve substantial resources and provide critical services to the public. 

The department’s inventory management of supplies in support of forces 

was one of the 14 operational areas identified as high risk in 1990 because, 

over the previous 20 years, we had issued more than 100 reports dealing 

with specific aspects and problems in DOD’s inventory management. 

These problems included excess inventory levels, inadequate controls over 

items, and cost overruns. As a result of this work, we had suggested that 

DOD take some critical steps to correct the problems identified. Since 

then, our work has shown that the problems adversely affecting supply 

support to the warfighter— such as requirements forecasts, use of the 

industrial base, funding, distribution, and asset visibility—were not 

confined to the inventory management system, but also involved the entire 

supply chain. In 2005 we modified the title for this high-risk area from 

“DOD Inventory Management” to “DOD Supply Chain Management.” 

Since 1995 we have issued over 70 reports on various deficiencies in 

DOD’s supply chain management system. Our assessment of these reports 

shows that DOD generally concurred with our recommendations. 

Furthermore, these reports had several common themes, including DOD’s 

need for accurate supply requirements forecasts, an effective distribution 

system, and visibility over assets in inventory and while in transit. 

Moreover, in our prior reports, we have noted problems with the 

information technology systems supporting the supply chain. For example, 

DOD has not been able to achieve total asset visibility for over 30 years in 

part because the department has lacked necessary integration among its 

many inventory management information systems and has not corrected 

long-standing data accuracy and reliability within its existing systems. In 

addition, DOD’s nearly 2,000 logistics business systems have suffered from 

duplication, limited interoperability, and unnecessarily costly operations 

and maintenance. GAO has not been alone in criticizing these aspects of 

DOD’s supply chain management. DOD and audit organizations such as 

the Department of Defense Office of Inspector General and the Army 

Inspector General have also issued studies and reports addressing the 

supply systems’ problems. 

DOD defines requirements as the need or demand for personnel, 

equipment, facilities, other resources, or services in specified quantities 

Supply Chain 

Management Is a 

High-Risk Area 

Because of LongStanding Weaknesses 
Page 6 GAO-06-113T 

for specific periods of time or at a specified time. Accurately forecasted 

supply requirements are a key first step in buying, storing, positioning, and 

shipping items that the warfighter needs. However, in our April 2005 

report on the effectiveness of logistics in support of OIF, we described 

how DOD had not modeled wartime demands for supplies as required to 

accurately forecast warfighter requirements. As a result, we found that 

DOD underestimated the demand in Iraq for some items, such as armor 

vehicle track shoes, lithium batteries, meals-ready-to-eat, and tires, and 

forces experienced supply shortages of these items. 

Distribution is the process for synchronizing all elements of the logistics 

system to deliver the “right things” to the “right place” at the “right time” to 

support the warfighter. In our April 2005 report, we describe several 

instances where the joint distribution system did not support the forces in 

Iraq. We attributed these instances to conflicts in doctrine about the 

authority over distribution, improper packaging of shipments, insufficient 

transportation equipment and supply personnel in theater, and the 

inability of the information systems to support the requisition and 

shipment of supplies into and through Iraq. For example, we found that 

DOD was not able to effectively distribute sufficient quantities of items 

such as body armor, meals-ready-to-eat, tires, and generators for Marine 

Corps amphibious vehicles because of problems with supply chain 

management. 

DOD describes asset visibility as the ability to provide timely and accurate 

information on the location, quantity, condition, movement, and status of 

supplies and the ability to act on that information. For over 30 years, the 

department has been attempting to improve the visibility over its inventory 

as well as items in transit, and we have repeatedly reported problems with 

its efforts. The continued lack of visibility over inventory and shipments 

increases vulnerability to undetected loss or theft; substantially increases 

the risk that millions of dollars will be spent unnecessarily; and if items are 

not delivered when needed, may impair warfighter readiness. We have 

recently reported on DOD’s problems with existing inventory systems 

being unable to share data on a near real-time basis and concerns related 

to tracking critical supplies for Iraq. For example, in December 2003 we 

reported a discrepancy of $1.2 billion between the amount of material 

shipped to Army activities in Iraq and the amount of material that those 

activities acknowledged they received. Since then, in an April 2005 report 

we reported that the lack of visibility over items in transit significantly 

affected distribution. For example, incomplete identification tags attached 

to shipments resulted in the loss of some body armor protection plates, 

delays in getting meals-ready-to-eat, and the Marine Corps’ ability to only 
Page 7 GAO-06-113T 

verify the receipt of 15 of 140 amphibious assault vehicle generators that 

were shipped. Improving asset visibility should not only improve data for 

supply managers’ decisions, but should also improve the warfighter’s trust 

in the supply system. 

DOD’s plan to improve supply chain management provides a good start 

and framework for addressing long-term systemic weaknesses in DOD’s 

supply chain management and for focusing the multiyear effort that will be 

needed to improve supply support to the warfighter. Notwithstanding this 

important, positive first step, the department faces many challenges and 

risks in its efforts to improve the supply chain. First, successful resolution 

of its supply chain management problems will require DOD to, among 

other things, diligently complete parts of the plan, fully implement 

proposed changes across the department, and measure progress. Second, 

resolution of supply chain management problems will require investment 

in needed information technology. DOD’s supply chain plan includes the 

Business Management Modernization Program as one of its 10 initiatives. 

In the plan, DOD recognizes that achieving success in supply chain 

management is dependent on developing interoperable systems that can 

share critical supply data. However, we recently reported that DOD had 

made limited progress developing a common architecture for its business 

system modernization investments despite having spent 4 years and about 

$318 million. Last week DOD, as part of its Business Management 

Modernization Program, issued an overarching business enterprise 

architecture and an enterprise transition plan for implementing the 

architecture. Under the Ronald W. Reagan National Defense Authorization 

Act for Fiscal Year 2005, we have 60 days to provide our assessment of the 

extent to which the architecture and transition plan meet statutory 

requirements of 10 U.S.C. section 2222. 

Our assessment of DOD’s plan to improve its supply chain management is 

based on work we have performed, prior recommendations, and the 

criteria cited in our November 2000 report on determining performance 

and accountability challenges and high risks. We use these criteria to 

assess an agency’s progress toward resolving a high-risk problem and 

determine whether to remove the high-risk designation. There are five 

essential questions to be addressed: 

1. Does DOD’s plan demonstrate a strong commitment and top leadership 

support to improve supply chain management? 

DOD’s Plan Is a Good 

Start toward 

Resolving Supply 

Chain Management 

Weaknesses that Will 

Require Continued 

Diligence to Succeed 
Page 8 GAO-06-113T 

The formulation of DOD’s plan and its endorsement by the Under 

Secretary of Defense for Acquisition, Technology and Logistics is evidence 

of a strong commitment by top leadership to improve DOD’s supply chain 

management. His recent referral to supply chain management as one of the 

five business areas targeted for improvement by the department’s 

Business Practices and Processes Integrated Product Team as part of the 

current Quadrennial Defense Review is further evidence of his 

commitment. However, it is important for DOD to sustain this 

commitment as it goes forward in implementing this multiyear plan while 

also engaged in departmentwide business transformation efforts. Because 

improving supply chain management may be one of several high-risk areas 

DOD will be addressing at one time, it may take the involvement of the 

Deputy Secretary of Defense or a chief management official, as proposed 

by the leadership of this Subcommittee, to ensure that a long-term 

departmentwide commitment is sustained. In addition, it is important that 

DOD act to institutionalize this effort by incorporating the elements of the 

plan into key Office of Secretary of Defense guidance, such as its Logistics 

Transformation Strategy and its follow-on document called the Focused 

Logistics Roadmap, that are to guide department activities. 

2. Does DOD have the capacity, meaning people and other resources, to 

resolve the problems with supply chain management? 

If DOD makes implementation of its plan a priority, the department has 

people and other resources to draw from in helping to resolve its supply 

chain management problems. However, the plan was developed at the 

Office of the Under Secretary of Defense level, whereas most of the people 

and resources needed to implement the plan are under the direction of the 

Defense Logistics Agency and the services. Therefore, it is important for 

the department to obtain the necessary resource commitments from the 

military services; the Defense Logistics Agency; and other organizations, 

such as U.S. Transportation Command, to ensure that the numerous 

initiatives on which the multiyear plan depends are properly supported. 

Obtaining these commitments might require the involvement of the Deputy 

Secretary of Defense or a position such as a chief management official. 

3. Does DOD have an action plan that defines root causes, identifies 

effective solutions, and provides for substantially completing corrective 

measures over the near term? 

DOD’s plan for improving supply chain management addresses some of 

the root causes for problems in three key areas with potentially effective 

solutions that it may be able to fully implement over the next few years. By 
Page 9 GAO-06-113T 

committing to improve requirements forecasting, material distribution, 

and asset visibility in this plan, DOD has focused its efforts on three areas 

we frequently identified as impeding effective supply chain management. 

DOD’s plan for improvement proposes departmentwide implementation of 

10 initiatives to help resolve supply chain management problems in the 

three areas by addressing some of the causes. For example, implementing 

radio frequency identification technology is expected to provide demand 

data for forecasting requirements, improve distribution performance, and 

provide fully automated visibility over assets in inventories and 

distribution centers. However, the time frames for completing some of 

these 10 initiatives are of concern. For example, milestones for 

implementing the Business Management Modernization Program, a critical 

enabler that will provide the essential information technology 

underpinning for achieving progress in all three focus areas, are not 

specifically linked to improvements in requirements forecasting, 

distribution, and asset visibility. Until the initiatives are substantially 

implemented across the department, we will not know whether they 

provide effective solutions to all of the root causes of DOD’s supply chain 

management problems. 

4. Does DOD have a program to monitor and independently validate the 

effectiveness and sustainability of corrective measures? 

While DOD’s plan recognizes the need and cites a general methodology for 

evaluating progress associated with each of the 10 initiatives, the 

department has not yet provided all of the information needed for this to 

occur. DOD’s plan cites a two-step approach. The first step is to have 

DOD’s organizations establish a methodology (internal process) for 

monitoring the validity of data as part of implementing the initiatives and 

reporting on metrics. DOD’s second step is to rely on independent groups, 

such as contractors and the Department of Defense Office of Inspector 

General, to validate the data, and GAO to monitor the department’s 

progress in improving supply chain management as part of its planned 

audits. Such validation processes are important because, as we have 

frequently reported, DOD’s systems do not have accurate and reliable data, 

and without valid data, it will be difficult to accurately track progress. 

However, until DOD specifies all of the metrics and systems it plans to use 

to measure progress it cannot ensure comprehensive monitoring within 

the department or that independent groups will know what data and 

systems should be validated to confirm DOD’s reported progress. 

5. Does DOD have the ability to demonstrate progress in implementing 

corrective measures? 
Page 10 GAO-06-113T 

DOD has the ability to demonstrate some progress in implementing the 

initiatives. However, it has not identified all of the performance metrics 

necessary to demonstrate how all of the initiatives are affecting supply to 

the warfighter. DOD’s plan identified some viable overall supply chain 

management performance metrics, including the level of backorders, the 

amount of customer wait time, and the percentage of orders on time. The 

plan also identified baseline and annual performance targets for these 

metrics to use in measuring progress. But it did not have any cost 

baselines or cost performance targets. Furthermore, DOD has not yet 

identified specific outcome metrics for many of the initiatives. For 

example, DOD’s plan shows that it expects to have radio frequency 

identification technology implemented at 100 percent of its U.S. and 

overseas distribution centers by January 2007, but noted that it has not yet 

identified additional metrics that could be used to show the impact of 

implementation on expected outcomes, such as receiving and shipping 

timelines, asset visibility, or supply consumption data. In total, DOD’s plan 

identifies a need to develop such supply performance metrics for 6 

initiatives, and 9 of the 10 initiatives lack cost metrics. Until DOD develops 

and tracks the additional costs and supply impact metrics it has promised, 

it will be difficult for the department to convincingly demonstrate its 

progress in improving supply chain management and providing timely 

logistics support to the warfighter. 

As part of our periodic reassessment of high-risk areas across the federal 

government, we will be assessing DOD’s progress in resolving supply 

chain management and its other high-risk areas. Our next high-risk update 

is due in January 2007. We plan to follow up on DOD’s supply chain 

management improvement efforts in three ways. First, as a matter of 

routine practice we will continue assessing DOD’s progress in 

implementing the recommendations made in our prior reports. Second, we 

also anticipate evaluating several of DOD’s supply management activities 

as part of our planned engagements over the next 2 years. For example, 

next year we expect to evaluate how the Defense Logistics Agency’s and 

services’ spare parts inventory management initiatives have progressed in 

meeting their performance objectives and timelines. Third, in August we 

met with representatives of the Department of Defense Office of Inspector 

General and service audit agencies as well as DOD and OMB to review 

DOD’s plan and begin the process of sharing information on planned 

audits. We expect to meet periodically with these representatives in the 

future to coordinate audit coverage of the initiatives, performance metrics, 

and data system validity while minimizing audit duplication. 

GAO Has Plans to 

Follow Up on DOD’s 

Supply Chain 

Improvement Efforts 
Page 11 GAO-06-113T 

Along with OMB and the Congress, we look forward to doing our part by 

monitoring DOD’s progress as it works toward mitigating supply chain 

management problems and achieving its goal of supporting the warfighter 

by providing the “right items to the right place at the right time.” 

Mr. Chairman and Members of the Subcommittee, this concludes my 

prepared statement. I would be happy to answer any questions you may 

have at this time. 

For further information regarding this testimony, please contact me at 202-

512-8365 or solisw@gao.gov. Individuals making contributions to this 

testimony include Tom Gosling, Assistant Director; Robert Brown; Richard 

Payne; John Pendleton; Dave Schmitt; George Stalcup; and John Wren. 

Staff Contacts and 

Acknowledgments 

(350757) 
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Gloria Jarmon, Managing Director, JarmonG@gao.gov (202) 512-4400 

U.S. Government Accountability Office, 441 G Street NW, Room 7125 

Washington, D.C. 20548 

Paul Anderson, Managing Director, AndersonP1@gao.gov (202) 512-4800 

U.S. Government Accountability Office, 441 G Street NW, Room 7149 

Washington, D.C. 20548 

GAO’s Mission 

Obtaining Copies of 

GAO Reports and 

Testimony 

Order by Mail or Phone 

To Report Fraud, 

Waste, and Abuse in 

Federal Programs 

Congressional 

Relations 

Public Affairs 

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