Defense Logistics: Preliminary Observations on Equipment Reset Challenges and Issues for the Army and Marine Corps
Published: 2006-03-30T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: The United States is engaged in an unconventional war, not a war against military forces of one country, but an irregular war against terrorist cells with global networks. Operations Iraqi Freedom and Enduring Freedom are sustained military operations, which are taking a toll on the condition and readiness of military equipment that, in some cases, is more than 20 years old. The Army and Marine Corps will likely incur large expenditures in the future to reset (repair or replace) a significant amount of equipment when hostilities cease. The Army has requested about $13 billion in its fiscal year 2006 supplemental budget request for equipment reset. Today's testimony addresses (1) the environment, pace of operations, and operational requirements in Southwest Asia, and their affects on the Army's and Marine Corps's equipping and maintenance strategies; (2) equipment maintenance consequences created by these equipping and maintenance strategies; and (3) challenges affecting the timing and cost of Army and Marine Corps equipment reset. GAO's observations are based on equipment-related GAO reports issued in fiscal years 2004 through 2006, as well as ongoing related work.
section_title: What GAO Found
paragraphs: In response to the harsh operating environments in Iraq and Afghanistan, and the unanticipated and prolonged length and pace of sustained operations, the Army and Marine Corps have developed and implemented several initiatives to equip its forces and maintain the extensive amounts of equipment in theater. Environmental factors such as heat, sand, and dust have taken their toll on sensitive components. In addition, operating equipment at a pace well in excess of peacetime operations is generating a large operational maintenance and replacement requirement that must be addressed when units return to their home stations. To meet ongoing operational requirements, the Army and Marine Corps have developed pools of equipment in theater to expedite the replacement of equipment damaged during operations and directed that equipment necessary for OIF and OEF operations remain in theater. In response, the Army and Marine Corps have developed several initiatives to increase the maintenance capacity in theater to be able to provide near-depot level repair capabilities. Although the Army and Marine Corps are reporting high rates of equipment readiness and have developed and implemented plans to increase the maintenance capabilities in theater, these actions have a wide range of consequences. Many of the equipment items used in Southwest Asia are not receiving depot-level repair because equipment items are being retained in theater or at home units and the Army has scaled back on the scope of work performed at the depots. As a result, the condition of equipment items in theater will likely continue to worsen and the equipment items will likely require more extensive repair or replacement when they eventually return to home stations. The Army and Marine Corps will face a number of ongoing and long-term challenges that will affect the timing and cost of equipment reset, such as Army and Marine Corps transformation initiatives, reset of prepositioned equipment, efforts to replace equipment left overseas from the active, National Guard, and Reserve units, as well as the potential transfer of U.S. military equipment and the potential for continuing logistical support to Iraqi Security Forces. Also, both the Marine Corps and Army will have to better align their funding requests with the related program strategies to sustain, modernize, or replace existing legacy equipment systems. Finally, both services will have to make difficult choices and trade-offs when it comes to their many competing equipment programs. While the services are working to refine overall requirements, the total requirements and costs are unclear and raise a number of questions as to how the services will afford them. Until the services are able to firm up these requirements and cost estimates, neither the Secretary of Defense nor the Congress will be in a sound position to weigh the trade offs and risks.

section_title: Letter
paragraphs: We welcome the opportunity to appear before you today to discuss a  number of maintenance and equipment reset challenges facing the Army  and Marine Corps. The United States is engaged in what the Department of  Defense has termed the long war. This is not a conventional war against  military forces of one country but an irregular war against terrorist cells  with global networks, with operations currently centered in Iraq and  Afghanistan. These sustained operations are taking a toll on the condition  and readiness of military equipment that, in some cases, is more than 20  years old. Age, along with the harsh environment in theater and combat  conditions over long periods of time, magnifies an already growing  problem of equipment repair, replacement, and procurement that existed  even before the onset of combat operations in Iraq and Afghanistan. While  combat units report high readiness rates, these reports reflect only that  equipment is fully mission capable, meaning that the equipment has no  critical or safety deficiencies as outlined in technical readiness reporting  instructions. However, equipment that is considered fully mission capable  may have a number of deficiencies that will need to be addressed in the  longer term.
In addition to the billions of dollars already spent to maintain this well- worn equipment for ongoing operations, the Army and Marine Corps will  likely incur large expenditures in the future to repair or replace (reset) a  significant amount of equipment when hostilities cease. The services are  currently funding their reset programs entirely through the use of  supplemental appropriations, and plan to rely on supplemental  appropriations for reset funding through at least fiscal year 2007. The  fiscal year 2006 supplemental budget request includes $10.4 billion for  equipment maintenance and reset. The Marine Corps has incurred a cost  of more than $12 billion to date to reset equipment. The Army estimates its  total reset bill for fiscal year 2006 alone to be nearly $13.5 billion. The  uncertainties of how long ongoing operations will continue make it  difficult to estimate future equipment reset costs. The overall condition of  major equipment items at the end of these operations, although difficult to  predict, will also be a significant factor affecting reset costs. Equipment  used in operations in Iraq and Afghanistan will eventually require more  intensive repair and overhaul than what is typically expected in peacetime.  Furthermore, the affordability of these maintenance requirements will be  an issue as the cost of these requirements compete for available funding in  the future with other Army and Marine Corps programs, as well as the  overall Department of Defense budget.
My statement today reflects our preliminary observations drawn from  ongoing work as well as recently published reports. As requested, my  testimony today will focus on the equipment maintenance and reset  challenges facing the Army and Marine Corps. Specifically, it addresses the  (1) environment, pace of operations, and operational requirements in  Southwest Asia, and their effects on the Army’s and Marine Corps’s  equipping and maintenance strategies; (2) equipment maintenance  consequences and issues created by these equipping and maintenance  strategies; and (3) challenges affecting the timing and cost of Army and  Marine Corps equipment reset.
The observations we will discuss today regarding Army and Marine Corps  equipment maintenance and reset plans is based on reports we issued in  fiscal years 2004 through 2006, as well as preliminary observations based  on related ongoing work. Several GAO teams conducted audit work  related to these issues in Iraq and Kuwait from November 2005 through  January 2006. We conducted our work in accordance with generally  accepted government auditing standards.
subsections: section_title: Background
paragraphs: The scope of equipment reset efforts that will be required as a result of  ongoing operations related to Operation Iraqi Freedom (OIF) and  Operation Enduring Freedom (OEF) is enormous. The services have  committed a significant amount of equipment to these operations. From  2003 until April 2005, the Army had deployed more than 40 percent of its  equipment in support of OIF and OEF. As of March 2005, the Marine Corps  had about 22 percent of its total fleet assets engaged in Iraq. Recently, the  Marines estimated that approximately 40 percent of all Marine Corps  ground equipment, 50 percent to 55 percent of communications  equipment, and 20 percent of aircraft assets are in use in support of  current operations.
According to the Army, reset comprises a series of repair, recapitalization,  and replacement actions to restore units’ equipment to a desired level of  combat capability commensurate with mission requirements and  availability of resources. The purpose of reset is to bring unit equipment to  combat-ready condition, either for the unit’s next rotation in support of  current operations or for other, unknown future contingencies.
The Army’s standard level of maintenance is known as 10/20. This  standard requires that all routine maintenance be executed and all  deficiencies be repaired. Equipment at less than the 10/20 standard can be  fully mission capable, which means there are no critical maintenance  deficiencies as outlined in the technical manuals and instructions, and no  safety deficiencies. Unit commanders have the authority to supersede the  technical manuals and declare a system fully mission capable even though  it has a non-mission capable deficiency. The Marine Corps’s equivalent  term is “mission capable.”
The Army’s reset strategy for ground vehicles includes an additional set of  maintenance procedures known as Delayed Desert Damage (3D) which  are designed to address damage that results from these vehicles operating  in a desert environment. These procedures are designed to address  damage that might otherwise not be visible. These 3D checks are initially  performed at the unit level. Equipment that goes to a depot is subjected to  more extensive 3D maintenance procedures. Army aviation equipment is  subject to Special Technical Inspection and Repair (STIR). Similar to 3D,  this maintenance is designed to address damage caused by operation in a  desert environment. STIR also includes other routine maintenance.
Although the terms may be slightly different, the Marine Corps equipment  repair and replacement process and equipment standards parallel the  Army process and standards for equipment maintenance. The Marine  Corps equivalent to the Army’s reset process is termed “recovery.” Marine  Corps equipment returning from combat theaters is evaluated and  transported to either a maintenance depot or to a Marine Corps unit’s  home station for repair. The Marine Corps’s equipment recovery process  entails restoring all equipment used in Global War on Terror (GWOT)  operations to its pre-GWOT condition. For equipment in the Marine Corps  prepositioning fleet, this means restoring to a “like new condition,” for all  other equipment, this means is restoring to a mission capable status. The  Marine Corps also applies procedures similar to the 3D as appropriate.
The Department of Defense (DOD) reported in April 2005 that they  expected a new set of protocols to emerge based on experience with  equipment used in OIF and OEF. These protocols may be similar to 3D  and STIR which emerged as maintenance procedures based on experience  from Operation Desert Storm. DOD, as part of its ongoing effort to assess  stress on equipment, plans to look for unusual wear patterns and methods  to address them as well as examining maintenance trends.
Depot maintenance is defined as the highest level of maintenance activity,  where the most complex maintenance work is done, from overhaul of  components to complete rebuilds. Military depots and defense contractors  throughout the United States perform depot-level maintenance.
section_title: Environment, Pace of Operations, and Operational Requirements Have Shaped Current Army and Marine Corps Equipping and Maintenance Strategies
paragraphs: In response to the harsh operating environments in Iraq and Afghanistan  and the unanticipated and prolonged length and pace of sustained  operations, the Army and Marine Corps have developed and implemented  several initiatives to equip their forces and maintain extensive amounts of  equipment in theater. Specifically, the Army and Marine Corps have  implemented initiatives to keep large amounts of unit equipment in theater  after the units redeploy to their home stations in the United States for the  purpose of rapidly equipping follow-on units, and have developed  additional maintenance capacity in theater above the unit level to sustain  major equipment items such as high mobility multi-purpose wheeled  vehicles (HMMWVs), other tracked and wheeled vehicles, and aviation  equipment.
subsections: section_title: Environment and High Operational Tempo Have Increased Wear and Tear on Equipment Above What Would Normally Be Expected
paragraphs: Environmental factors such as heat, sand, and dust have taken their tolls  on major equipment items. In addition, as we have previously reported, the  Army and Marine Corps are operating equipment at a pace well in excess  of their normal peacetime levels, which is generating a large operational  maintenance and replacement requirement that must be addressed when  the units return to their home stations. Continued operations have  increased the operational tempo for a great deal of Army and Marine  Corps equipment. In April 2005, the Department of Defense (DOD)  reported Army equipment usage rates averaged two to eight times that of  peacetime rates. Senior Marine Corps officials recently testified that the  Marine Corps usage rates for ground equipment in ongoing operations  were four to nine times that of peacetime rates.  Despite these high usage  rates, the deployed Army units have generally reported high levels of  overall readiness and relatively high levels of equipment readiness.   Deployed Marine Corps units, however, report more degraded levels of  overall and equipment readiness.  Unit commanders in both services are  able to subjectively upgrade their overall readiness ratings, although this  has been done to a lesser extent by the Marine Corps.  Absent such  upgrades, overall readiness levels (particularly for the Army) would be  significantly lower as a result of units’ low levels of equipment and  supplies on hand.
section_title: Army and Marine Corps Hold Large Amounts of Unit Equipment in Theater
paragraphs: To meet ongoing operational requirements, the Army and Marine Corps  have developed and implemented initiatives to concentrate equipment in  theater. When the Army initially developed its strategy of retaining  equipment from redeploying units in theater, it did not envision this to be a  long-term mechanism for managing equipment needs, but rather a short- term measure to conserve transportation assets and, more importantly,  ensure that units were rapidly equipped. The Marine Corps, like the Army,  developed a similar equipment management initiative. Additionally, the  Army has developed a pool of equipment in theater to expedite the  replacement of equipment damaged during these operations, referred to as  theater sustainment stocks (TSS), which includes, for example, tanks,  HMMWVs, Bradley Fighting Vehicles, and support vehicles.  As of January  2006, TSS included an estimated 400 different types of vehicles and other  equipment.  The Marine Corps recently testified that they have developed a  similar pool of ground equipment known as Forward In-Stores to replace  damaged major equipment items.
To ensure that deployed units receive required amounts of equipment  critical for their missions, the Army has designated certain major  equipment items, such as add-on-armor vehicles, up-armored HMMWVs,  selected communications and intelligence equipment, and other items  deemed critical for OIF and OEF missions as “theater provided equipment”  (TPE). According to Army officials, based on operational decisions, these  theater-specific items are being left in theater because these are force  protection items.  This equipment is taken from active, Guard, and Reserve  forces when they return to the United States and is retained in theater to  hand off to follow-on units. TPE includes equipment such as armored  vehicles, individual soldier body armor, and equipment used to counter  improvised explosive devices. As of November 2005, the Coalition Forces  Land Component Commander estimated that there were approximately  300,000 equipment items in the TPE inventory in Iraq, including more than  26,000 vehicles. The Army’s TPE initiative began in late 2003, when the  first Army units were directed to leave equipment in theater, then known  as “stay behind equipment.” The Army, in November 2005, replaced the  term “stay behind equipment” with the term TPE to better manage  equipment accountability and also reflect items that were procured  directly for the theater. Unlike other less intensely managed equipment  items, TPE is transferred directly from units leaving the theater to  deploying units taking their place. In most cases, these transfers take place  at the unit’s forward station in Iraq. As a result, most of this equipment has  been in heavy use in harsh desert and combat conditions since it was first  left in theater by the units that originally deployed with the equipment.  Because TPE is maintained at the unit level, this strategy has not provided  the Army with an opportunity to periodically rotate TPE back to the  United States for depot level maintenance. As discussed in a later section,  keeping large amounts of equipment in theater for long periods of time  without the opportunity for depot-level repair has created a number of  related consequences.
The Marine Corps, like the Army, has directed that equipment necessary  for OIF and OEF operations remain in theater. Because many Marine  Corps mission requirements have been exceeding the unit’s typical combat  equipment allowances, Marine Corps commanders in theater have  developed expanded equipment packages for deploying units that are  designed to ensure that units have the required equipment for their  missions. Deploying Marine Corps units fall in on and assume custody of  equipment left by other units departing the theater. According to recent  Marine Corps testimony, this initiative allows it to provide the best  equipment possible to forces in theater while also reducing equipment  rotation costs. Marine Corps officials estimated they had deployed about  30 percent of its ground equipment, and 20 percent of aviation assets in  support of ongoing operations. However, the percentage of ground  equipment deployed in support of operations has been as high as 40  percent according to recent Marine Corps testimony.  While this initiative  has met equipment needs to date, it has caused some major equipment  items to remain in constant operation, often in harsh desert conditions.
section_title: Initiatives to Develop More Extensive Maintenance Capacity in Theater
paragraphs: To address the effects of the harsh operating environments and the  maintenance needs of rapidly deteriorating equipment that is being held in  theater for extensive periods, the Army and Marine Corps have developed  initiatives to increase the maintenance capacity in theater to be able to  provide near-depot level repair capabilities. For example, the Army has  developed a refurbishment facility for HMMWVs in Kuwait and a Stryker  maintenance facility in Qatar to limit the repair time and resupply time of  these assets. The HMMWV refurbishment facility in Kuwait began  operations in July 2005 and is operated by a defense contractor. The  primary objective of this refurbishment facility is to mitigate the effects of  high mileage, heavy weights, high temperatures, and lack of sustained  maintenance programs. The HMMWV refurbishment facility workload  includes refurbishment maintenance, as well as modernization and  upgrades. As of December 2005, this facility had refurbished a total of 264  HMMWVs. Similarly, the Marine Corps created a limited aircraft depot  maintenance capability in theater.
Additionally, both the Army and Marine Corps have taken other steps to  increase maintenance capacity and the availability of spare parts in  theater. For example, at the time of our visit to Kuwait in January 2006, the  Army was developing plans to increase the maintenance capacity at  contractor maintenance facilities in Iraq. In addition, according to recent  Army testimony, the Army Materiel Command (AMC) and the Defense  Logistics Agency have taken steps to allow the rapid delivery of critical,  low-density parts to the theater to maximize their availability and minimize  transportation costs. The Marine Corps has also recently testified on  efforts to leverage Army ground depot maintenance capabilities in the  theater, and developed a rotation plan for major equipment items.
section_title: Equipment Maintenance Consequences and Issues Created By Army and Marine Corps Equipping and Maintenance Strategies
paragraphs: Although the Army and Marine Corps are reporting high rates of  equipment readiness for combat units and have developed and  implemented plans to increase the maintenance capabilities in theater,  these actions have a wide range of consequences and issues. The services  have made a risk-based decision to keep equipment in theater, to forego  depot repairs, and to rely almost exclusively on in-theater repair  capabilities to keep equipment mission capable. As a result, much of the  equipment has not undergone higher level depot maintenance since the  start of operations in March 2003.  While Army officials noted that not all  equipment would undergo full depot-level maintenance, much of this  equipment has incurred usage rates ranging from two to nine times the  annual peacetime rate meaning that, in some cases, some equipment may  have added as much as 27 years of use in the past three years. Continued  usage at these rates without higher levels of maintenance could result in  the possibility that more equipment will require more extensive and  expensive repairs in the future or may require replacement rather than  repair.  Because most equipment is staying in Iraq, there are other  ramifications that have implications for the depots in the United States  such as the fact that depots are not operating at full capacity and that the  scope of depot repair work is being reduced to meet operational needs. In  addition, other maintenance issues are beginning to surface, which could  have a variety of consequences such as a decrease in near-term and long- term readiness of equipment or an increase in repair or replacement costs.  These additional issues include questions regarding contractor  performance for in-theater maintenance and the condition and availability  of the Army’s TSS in Kuwait.
subsections: section_title: Most Equipment Not Receiving Depot-Level Repair
paragraphs: Many of the equipment items used in Southwest Asia are not receiving  depot-level repair because they are being retained in theater or at home  units and the Army has scaled back on the scope of work performed at the  depots. As a result, the condition of equipment items in theater will likely  continue to worsen and the equipment items will likely require more  extensive repair or replacement when it eventually returns to home  stations. The Army retains equipment in theater to support ongoing  operations. For example, as of November 2005, the Army had about  300,000 pieces of equipment retained in theater to support troop  deployment rotations. Very little of this equipment is being returned from  theater to depots in the United States for repair. Instead, redeploying units  are expected to maintain their assigned equipment to a fully mission  capable condition to facilitate the transfer of equipment to deploying units.  Since TPE is transferred directly from units leaving the theater to  deploying units taking their place, usually at the units’ forward station in  Iraq, the strategy has not allowed the equipment to receive periodic depot- level maintenance.  Further, some units have commented that the TPE  they received, while operable, requires higher levels of maintenance.  The  fully mission capable definition is to some extent a broad and malleable  term. Unit commanders have reported concerns with downtimes,  availability of spare parts, repair and replacement of damage or combat  losses, and the need for additional contractor support. The Army is also  reconfiguring its prepositioned equipment set and consequently is  retaining some deploying units’ equipment in theater to support this Army  Prepositioned Set, Kuwait (APS-5) reconstruction. For example, according  to officials at the U.S. Army Forces Command, approximately 13,000  pieces of equipment from a redeploying unit were transferred to  prepositioned stocks in Kuwait instead of returning to the United States  with the unit. This included about 7,000 tactical wheeled vehicles. While  this equipment is supposed to be reset to a 10/20 standard before being  transferred to prepositioned equipment stocks, it is not being returned for  depot overhaul.  According to Army officials, this equipment was not  returned for depot overhaul because of short timeframe requirements.   This equipment was reset to a fully mission capable standard.
In some instances, Army units retain equipment to reconstitute their unit  quickly rather than send this equipment to depot for overhaul. According  to officials in the Office of the Secretary of Defense, warfighters are not  readily willing to give up equipment, which contributes to fewer  equipment items being returned to the depots for repair. Officials at the  U.S. Army Forces Command and at army depots echoed this concern,  stating that availability of assets to induct into the depot repair program is  limited by units’ need and desire to have equipment available for training.  These officials added that the units fear that they will have to wait for  replacement equipment because their unit priority is not high enough  within the Army to ensure immediate replacement of the equipment items.  To increase the number of equipment items going to depots from units, the  Army created a list of equipment that it will now require units to  automatically send to the Army depots for reset. The list is based on  lessons learned from earlier experiences that damage and wear to certain  types of equipment items used in Southwest Asia require more extensive  depot level repairs. For example, some equipment reset at the units’ home  station was failing at higher than expected rates in theater during follow- on deployments. The list contains about 200 equipment items and has been  updated several times, most recently in October 2005, to include items  such as the Bradley Fighting Vehicle and the Abrams Tank. According to  the implementing memorandum, unit commanders are required to  nominate a minimum of 25 percent of the listed equipment for return to  depots for reset. According to the memorandum, the intent is to provide  units the flexibility to maintain equipment for training while placing the  maximum possible into reset programs, and items retained for training are  to be maintained in fully mission capable condition.
section_title: Depots Are Not Operating At Full Capacity Due to Fewer Equipment Returns and Enhanced In-Theater Maintenance Capability
paragraphs: Because the services are retaining most equipment in theater, depots in  the United States, tasked with complex maintenance work above and  beyond in-theater maintenance reset, are not operating at full capacity.  For example, DOD has estimated that Army depots can produce about 19  million direct labor hours of production on a single shift basis—8 hours a  day, 5 days a week. Based on this measure, the Army depots are currently  utilized at about 110 percent of capacity. However, according to depot  officials, the Army could double or triple depot capacity by adding more  work shifts at the depots. Using this multiple shift approach the Army  could produce up to approximately 57 million direct labor hours of  production or 170 percent more than the current workload at Army  depots. Army depots are currently using some second shifts; however,  second shifts are primarily limited to manufacturing process shops such as  cleaning, machining, sand-blasting and painting, which depot officials say  could easily be contracted out to increase throughput. According to depot  officials, the factors that impact their decision to add more shifts and  increase throughput are a stable commitment of funding throughout the  year, the availability of retrograde equipment to repair, and the right mix  of spare parts inventory to support production.
section_title: Scope of Depot Repair Work Is Being Reduced to Meet Operational Needs
paragraphs: In addition, the Army has reduced the scope of work performed on some  equipment items to less than a full overhaul. According to U.S. Army Tank  and Automotive Command (TACOM) officials, the Army cannot afford to  do a full overhaul of its ground equipment and has therefore made a risk- based decision to perform a reduced scope of work for equipment at the  depots. To determine what the repair scope should be, the Army focused  on major readiness components on the vehicles. For example, the engine  on the Abrams tank is the component that fails the most often and is the  most expensive to replace. Consequently this was the number one  component included in the reduced scope of depot repair work. The less  robust depot level repair being performed speeds repair time and reduces  expenditures on depot repair. For example, the reduced scope of work on  the Abrams costs approximately $880,000 versus $1.4 million for a  complete overhaul. This scope does not include complete disassembly of  the vehicle and identifies 33 items to be inspected and repaired only if  necessary. During a full overhaul these items would be reconditioned to  like new condition, and consequently would be less likely to fail after the  depot visit although it is unclear what actual failure rates might be.  According to TACOM officials, the reduced overhaul represents what the  Army can afford to do.
The Marine Corps recently instituted an annual equipment rotation plan to  begin returning equipment from Southwest Asia to the United States for  reset. The first of this returning equipment was received in the first quarter  of fiscal year 2006. Previously, Marine Corps reset strategy was to  overhaul equipment located in the United States, then provide the  equipment to deploying units to fill requirements that could not be  satisfied with the pool of mission capable equipment in theater. According  to depot officials, the Marine Corps found it necessary to begin returning  equipment from the theater because it is running short of available  equipment in the United States for depot overhaul. However, depot  officials told us that the equipment returning from theater is in much  worse condition than they anticipated so they may not be able to reset as  many vehicles as planned with available reset funds.
section_title: Army Concerned That Maintenance Contractors Are Not Meeting Performance Expectations
paragraphs: While we did not review copies of the contracts, our review of other Army  documents and discussions with Army officials identified two examples to  indicate that maintenance contractors are not meeting performance  expectations. Army officials estimated that about 70 percent of equipment  maintenance in theater above the unit level is being done by contractors.  Some of these contractors have experienced a number of problems in the  past few years, such as not being able to quickly acquire skilled  maintenance personnel.  Specifically, we identified a number of  maintenance issues regarding the HMMWV refurbishment facility in  Kuwait and the reset of equipment in the prepositioned set of equipment in  Kuwait.
As of January 2006, according to Army maintenance officials in Kuwait,  the contractor operating the HMMWV refurbishment facility in Kuwait had  not been able to meet original production goals.  In some cases, for  example, the contractor’s actual labor requirements for some vehicles  exceeded the original estimates by almost 200 percent. This contributed to  the facility falling over 200 vehicles short of its output goal of refurbishing  300 vehicles per month since the facility became operational in July 2005.  Also cited as contributing to the facility’s poor performance were  difficulties the contractor experienced in obtaining the required number of  third country national workers, mostly due to difficulties meeting host  country visa requirements. Furthermore, according to Army maintenance  officials in Kuwait, during the first 6 months the facility was operational,  the contractor repeatedly failed to gather data on resources expended on  vehicle refurbishments. Without accurate information on the actual level  of resources required to refurbish these vehicles, it will be more difficult  for the contractor to estimate and plan for future requirements. Since the  original contract was issued in April 2005, it has been modified multiple  times, increasing the total funding requirement from slightly more than $36  million over the contract’s first year of performance, an increase of over  100 percent.
In addition to concerns about the contractor management of the HMMWV  refurbishment facility, theater commanders have also expressed concerns  about contractor performance in support of efforts to reset equipment for  reconfiguring Army prepositioned stocks. The Army has contracted for the  maintenance and management of Army prepositioned equipment in  Kuwait. The Army has recently noted several concerns about contractor  performance in the areas of personnel and maintenance. For example,  there is a shortage of contractor personnel which contributes significantly  to a decline in production. The contractor also attributed the shortages to  difficulties obtaining the required number of third country national  workers due to problems with host country visa requirements. The Army  had to resort to acquiring additional vehicle mechanics and supply  personnel from another contractor and an active duty Army unit and an  Army maintenance company. The Army also reports that the contractor  does not conduct thorough technical inspections. If thorough inspections  were conducted it would significantly reduce the amount of time the  equipment spends in maintenance shops. According to officials at the U.S.  Army Field Support Command, equipment is often rejected because of the  contractor’s lack of attention to detail and inadequate maintenance  inspection procedures.
section_title: Condition of Theater Sustainment Stocks Is Not Sufficient to Rapidly Meet Replacement Needs
paragraphs: The condition of TSS is not sufficient to replace battle damaged equipment  without additional maintenance, which may delay the equipment’s  availability and strain in-theater maintenance providers. The purpose of  TSS is to ensure that equipment is on hand to quickly fill unit requirements  that may arise due to battle damage or other losses. The Army created this  stockpile of equipment in Kuwait as a quick source to provide replacement  equipment, as needed. As of January 2006, an AMC official responsible for  TSS estimated that there were approximately 174,000 pieces of equipment  in Kuwait and Qatar, representing 400 different types of equipment. TSS  includes, for example, tanks, HMMWVs, Bradley Fighting Vehicles, and  support vehicles. Expected loss rates are taken into consideration in  setting TSS equipment levels. When a requirement arises in Iraq,  equipment items are taken from TSS, maintenance is performed in theater  to ensure the equipment is in suitable condition, and it is sent to units.  Much of TSS requires additional maintenance before it can be reissued to  operational units in Iraq and, in some cases, to restore it to fully mission  capable. For example, as of January 2006, for a cross-section of several  types of ground vehicles in TSS, less than 7 percent were fully mission  capable. As such, TSS that requires additional maintenance before it can  be reissued as replacement equipment increases requirements on the in- theater maintenance capability, which may affect other efforts to refurbish  equipment in theater for prepositioned stocks. The Army Field Support  Battalion at Camp Arifjan, Kuwait, is responsible for the management and  reconstitution of prepositioned stocks, the management and repair of TSS  in support of ongoing requirements, as well as a number of other logistics  missions. The same contract workforce the Army Field Support Battalion  employs for maintenance on prepositioned stocks is responsible for  maintenance of TSS.  The capacity of the Army Field Support Battalion to  conduct reset of equipment being used to reconstitute prepositioned  stocks in Kuwait is directly affected by ongoing requirements to manage  TSS and is affected by other missions in support of deployed units in Iraq.
section_title: A Number of Challenges Will Affect the Timing and Cost of Army and Marine Corps Equipment Reset
paragraphs: The Army and Marine Corps will face a number of ongoing and longer- term challenges that will affect the timing and cost of equipment reset. As  previously mentioned, current military operations are taking a toll on  equipment, which will affect the cost of repairing equipment as well as the  amount and cost of equipment that will need to be replaced. In addition,  other issues such as the Army and Marine Corps efforts to modularize and  transform their forces, respectively, the reconstitution and reset of  prepositioned equipment, and the ongoing and longer-term efforts to  replace equipment from the active, National Guard, and Reserve units, as  well as the potential transfer of U.S. military equipment and potential for  continuing logistical support to Iraqi Security Forces will also affect the  timing and cost of reset. Furthermore, both the Army and Marine Corps  will have to better align their funding and program strategies to sustain,  modernize, or replace existing legacy equipment systems. Similarly, both  services will need to face difficult choices for the many competing  equipment programs. Finally, working with the Congress, both services  will have to determine the best approaches for dealing with the issues  created by the timing of depot maintenance supplemental appropriations.
subsections: section_title: Army Modularity and Marine Corps Transformation
paragraphs: The Army’s and Marine Corps’s equipment reset programs will also have to  compete with ongoing and planned force structure changes designed to  provide more flexibility in deploying forces for ongoing and future  operations. The Army began its modular force transformation in 2004 to  restructure itself from a division-based force to a modular brigade-based  force. The modular forces are designed to be stand-alone, self-sufficient  units that are more rapidly deployable and better able to conduct joint and  expeditionary operations than their larger division-based predecessors.  Modular restructuring will require the Army to spend billions of dollars for  new equipment over the next several years while continuing to reset and  maintain equipment needed for ongoing operations. The Army estimates  that the equipment costs alone will be about $41 billion.  In addition to  creating modular units, the Army plans to continue to develop and fund  the Future Combat System, which the Army recognizes is one of the  greatest technology and integration challenges it has ever undertaken.
The Marine Corps has also initiated force structure changes to provide  flexibility in deploying troops, which will also likely affect the Marine  Corps’s equipment reset strategies. Its force structure initiative is designed  to reduce the effects of operational tempo on the force and reshape the  Marine Corps to best support current and future operations. In 2004, the  Marine Corps conducted a comprehensive force structure review to  determine how to restructure itself to augment high demand, low density  capabilities, reduce deployed tempo stress on the force, and shape the  Marine Corps to best support the current and future warfighting  environments.
section_title: Requirements to Reconstitute and Reset Army and Marine Corps Prepositioned Equipment
paragraphs: Both the Army and Marine Corps drew heavily upon prepositioned stocks  for operations in Iraq and Afghanistan. As we reported in September 2005,  DOD faces some near term operational risks should another large scale  conflict emerge, because it has drawn heavily on prepositioned stocks to  support ongoing operations in Iraq. And although remaining stocks  provide some residual capability, many of the programs face significant  inventory shortfalls and, in some cases, maintenance problems.
The focus of the Army’s current prepositioned equipment reset program is  building two brigade-sized equipment sets in Kuwait, as well as battalion- sized sets in Qatar and Afghanistan. Prepositioned stocks in Kuwait are  not designated to serve as a pool of equipment available to support current  missions. Equipment to form these sets is coming from a combination of  equipment left in theater, as well as equipment being transferred from U.S.  depots and from units around the world. While a sizeable portion of the  needed equipment is now in place, much of this equipment needs  substantial repair. Maintenance facilities are limited as are covered storage  facilities. Lack of covered storage facilities presents yet another challenge.  Prepositioned stock, like TSS, is stored in the open desert environment,  which in some cases may lead to further degradation. Harsh  environmental conditions such as sand and high humidity levels accelerate  equipment corrosion, which may not be apparent until extensive depot  maintenance is performed. We have previously reported that outdoor  storage aggravates corrosion and the use of temporary shelters with  climate-controlled facilities is cost effective, has a high return on  investment, reduces maintenance and inspections and, as a result,  increases equipment availability. The Marine Corps has also drawn on a  significant portion of its prepositioned stocks from five ships to support  current operations. It is unclear when this equipment will be returned to  prepositioned stocks because much of this equipment will be left in Iraq to  support the continuing deployment of Marine Corps forces there.
Our September 2005 report also raised serious concerns about the future  of the department’s prepositioning programs, and we believe these  concerns are still valid. No department-wide strategy exists to guide the  programs, despite their importance to operational plans as evidenced in  OIF. Without an overarching strategy, the services have been making  decisions that affect the future of the programs without an understanding  of how the prepositioning programs will fit into an evolving defense  strategy. The Army’s decision to accelerate the creation of substantial  combat capabilities in Southwest Asia is understandable because it could  speed buildup in the future, especially if large numbers of troops are  withdrawn. However, the Army’s decisions in other parts of its  prepositioning programs are questionable. For example, the Army recently  decided to cut its afloat combat capability in half (from two brigade sets to  one) by the end of fiscal year 2006 as a result of a budget cut from the  Office of Secretary of Defense. However, internal planning documents that  we reviewed indicated that the Office of Secretary of Defense directed  terminating a planned third set afloat, cutting an existing capability that  would likely be critical to responding to another crisis should it occur. In  the meantime, the Army is making plans to reduce its contractor  workforce in Charleston, South Carolina, where it performs the  maintenance on its afloat stocks. At the same time, in Europe, the Army  has a $55 million military construction project well underway at a site in  Italy, but the Army’s draft prepositioning strategy identifies no significant  prepositioning mission in Europe. In our discussions with Army managers,  they told us they are planning to use the Italian workforce to perform  maintenance on equipment that ultimately will be placed afloat in 2013 or  later.
section_title: Army and Marine Corps Will Need to Replace Active, Guard, and Reserve Equipment Left in Theater
paragraphs: The Army and Marine Corps must also plan for replacement of active,  National Guard, and Reserve equipment left in theater to support ongoing  operations. In late 2003, the Army began to direct redeploying Guard and  Reserve units to leave their equipment in theater for use by deploying  forces. As we have previously testified, DOD policy requires the Army to  replace equipment transferred to it from the reserve component including  temporary withdrawals or loans in excess of 90 days, yet the Army had  neither created a mechanism in the early phases of the war to track Guard  equipment left in theater nor prepared replacement plans for this  equipment, because the practice of leaving equipment behind was  intended to be a short-term measure. As of March 2006, only three  replacement plans have been endorsed by the Secretary of Defense, all to  replace Guard equipment, while 33 plans are in various stages of approval.
Lack of equipment for the active, Guard, and Reserve forces at home  stations affects the ability of the forces to conduct unit training, and  adversely affects the ability of the Guard and Reserve forces to be  compatible with active component units. As operations have continued,  the amount of Guard equipment retained in theater has increased, which  has further exacerbated the shortages in nondeployed Guard units. For  example, when the North Carolina 30th Brigade Combat Team returned  from its deployment to Iraq in 2005, it left behind 229 HMMWVs, about 73  percent of its pre-deployment inventory of those vehicles, for other units  to use. Similarly, according to Guard officials, three Illinois Army National  Guard units were required to leave almost all of their HMMWVs, about 130,  in Iraq when they returned from deployment. As a result, the units could  not conduct training to maintain the proficiency they acquired while  overseas or train new recruits. In all, the Guard reports that 14 military  police companies left over 600 HMMWVs and other armored trucks, which  are expected to remain in theater for the duration of operations, which  according to Army officials, would be required regardless of Guard,  Reserve, or active unit.  Lack of equipment for training also adversely  affects Marine Corps units. For example, in the interest of supporting units  in theater by leaving certain pieces of equipment in theater and drawing on  equipment from elsewhere to meet theater needs, the Marine Corps has  experienced home station equipment shortfalls, among both active and  reserve components. According to a senior Marine Corps official, these  shortfalls may have detrimental effects on the ability of the Marine Corps  to train and to respond to any contingencies. In addition, the Army has  acknowledged that the benefits of prepositioned stocks are diminished  when units are not trained on equipment that matches that present in the  stocks.
The Army and Marine Corps strategy for retaining and maintaining  significant numbers of low density, high demand equipment items in  theater will affect plans to replace equipment left in theater by the Guard  and Reserve. We have previously reported that to meet the demand for  certain types of equipment for continuing operations, the Army has  required Army National Guard units returning from overseas deployments  to leave behind many items for use by follow-on forces. According to the  National Guard and Reserve Equipment Report for Fiscal Year 2007, the  Army National Guard has been directed to transfer more than 75,000  pieces of equipment valued at $1.76 billion, to the Army to support OIF  and OEF. However, the Army does not have a complete accounting of  these items or a plan to replace the equipment, as DOD policy requires.  The Army expects that these items will eventually be returned to the  Guard, although the Guard does not know whether or when the items will  be returned. We have also previously reported that like the Army National  Guard, Army Reserve units have been required to leave certain equipment  items, such as vehicles that have armor added, in theater for continuing  use by other forces. This further reduces the equipment available for  training and limits the Army Reserve’s ability to prepare units for  mobilizations in the near term. The Army is working with both the Army  National Guard and the Army Reserve to develop memoranda of  agreement on how equipment left in Iraq will be replaced. Until these  plans are completed and replacement equipment provided, the Army  Reserve and Army National Guard will face continuing equipment  shortages while challenged to train and prepare for future missions.
According to Marine Corps testimony, the policy of retaining equipment in  theater to meet the needs of deployed forces has led to some home station  equipment shortfalls, among both active and reserve units, which if  allowed to continue could have a direct impact on the ability of Marine  Forces to train for known and contingent deployments. Furthermore,  according to the National Guard and Reserve Equipment Report for fiscal  year 2007, more than 1,800 major Marine Corps equipment items, valued at  $94.3 million have been destroyed, and an additional 2,300 require depot  maintenance.
section_title: Potential Requirements for Transferring Equipment and Providing Logistical Support to the Iraqi Security Forces Are Unclear
paragraphs: Future requirements to transfer equipment and provide logistical support  to the Iraqi Security Forces and the extent of required U.S. support are  unclear. In its report to Congress in April 2005, DOD stated that the  primary constraint on future maintenance processes is the lack of  equipment that is available for reset and recovery activities. DOD noted  that a large amount of equipment is being held in the theater as a  rotational pool for deploying units, and will remain in theater for the long  term. DOD noted that when hostilities cease, some of the equipment being  held in theater may be turned over to Iraqi Security Forces, if authorized  by law. In addition, some equipment will be scrapped and the rest would  be assessed for maintenance. Military service officials have recently  testified that some types of equipment may be left for Iraqi Security  Forces, and cited concerns with supporting that equipment in the future.  Until the determination of what equipment will be given to the Iraqi  Security Forces is made, it will be difficult to determine what will be  available for reset.  As the United States military draws down its combat  forces, any continued logistical support using equipment such as wheeled  vehicles and helicopters will have to come from the Army or Marine Corps  and will have to be factored into plans for reset and reconstitution.
section_title: Lack of Comprehensive Sustainment, Modernization, and Replacement Strategies for Certain Army and Marine Corps Equipment Items
paragraphs: We have previously reported that, for certain equipment items, the Army  and Marine Corps have not developed complete sustainment,  modernization, and replacement strategies or identified funding needs for  all priority equipment items such as the Army Bradley Fighting Vehicle and  Marine Corps CH-46E Sea Knight Helicopter. Given that funding for the  next several years to sustain, modernize, and replace aging equipment will  compete for funding with other DOD priorities, such as current  operations, force structure changes, and replacement system acquisitions,  the lack of comprehensive equipment strategies may limit the Army’s and  Marine Corps’s abilities to secure required funds. Furthermore, until the  services develop these plans, Congress will be unable to ensure that DOD’s  budget decisions address deficiencies related to key military equipment.
We first reported in 2003 that the condition of 25 selected military  equipment items varied from very good to very poor and that, although the  services had program strategies for sustaining, modernizing, or replacing  most of the items reviewed, there were gaps in some of those strategies.  Since this report, DOD’s continued operations in Iraq and Afghanistan  have resulted in additional wear and tear on military equipment. Given  continued congressional interest in the wear and tear being placed on  military equipment and the funding needed to reconstitute the equipment,  we issued a follow up report in October 2005 in which we assessed the  condition, program strategies, and funding plans for 30 military equipment  items, including 18 items from our December 2003 report. With respect to  these 30 selected equipment items, we identified that the military services  had not fully identified near- and long-term program strategies and funding  plans to ensure that all of these items can meet requirements. For many of  the equipment items included in our assessment, average fleet wide  readiness rates had declined, generally due to the high pace of recent  operations or the advanced age or complexity of the systems. Although  selected equipment items have been able to meet wartime requirements,  the high pace of recent operations appears to be taking a toll on selected  items and fleet wide mission capable rates have been below service  targets, particularly in the Army and Marine Corps. For example, the  Army’s Bradley Fighting Vehicle, Abrams Tank, and AH-64A/D Apache  Helicopter, and the Marine Corps’s Light Armored Vehicle and Sea Knight  Helicopter were assessed as warranting additional attention by DOD or the  military services due to the high pace of operations increasing utilization  beyond planned usage. Furthermore, according to officials, the full extent  of the equipment items’ degradation will not be known until a complete  inspection of the deployed equipment is performed.
Marine Corps legacy aviation equipment in use faces special readiness  challenges due to the increased usage rates coupled with the absence of  new production of that equipment. Existing equipment must be  maintained and managed to provide the warfighter with needed equipment  until next generation equipment is constructed. We have recently reported  severe problems or issues that warrant immediate attention by DOD or the  military services with the near term program strategies and funding plans  for the Marine Corps CH-46E Sea Knight Helicopter program due to  anticipated parts shortages and maintenance issues, as well as potential  problems with the readiness of Marine Corps M1A1 tanks, Light Armored  Vehicles, and CH-53E helicopters stemming from the high pace of  operations and increased utilization beyond planned usage. In recent  Congressional testimony, Marine Corps officials discussed problems with  a lack of active production lines for the CH-46 and CH-53 helicopters.
Given that no replacement aircraft is available, as these platforms are lost  in combat they cannot be replaced. The Marine Corps has requested funds  in the fiscal year 2006 supplemental to bring CH-53E helicopters out of  desert storage and refurbish them to replace those destroyed during  current operations.
section_title: Army and Marine Corps Face Difficult Choices For Competing Equipment Programs
paragraphs: The Army and Marine Corps will need to make difficult choices for  competing equipment programs, such as Army modularity and equipment  reset, when considering future equipment budget requests. While the  services are working to refine overall requirements, the total requirements  and costs are unclear and raise a number of questions as to how the  services will afford them. The growing requirement for future equipment  repair, replacement, and reset will only serve to exacerbate the problem.  For example, based on our preliminary observations, the Army’s cost  estimate, to create modular units has increased from $28 billion in 2004 to  its current estimate of $52.5 billion. Of that $52.5 billion, $41 billion or 78  percent has been allocated to equipment. However, our preliminary  observations also indicate that it is not clear how the Army distinguishes  between costs associated with modularity and costs for resetting  equipment used during operations. According to recent Army information,  the Army’s requirement for equipment reset is more than $13 billion for  fiscal year 2006. This includes funds to repair equipment in theater or at  the depots, replace battle losses, and recapitalize equipment. In fiscal year  2006 alone, the Army estimated it would need to reset about 6,000 combat  vehicles, 30,000 wheeled vehicles, 615 aircraft, and 85,000 ground support  items. In addition, according to recent Marine Corps testimony, accurately  forecasting the total cost to reset the force is dependent upon calculations  of what percentage of current inventory in theater will be repairable or  will need to be replaced, how much equipment may be left behind for Iraqi  forces, and other determinations dependent on circumstances and  conditions that cannot be easily predicted. The Army has also indicated  that additional supplemental funding will be required for equipment reset  for at least two years after hostilities cease. The Army and Marine Corps  must consider these affordability challenges in the context of future fiscal  constraints.
section_title: Depots Experience Difficulties With Executing Supplemental Appropriations Received Late in the Fiscal Year
paragraphs: The Army depots received their fiscal year 2005 supplemental in the  June/July 2005 timeframe, at which time they began executing their reset  workload. Subsequently, some of these funds were later pulled back by the  AMC. According to AMC officials, the funds were pulled back from the  depots for three reasons: (1) the depots could not complete the reset  workload until several months after the end of fiscal year 2005, (2) the  funds were needed to meet other Army-wide requirements, and (3) the  Army wanted to avoid potential Congressional cuts to its fiscal year 2006  budget for depot carry over workload. In total, AMC pulled back $193  million, or about 10 percent of reset funds for fiscal year 2005 for Army  depot maintenance. According to AMC officials, the command did not use  these funds for contract depot maintenance, but rather gave them back to  Army headquarters to meet other unfunded fiscal year 2005 operation and  maintenance requirements. According to Army and Marine Corps depot  officials, receipt of funds too late in the fiscal year does not allow timely  execution of major item workload within the current fiscal year. Given the  time it takes to preposition parts and materials (at best 60 days), plus the  repair cycle time to complete repairs (approximately another 60 to 90 days  for major items) there is basically little end item production to be achieved  at the depot within the fiscal year the funding is received. Receiving the  supplemental late in the year of execution reduced the amount of planned  depot maintenance work for 2005. Depot officials anticipate that the  condition may repeat itself in fiscal year 2006. For example, one Army  depot reported that its planned fiscal year 2006 workload of 27 million  direct labor hours will likely be reduced to 21 million hours, a reduction of  6 million, or 22 percent, of planned direct labor hours.
Depot officials commented that the timing of the supplemental  appropriations compounds problems depots have in efficiently managing  their maintenance workload. The depots face the challenge of managing  changes in funded requirements during the year of execution, obtaining  the equipment they have programmed for overhaul, and ensuring that the  right spare parts are purchased in advance of equipment overhauls. For  example, in preparing its fiscal year 2006 supplemental budget request,  AMC included the repair of HMMWVs at its depots. The depots planned  accordingly to support this requirement. However, since the supplemental  was submitted to Congress, the Army has requested that Congress shift  $480 million in HMMWV reset funds to new procurement. This change has  reduced the planned depot workload by almost 6,000 HMMWVs creating  disruptions in depots’ workforce structure plans. Until the reduction, Red  River depot anticipated hiring additional employees to perform the  HMMWV and Bradley workloads, and Letterkenny Army Depot recently  reduced its contract workforce by 150 employees due to declining work on  the HMMWV and the Patriot missile system.
section_title: Concluding Observations
paragraphs: Prior to the Global War on Terror, the Department of Defense, the Army,  and the Marine Corps faced significant challenges in sustaining and  modernizing legacy equipment as well as funding the procurements of  replacement weapons systems.  With the advent and continuation of  military operations over the past several years in Afghanistan and Iraq, the  challenges of sustainment and modernization of legacy weapons systems,  and procurement of new and replacement weapons systems has been  significantly exacerbated.  The harsh operating environment and high  operational tempo, coupled with the operational requirement to keep  equipment in theater without significant depot repair, could lead to higher  than anticipated reset costs and more replacements than repair of  equipment.
Although the precise dollar estimate for the reset of Army and Marine  Corps equipment will not be known until operations in Iraq and  Afghanistan cease, it will likely cost billions of dollars to repair and  replace the equipment used. As the funding requirements increase over  time, the Army and Marine Corps will be forced to make difficult choices  and trade-offs for the many competing equipment programs. While the  services are working to refine overall requirements, the total requirements  and costs are unclear and raise a number of questions as to how the  services will afford them.  Until the services are able to firm up these  requirements and cost estimates, neither the Secretary of Defense nor the  Congress will be in a sound position to weigh the trade offs and risks.
Mr. Chairman, this concludes my statement. I would be happy to answer  any questions.
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