Defense Inventory: Opportunities Exist to Improve Spare Parts Support Aboard Deployed Navy Ships
Published: 2003-08-29T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: GAO is conducting a series of reviews in response to a congressional request to identify ways to improve the Department of Defense's (DOD's) availability of high-quality spare parts for ships, aircraft, vehicles, and weapons systems. This report focuses on the effectiveness of the U.S. Navy's spare parts support to deployed ships. It examines (1) the extent to which the Navy is meeting its spare parts supply goals, (2) the reasons for any unmet supply goals, and (3) the effects of spare parts supply problems on ship operations, mission readiness, and costs. To conduct the review, GAO looked at data on parts requisitions, maintenance work orders, and casualty reports for various Navy ship deployments between fiscal years 1999 and 2003.
section_title: What GAO Found
paragraphs: In typical 6-month deployments at sea, Navy ships are generally unable to meet the Navy's supply performance goals for spare parts. GAO's analysis of data for 132,000 parts requisitions from ships in 6 Atlantic and Pacific battle groups deployed in fiscal years 1999 and 2000 showed that 54 percent could be filled from inventories onboard ship. This supply rate falls short of Navy's long-standing 65 percent goal. When parts were requisitioned, maintenance crews waited an average of 18.1 days to get the parts--more than 3 times the Navy's wait-time goal of 5.6 days for ships outside the continental United States. The Navy recognizes it has not met its supply goals for over 20 years. Two key problems contribute to the Navy's inability to achieve its supply goals. Its ship configuration records, which identify the types of equipment and weapons systems that are installed on a ship, are often inaccurate because they are not updated in a timely manner and because audits to ensure their accuracy are not conducted periodically. In addition, the Navy's historical demand data are often out-of-date, incomplete, or erroneous because supply crews do not always enter the right information into the ships' supply system databases or do not enter it on a timely basis. Because configuration-record and demand data are used in models to estimate what a ship needs to carry in inventory, inaccuracies in this information can result in a ship's not stocking the right parts for the equipment on board or not carrying the right number of parts that may be needed during deployment. While precise impacts are not always well defined, the Navy's spare parts supply problems can affect a deployed ship's operations, mission readiness, and costs. GAO's analysis of data on 50,000 work orders from 6 deployed battle groups showed that 58 percent could not be completed because the right parts were not available onboard. More complete reporting of work orders identified as critical or important would have resulted in a more complete assessment of ship mission readiness. In addition, the Navy expends substantial funds--nearly $25 million for six ships GAO reviewed--to maintain large inventories that are not requisitioned during deployments.

section_title: Letter
paragraphs: During deployments of U.S. Navy ships around the world, it is inevitable  that some of the equipment or weapons systems on board these ships will  break down and need repairs. To meet this eventuality, the Navy stocks  each ship with tens of thousands of spare parts to enable the ship’s  crew to maintain and repair the equipment in a timely manner. If the  needed spare parts are not on board the ship, the repair work could be  delayed—and equipment disabled—while supply crews obtain the parts  from off-ship sources. During this delay, the ship’s operations and mission  readiness may be compromised.
This report is one of a series of reviews that we are conducting in response  to your request that we identify ways to improve the Department of  Defense’s (DOD’s) availability of high quality spare parts for aircraft, ships,  vehicles, and weapons systems. In one of these reviews, we found that  the Navy’s servicewide strategic plan does not specifically address  means to mitigate critical spare parts shortages. This report focuses on  the effectiveness of spare parts support provided to deployed U.S. Navy  ships. To address this issue, we examined (1) the extent to which the Navy  is meeting its spare parts supply goals on deployed ships, (2) the reasons  for any unmet supply goals, and (3) the effects of spare parts supply  problems on ships’ operations, mission readiness, and costs.
In performing our work, we examined a variety of data related to Navy  spare parts supply and ship maintenance. These data covered different  time periods between 1999 and 2003 and represented the most current or  accessible information available during the period of our analysis. As  part of our study, we analyzed spare parts requisitions from Navy ships  deployed in Atlantic and Pacific fleet battle groups, amphibious readiness  groups, and Marine Corps expeditionary forces for varying periods during  fiscal years 1999 to 2001. We also analyzed maintenance work order and  casualty report data from the 6-month deployments of the Truman battle  group (Atlantic Fleet) in fiscal year 2000, and spare parts carried and used  by the Lincoln battle group (Pacific Fleet) in fiscal year 2002. In addition,  we reviewed historical information from 1982 to 2000 on the Navy’s ability  to fill onboard spare parts requests for both deployed and nondeployed  ships. We conducted our review from July 2002 to May 2003 in accordance  with generally accepted government auditing standards. Further details on  the scope and methodology we used in our work are found in appendix I.
subsections: section_title: Background
paragraphs: The Chief of Naval Operations is responsible to the Secretary of the  Navy for the command, utilization of resources, and operating efficiency  of the operational forces of the Navy and of the Navy’s shore activities.  The shore establishment provides support to the operating forces (known  as the fleet), including facilities for the repair of machinery and  electronics, ships, and aircraft, and for the storage of spare parts. The  Naval Supply Systems Command provides naval forces with supplies and  services through a worldwide, integrated supply system. Its Naval  Inventory Control Point exercises centralized control over different line  items of repair parts, components, and assemblies for ships, aircraft, and  other weapons systems.
Supplying spare parts to deployed ships requires coordination between  the supply command and the Naval operating forces. The operating forces  report to the Chief of Naval Operations and provide, train, and equip naval  forces. The operating forces also report to the appropriate Unified  Combatant Commanders. As units of the Navy enter one of the designated  worldwide areas of Naval responsibility, they are operationally assigned to  the appropriate numbered fleet. All Navy units also have an administrative  chain of command with the various ships reporting to the appropriate  ship type commander: aircraft carriers, aircraft squadrons, and air  stations are under the Commander, Naval Air Force; submarines come  under the Commander, Submarine Force; and all other ships fall under  the Commander, Naval Surface Forces. Normally, the type commander  controls the ship during its primary and intermediate training cycles, and  then it moves under the operational control of a fleet commander.
The Navy determines what kinds of spare parts to carry on board deployed  ships by identifying the kinds of equipment that are installed (the ship’s  configuration) and the types and quantities of repair parts and any special  tools, test equipment, or support equipment needed to do preventive and  corrective maintenance during extended and unreplenished periods at sea.  Specifically, the Navy identifies maintenance requirements and uses them  to develop a list of allowable parts for the equipment. For parts on the list,  the Navy uses predicted failure rates, which it updates using actual  demand for parts data in inventory allowance models. The office of the  Chief of Naval Operations approves these models.
Although the Navy revised its instruction for determining spare parts  supply effectiveness in October 1999, it continues informally to use the  supply-system performance goals that were established in 1983. These  performance goals measure a ship’s ability to fill all of the repair part  requisitions that it receives. Two important goals are: (1) that gross  availability of 65 percent of repair parts required by ships and aircraft  carriers are to be filled from onboard inventories and (2) that the average  customer wait-time for the delivery of high-priority parts from ships’  supply inventories and off-ship sources is to occur within 135 hours (or  about 5.6 days) for ships outside of the continental United States. This  average customer wait-time is the supply system’s response time from the  date an order for a required part is issued until it is received by the  customer. The Navy is in the process of revising its supply performance  goals but it has not yet completed this work.
The Navy’s annual budgets contain about $750 million for ships’ spare  parts, including about $200 million for initial spares and about $525 million  for replenishment spares. However, the Navy also identifies requirements  for spare parts that have not been funded. For example, it identified  $200 million in unfunded requirements in the fiscal years 2002 to 2004  budgets to increase safety-level stock for repairable items.
section_title: Deployed Ships’ Supply Goals Go Unmet As Only About Half of Needed Spare Parts Are Onboard
paragraphs: Only about 54 percent of spare parts requisitions for ships in 6 battle  groups in the Atlantic and Pacific fleets deployed in fiscal years 1999 and  2000 could be filled from onboard sources—a supply effectiveness rate  that fell below the Navy’s goal of 65 percent. When priority parts were not  on board, ships had to wait an average of 18.1 days, more than 3 times the  Navy’s wait-time goal of 5.6 days for ships outside the continental United  States. The Navy has fallen short of meeting its ship supply performance  goals for more than 20 years.
subsections: section_title: Ships Average 54 Percent Onboard Parts Supply Rates
paragraphs: Our analysis of ships in 6 selected Atlantic and Pacific fleet battle groups  deployed in fiscal years 1999 and 2000 showed that on average they were  able to supply about 54 percent of the spare parts that were requisitioned  from onboard inventories. As table 1 shows, this average supply  effectiveness rate ranged from 51 to 61 percent for different battle groups  during that period. The rates fell short of the Navy’s supply system  performance goal of 65 percent for surface ships and aircraft carriers,  which it has used informally since 1999.
These supply rates for the deployed battle groups are consistent with  fleetwide historical data available from Navy reports. These data show  that from 1982 to 2000 Navy ships in both deployed and nondeployed  status were, on average, able to fill about 55 percent of their parts  requisitions from onboard inventories. These rates have not varied much  over the past 20 years, indicating that little overall progress has been made  in meeting the Navy’s 65 percent goal.
These findings were further reinforced by our analysis of Navy data for  Pacific Fleet surface ships in amphibious readiness groups and ships in  Marine Corps expeditionary forces. These groups, which included a total  of 42 ships, showed an average availability of about 54 percent of spare  parts requisitioned during deployments in calendar years 1999 to 2001,  although individual ships reported a wide range of supply rates. For  example, a destroyer in one Marine expeditionary force group reported an  average supply rate of about 31 percent during deployment, whereas a  ship used to transport and land Marines and their equipment and supplies  in a deployed amphibious readiness group averaged 62 percent.
section_title: Average Wait-Times Exceed Navy Goal
paragraphs: When requisitioned parts were not on board ship, the Navy maintenance  crew had to wait far longer than the Navy’s stated wait-time goals to  obtain the needed parts from off-ship sources. The wait-time goal for  critical, high-priority items for ships outside the continental United States  is 5.6 days. The Navy’s data for these ships, which were deployed between  fiscal year 2000 and February 2003, showed that when needed high-priority  parts were requisitioned, maintenance crews had to wait an average of  18.1 days—more than 3 times the Navy’s wait-time goal—to receive  the parts.
The average wait-times for all spare parts, not just priority items, are  even longer. For the six Atlantic and Pacific battle groups deployed in  fiscal years 1999 and 2000 that we analyzed, repair crews experienced an  overall average wait-time of about 25.6 days, with a range of 16.2 to  32.5 days. Table 2 shows the wait-times for spare parts supplied both from  off-ship sources, as well as from onboard supplies.
Navy supply officials said they are concerned about the lengthy average  wait-time data being reported and are analyzing how this response time  can be shortened. They were especially concerned that the number of days  required for getting the parts to do the repair work seemed higher than  what would be reasonable.
The best of the Navy’s wait-time performance is for parts that are needed  to repair high-priority, mission-critical equipment. Navy supply officials  said that wait-times of about 12 to 14 days for these critical parts are about  the best the Navy is achieving because it uses expeditors to locate the  parts and it employs premium transportation to deliver the parts to the  ships. For example, a ship will send a requisition for a critical part to a  shore-based team whose job is to determine quickly if the part is available  anywhere in the military supply system or elsewhere, and identify the  fastest mode of transportation available (usually commercial overnight  delivery) to an overseas point. The Navy will then pick up the part for final  delivery to the ship while it is either in port or at sea.
section_title: Inaccurate Configuration and Demand Data Contribute to Unmet Supply Goals
paragraphs: Our analysis identified two key problems that contribute to the Navy’s  inability to achieve its supply goals for deployed ships: inaccurate ship  configuration records and incomplete, outdated, or erroneous historical  parts demand data. The Navy uses these data in models that estimate the  types of parts (range) and the number of each part (depth) that should be  stocked on board a ship during its deployment. However, because of data  inaccuracies, the ships may stock all of the parts they are allowed to  carry but still find they cannot fill a large number of parts requisitions  from onboard inventories, thus failing to meet the Navy’s supply  performance goals.
subsections: section_title: Ship Configuration Records Are Often Inaccurate
paragraphs: Navy headquarters and fleet officials acknowledge that the accuracy  of ship configuration data is a serious concern. Specifically, they said  that (1) ship configuration records are not always updated in a timely  manner when equipment or weapons systems are modified and  (2) required configuration audits are not conducted regularly to ensure  that configuration data correspond with the equipment or weapons  systems on board. The Navy identifies current and accurate configuration  data as the cornerstone of logistics support to its ships. Configuration  records provide a detailed description of the characteristics, including  dimensions and technical information, of each piece of equipment or  weapon system on board the ship. This information is used in allowance  models to prepare a Coordinated Shipboard Allowance List (COSAL).
The allowance list identifies the individual spare parts related to each  piece of equipment or weapon system on board. Ships depend on  accurate configuration records to ensure that, among other things, the  right spare parts and special tools, along with the proper manuals and  other documentation, are available on board ship.
Navy officials said that while it is difficult to attribute any one cause to  spare parts shortages on board, inaccurate ship configuration records are  a major problem. If inaccurate configuration records are used in allowance  models, the resulting allowance lists may identify some parts that should  be stocked but that do not match the equipment that is actually on board.  As a result, repair crews could requisition a part for a failed piece of  equipment but find that the part is not on the allowance list and, thus,  not in stock. The requisitions data from our sample of 6 battle group  deployments showed that about 17.3 percent of the 60,365 unfilled  requisitions were for parts that were not on the ships’ allowance parts lists  (see app. III).
One reason that ship configuration records are not current or accurate  is that they are not updated or changed, as required, when equipment or  systems are installed, removed, or modified. This problem can occur on  both new and older ships. According to Navy supply and fleet officials,  the allowance lists for new ships are often based on the configuration  of the first ship to be built in the production line, and subsequent  changes to follow-on ships’ configurations are not always documented.  Thus, a ship’s actual configuration could change—and the records not be  modified—even before the ship is delivered from the shipbuilder. On older  ships, the equipment and systems are frequently upgraded or replaced  without properly updating configuration data because the procedures in  place to change configuration records as equipment is changed are not  always followed. For example, when equipment is installed, removed,  or modified by contractors, ship personnel do not always promptly or  accurately enter these changes into the ship’s configuration database in  order that the spare parts required to support the altered equipment can  be ordered.
Moreover, the Navy has not performed the configuration audits it has  identified as needed to ensure that configuration data for equipment  and weapons systems on board are accurate. According to Navy  officials, these audits are supposed to be done periodically but none  were conducted between 1995 and 2000 because of budget constraints.  Officials said they are beginning to perform configuration audits again  and are developing an audit program, but its implementation will depend  on the funding available and whether funding is earmarked specifically for  audits. The officials estimated that a viable program might cost about  $500,000 a year. Without these audits, the extent of the configuration  records’ accuracy will remain unclear.
While audits have not been conducted for a period of time, validations— which are more in-depth than audits—of ships’ configuration data have  revealed problems with their accuracy. The Navy performs validations to  establish the precise configuration of critical systems and equipment that  is experiencing problems and corrects the configuration data (e.g., items  are added or deleted) to reflect what is actually found on board the ships.  Seven Pacific Fleet validations completed between October 2002 and  January 2003 identified inaccuracies averaging 37 percent of the records  reviewed. For example, Navy Pacific Fleet officials provided us with  information about a configuration record validation of a new ship  delivered to the fleet. The validation identified 901 errors (588 added and  313 deleted records) in the selected systems and equipment, or about  39 percent of the 2,337 configuration records that were reviewed. On an  older aircraft carrier, a January 2003 validation identified 3,712 errors  (1,790 added and 1,922 deleted records) in the selected systems and  equipment, or about 43 percent of 8,555 configuration records reviewed.
section_title: Parts Demand Data Are Frequently Incomplete and Out-of-Date
paragraphs: In addition to inaccurate ship configuration information, the Navy  frequently uses incomplete, outdated, or erroneous historical demand data  in its parts allowance models. This can lead to incorrect estimates of the  number of parts needed during a deployment period and result in unmet  supply goals. Historical parts demand data provides the projected failure  rates or actual replacement rates for spare parts over a long period of  time. Each repair part listed on the allowance list is expected to fail at  some point in normal ship operations during deployment and is a potential  allowance item. However, only those parts with sufficiently high projected  failure rates or actual replacement rates, along with items required for  planned maintenance or for safety measures, will normally be authorized  as onboard repair parts.
According to Navy officials, data on parts’ failure rates are supposed to  be accurately, promptly, and continuously updated, but this updating does  not always happen. In some cases, ship or shore personnel may not report  that a particular spare part has been used and, thus, the information does  not get into the supply system database. As a result, the Navy’s parts  allowance list will be based on incomplete, outdated, or erroneous  historical failure-rate data and the ship will stock too few or too many  spare parts of a particular type.
Our analysis of the requisitions on board deployed battle group ships  revealed that about 38 percent of the 60,365 unfilled requisitions were  mainly for parts that were on the allowance list, but were not in stock  when requisitioned (see app. III). Navy officials told us that this problem  could result partly from inaccuracies in the demand data that are used to  develop allowance lists. Officials also suggested that it could stem from  the inability of a ship’s crew to obtain a high percentage of the spare parts  on their allowance lists prior to deployment. However, our analysis  showed that, at deployment, Navy ships generally are stocked with a high  percentage of the types of parts (range) and the quantities of parts (depth)  that are on their allowance lists. Supply officials from the Navy’s Pacific  Fleet told us that their goal for surface ships was to stock 93 percent of the  range and 90 percent of the depth identified on their allowance lists and  that deploying ships, which were usually given a high funding priority,  generally deployed with percentages higher than these.
As table 3 shows, our analysis of data for the Lincoln battle group (Pacific  Fleet) deployed in fiscal year 2002 indicated that the ships were stocked  with an average of 98.1 percent of the different types of parts (range) and  an average of 93.1 percent of the quantities of each part (depth) that were  on their allowance lists, which included the parts expected to be needed  during the first 90 days of deployment (July to September 2002). In  contrast, during this period, an average of only 58.3 percent of the ships’  requisitions were filled from parts carried on board. This assessment  shows that, although these ships carried a high percentage of the types  and quantities of allowed items, they continued to fall short of meeting the  Navy’s supply effectiveness rate goal of 65 percent.
section_title: Spare Parts Supply Problems Can Affect Ship Operations and Mission Readiness and Increase Costs
paragraphs: The Navy’s spare parts supply problems can delay the completion  of needed maintenance and repair jobs on deployed ships and can  affect their operations and mission readiness, although their precise  impacts are not always well defined. Our analysis of data on more than  50,000 maintenance work orders for 6 battle group deployments in 1999  and 2000 indicated that about 58 percent were delayed because the  needed repair parts were not available on board ship. Our closer analysis  of maintenance work orders and casualty reports for one battle group  indicated a discrepancy in reporting the extent to which equipment  failures occurred and, thus, the extent to which these problems were  reflected in readiness assessments is unclear. The Navy’s supply problems  also have an impact on costs. Although the exact amounts have not been  quantified, Navy officials recognize that they incur substantial costs to  obtain needed parts from off-ship supply sources. The Navy also expends  substantial funds—totaling nearly $25 million for the six ships we  reviewed—to maintain large inventories that are not requisitioned during  deployments because it has given low priority to identifying and purging  unneeded spare parts from ship inventories.
subsections: section_title: Lack of Spare Parts Can Delay Needed Ship Repairs
paragraphs: Shortages of required parts can often delay the completion of  needed maintenance and repair jobs. Our analysis of more than  50,000 maintenance work orders opened during 6 recent battle  group deployments indicates that about 29,000 (almost 58 percent of  the total) could not be completed because one or more needed repair  parts were not on board ship. Table 4 summarizes this information.
Navy fleet officials told us that a maintenance job is generally not started  until all the needed parts are on board ship. This delay is due to the time  and labor involved in tearing down equipment and possibly losing parts if  equipment is left partially disassembled awaiting repair.
section_title: Data Unclear on Impact of Spare Parts Shortages on Ship Operations and Mission Readiness
paragraphs: A complete picture of the impact of the Navy’s spare part shortages,  however, is unclear because the Navy’s two forms of reporting on the  extent to which significant equipment malfunctions affect a ship’s  operations and mission readiness are inconsistent. The two forms of  reporting are high-priority maintenance work orders and casualty  reports. The Navy uses four priority codes for maintenance work,  with priorities 1, 2, and 3 considered high priority. High priority work is  defined as critical, extremely important, or important to a ship’s essential  equipment and systems, operations, or mission (see app. II for complete  definitions of these codes). Navy maintenance reporting instructions  require that any maintenance job with one of these three priority codes  should generate a casualty report. According to Navy guidance on casualty  reports, they are directly related to a unit’s readiness reporting and  identify the ship’s equipment status and impact on the ship’s operations  and mission readiness. Where casualty reports are issued, these problems  are to be reflected in a ship’s readiness reporting. Our review of about  4,000 casualty reports issued for deployed Pacific Fleet ships from 1999 to  2001 indicated that they generally resulted in degraded ship readiness, as  reported by the Status of Resources and Training System (SORTS).  SORTS is used DOD-wide to report the degree to which a unit is capable of  undertaking its assigned wartime missions.
However, our analysis of ship maintenance work orders and casualty  reports for one battle group (Truman) in the Atlantic Fleet deployed in  fiscal year 2000 showed a discrepancy between the number of work orders  with priority 1, 2, or 3 and the number of casualty reports that were filled  out when a job was assigned one of these priority codes. The work orders  indicated that, of 5,435 total maintenance jobs, 2,635 were identified as  priority 1, 2, or 3. Although there should have been a similar number of  casualty reports, only 906, or one-third of the 2,635, were issued for these  ships during this period of time. One must assume that a more complete  reporting of casualty reports, as required for high priority maintenance  work orders, would provide the basis for a more complete assessment  of readiness.
A similar discrepancy occurred between the number of high-priority  work orders and casualty reports issued for maintenance jobs on surface  ships in the Pacific Fleet between fiscal years 1995 and 2002. According  to a Pacific Fleet maintenance analyst, of about 1 million surface ship  maintenance jobs coded with priority 1, 2, or 3, only about 50,000 casualty  reports, or about 5 percent, were issued.
Although Navy guidance calls for up-to-date and accurate casualty reports,  Navy officials said that the final decision on whether to submit a casualty  report is left to the judgment of the ships’ commanders and is based on  their perception of the importance of the degraded equipment to the ships’  assigned missions and the status of redundant equipment that the ships  carry. Navy officials said that the number of casualty reports that are  issued should be higher, but they suggested that commanders’ concerns  that a high number of such reports could reflect negatively on their  leadership may limit the number of reports that are issued. For example,  we were told that casualty reports are usually not generated when ships  are getting ready to deploy; if too many are generated, it might be seen as a  failure of the ships’ command leadership.
Some ships that issued only a few minor casualty reports were found,  on closer inspection, to have significant ship operations and mission  readiness problems. For example, Navy ships are required to have periodic  inspections to determine if they are fit for further service and to identify  any conditions that limit their capability to carry out assigned missions.  Inspection reports we reviewed identified various deficiencies, such as  the failure of equipment to meet performance and safety requirements or  the need for excessive maintenance resources. During an inspection in  February 2002 of a destroyer forward-deployed in Yokosuka, Japan,  which had issued 16 low-priority casualty reports prior to the inspection,  inspectors gave the ship an unsatisfactory rating—the lowest possible  rating—in the areas of self-defense, full power, and steering tests; they  also found that it had significant material deficiencies and equipment  operational capabilities discrepancies. Inspectors told us such  discrepancies between casualty reporting and the actual conditions found  during the inspections of the ships were not uncommon.
section_title: Navy Incurs Substantial Costs to Obtain Off-Ship Parts and Maintain Large Inventories
paragraphs: Another effect of the Navy’s spare parts supply problems is increased  costs. The Navy expends additional funds to obtain needed spare parts  from off-ship sources. To get these parts, it must identify where they are  available (e.g., from a shore-based Navy supply center or a commercial  vender) and then transport them to the ship.
The Navy also incurs substantial costs to carry large parts inventories  that are not requisitioned. Our analysis of data for six ships in the Lincoln  battle group (Pacific Fleet) during deployment in 2002 showed that the  ships requisitioned only a small percentage of the different types of parts  carried on board. As shown in table 5, the ships carried a total of  62,727 different types of parts. By the end of 6 months, the supply crews  had received 10,471 requisitions for spare parts and filled 6,549 of them  from onboard stocks. This number (6,549) represented 10.4 percent of the  total part types carried on board. Navy fleet officials acknowledged that  ships generally carry many times more parts than are requisitioned during  their deployments and indicated that there are opportunities to reduce  inventories without adversely affecting ship operations if more accurate  data was available.
Furthermore, the Navy spent far more to carry this inventory of spare  parts than it spent for the parts that it actually used during the Lincoln  battle group’s 6-month deployment in 2002. Using available Navy data on  the value of the six ships’ onboard inventories, we estimated the value of  the inventory carried onboard ship be about $27.6 million and the value of  the used inventory to be about $2.9 million. See figure 1.
According to Navy supply officials, to minimize the inventory of unneeded  spare parts carried on board ships, ships could purge their existing  inventories periodically and revise the allowance parts lists based on  accurate configuration records, demand data, and allowance models. The  revised allowance would identify both shortages of needed parts and  excesses of unneeded parts. They said that allowance lists used to be  reviewed and updated periodically, but these reviews are no  longer performed. Although officials acknowledged that the inventory of  unneeded parts should be minimized, they said a higher priority has been  placed on correcting the shortages of needed spare parts because of their  impact on ships’ operations and mission readiness. They said that the  existing inventories of unneeded parts have already been purchased, and  the costs cannot be recouped.
section_title: Conclusions
paragraphs: The Navy’s long-standing failure to meet its spare parts supply  performance goals has led to shortages of needed parts on board  ships and some degradation in ships’ operations and mission readiness  during long deployments at sea. These shortages stem from the Navy’s  inability to determine, in a reliable way, what types of spare parts and  how many of each type need to be stocked on board ship. The Navy uses  inaccurate, out-of-date, or incomplete ship configuration and historical  demand information to develop the parts allowance lists that identify what  repair parts, manuals, and other related items a ship should carry in its  onboard inventory. Even though a ship may stock almost all of the parts  on the allowance list, it is likely to fall short of meeting the Navy’s  supply performance goals because the data used to develop the  allowance lists are inaccurate. When needed parts are not available on  board, a large number of repair jobs are delayed and equipment is not  functional—sometimes for weeks or months—until the ships’ crews can  obtain the parts from off-ship sources. Moreover, the Navy may not have a  complete picture of the actual impact that equipment downtime has on the  ships’ operations and mission readiness because of discrepancies in the  reporting systems the Navy uses to monitor these problems.
The Navy’s spare parts supply problems also substantially increase costs.  Because of inaccuracies in the information the Navy uses to develop its  allowance lists, it often stocks the wrong types or the wrong quantities  of parts on board ships. As a result, the Navy has to spend additional  money to obtain the parts it needs from off-ship sources, often incurring  high expenses to locate the parts and transport them to the ships. It also  expends substantial funds to maintain large inventories on board its ships  that are not requisitioned during deployments. However, the Navy has  given low priority to purging unneeded parts from its ships’ inventories  and, instead, has focused on purchasing additional spare parts to avoid  future shortages.
Until the reliance on poor ship configuration records and historical  demand information to identify what spare parts should be carried on  board is broken, the Navy’s deployed ships will continue to experience  critical spare parts shortages that undermine their ability to fulfill their  missions at sea.
section_title: Recommendations for Executive Action
paragraphs: In order to improve supply availability, enhance operations and mission  readiness, and reduce operating costs for deployed ships, we recommend  the Secretary of Defense direct the Secretary of the Navy to    develop plans to conduct periodic ship configuration audits and to ensure  that configuration records are updated and maintained in order that  accurate inventory data can be developed for deployed ships;    ensure that demand data for parts entered into ship supply systems are  recorded promptly and accurately as required to ensure that onboard ship  inventories reflect current usage or demands;    periodically identify and purge spare parts from ship inventories to reduce  costs when parts have not been requisitioned for long periods of time and  are not needed according to current and accurate configuration and parts  demand information; and    ensure that casualty reports are issued consistent with high priority  maintenance work orders, as required by Navy instruction, to provide a  more complete assessment of ship’s readiness.
section_title: Agency Comments and Our Evaluation
paragraphs: In written comments on a draft of this report, DOD concurred with three  recommendations and concurred with the intent of the fourth  recommendation, but not its specific action. DOD’s written comments are  reprinted in their entirety in appendix IV.
In concurring with our first recommendation, DOD said that, although the  Navy has an audit plan to look at current ship configurations and provide  updated allowance listings, the Navy needs to be more aggressive in  following up on configuration changes to ensure that the configuration  records on board ship match those in the Navy’s main configuration  database. At the time of our review, the procedures had not been validated  and reconciled, for example, with the high percentages of inaccuracies  identified during validations done to identify and correct problems;  moreover, sufficient funding to implement the program was not assured.  DOD also noted that the Navy recently set up a Maritime Allowancing  Working Group that is undertaking a comprehensive review of its current  inventory and allowance practices, including ship configuration  management. However, at the time of our review, the Navy had not  established time frames for reporting on this effort.
Although DOD concurred with our second recommendation, it asserted  that our report does not adequately substantiate our claim about the  accuracy of demand data. In our report, however, we cited Navy officials  who told us that spare parts’ failure rates, which rely on demand data, are  not always updated promptly or accurately. Moreover, 60,000 requisitions  for spare parts were not on ships in 6 battle groups deployed in fiscal  years 1999 and 2000 either because they were not on allowance parts  lists or were on these lists but were not in stock when requisitioned  (see app. III). Navy officials told us that such shortages occur in part from  relying on inaccurate demand data. DOD pointed out that many items on  the lists do not qualify for allowances. They said that these parts are not  stocked on board because of a ship’s designated repair capability, the  results of the readiness optimization calculation used in the sparing model,  and the forecast for demand falling below the sparing threshold. However,  these determinations also rely on accurate and timely demand data.
In concurring with our third recommendation, DOD said that the Navy  needs to undertake a more comprehensive program to identify and,  when appropriate, purge excess spare parts from ship inventories, but it  added that such efforts should not be based solely on parts demand  history. In our recommendation, we said that decisions to remove spare  parts from ship inventories should be based on both demand data and  current and accurate ship configuration information. DOD correctly  noted that critical items related to safety requirements and readiness  optimization should not be removed because they could jeopardize a  ship’s safety and mission. We support the Navy’s plan to focus initially on  identifying and purging those spare parts that support systems that are no  longer installed on board ships.
DOD concurred with the intent of our fourth recommendation that called  for the Navy to ensure that casualty reports are issued consistent with high  priority maintenance work orders as required by Navy instruction, to  provide a more complete assessment of ship’s readiness. We based our  recommendation on the Navy’s current maintenance instruction that calls  for casualty reports to be issued for certain high-priority maintenance  actions according to the level of importance that the failed equipment has  on a ship’s operations and mission. DOD said that casualty reports and  maintenance orders are inherently different in purpose, and the  instructions should be updated to ensure that casualty reports are  generated when deemed appropriate to get the attention required from the  logistics system. We believe that, while the instruction may need to be  updated or revised, the maintenance data that are gathered under the  current instruction are both relevant and important to the Navy’s ability to  assess fully a ship’s operations and mission readiness. In its response,  DOD said the Navy has emphasized the need to use standardized reporting  procedures and that fleet commanders have asked their commanding  officers to report on ship status accurately and in a timely manner through  the Status of Resources and Training System report.
We are sending this report to other interested congressional committees;  the Secretary of Defense; the Secretary of the Navy; and the Director,  Office of Management and Budget. We will also make copies available to  others upon request. In addition, the report will be available at no charge  on the GAO Web site at http://www.gao.gov/.
Please contact me on (202) 512-8412 if you or your staff has any  questions concerning this report. Key staff members who contributed to  this report were Allan Roberts, Lionel Cooper, Gary Kunkle, Joel Aldape,  Odilon Cuero, Dale Yuge, Jean Orland, and Nancy Benco.
section_title: Appendix I: Scope and Methodology
paragraphs: To identify the extent of spare parts shortages on deployed Navy ships,  we focused on spare parts requisitions by deployed battle groups in the  Atlantic and Pacific fleets during fiscal years 1999-2002. We analyzed  the Navy’s goal and supply effectiveness data from its Maintenance and  Material Management (3-M) Database Open Architectural Retrieval System  by identifying supply requisitions for repair parts that were either filled or  not filled from inventories on board deployed ships. We reviewed reports  regarding the Navy’s overall ability to fill onboard spare parts requisitions  on deployed ships between 1982 and 2001 in order to identify any long- term trends. We also reviewed the Navy’s goals and data on the average  customer wait-time for critical and noncritical parts on deployed ships  during fiscal years 1999 and 2002.
To determine the reasons for spare parts shortages, we analyzed Navy data  on unfilled requisitions for 6 battle groups deployed during fiscal year  1999-2000. We analyzed and categorized the reasons for parts shortages  based on the reported data. We also examined Navy policies and  procedures regarding ships’ spare parts, including the need for accurate  data and the impact of inaccurate data on the allowed parts carried on  deployed ships. We examined and discussed with Navy officials the  procedures that are used to ensure that accurate ship configuration  and demand data records are maintained and the circumstances that  can affect this accuracy. Moreover, we analyzed the reasons for the  differences between the spare parts provisions, (e.g., the range and depth)  and the amounts that are actually used to fill spare parts requisitions in  order to gain a better understanding of why the Navy’s provisioning  process does not more effectively and efficiently meet the deployed ships’  spare parts requirements.
To examine the impact of spare parts shortages on deployed ships’  operations and mission readiness, we analyzed data on maintenance work  orders and requests for spare parts that were not available on board the  6 battle groups during selected fiscal year 1999-2000 deployments.  Also, we reviewed the Navy’s criteria for assessing the effects of failed  equipment on a ship’s ability to accomplish its mission, particularly  the standards for determining what maintenance work orders result in  casualty reports. We then applied the criteria to maintenance work orders  for the Truman (Atlantic Fleet) battle group deployed in fiscal year 2000 to  identify those that should have resulted in casualty reports reflecting ship  operations and mission readiness. We compared the results of this analysis  with data on Navy casualty reporting to determine if the number of failed  equipment items meeting the criteria for reporting mission readiness  degradation were reported in accordance with Navy criteria, policies, and  procedures. We also reviewed data on casualty reports and SORTS data  submitted by deployed Pacific Fleet surface ships during calendar years  1999, 2000, and 2001 to determine if the casualty reports were reflected in  SORTS equipment readiness reporting. In addition, for six ships in the  Lincoln (Pacific Fleet) battle group deployed in fiscal year 2002, we  identified the total number of parts carried, both range and depth, and  compared this to the number of requisitions submitted and filled from  onboard inventories. We compared the Navy’s data on the estimated value  of the onboard inventory with the estimated value of the inventory actually  used in order to gain insight into the dollar impacts of carrying parts that  are not used during ships’ deployments. We discussed the results of this  analysis with Navy headquarters and fleet officials.
We reviewed Navy briefings and prior GAO reports regarding the effects  of parts shortages on Navy supply and maintenance actions, and we  discussed the Navy’s goals and initiatives intended to assess the effects  of parts shortages on ships’ operations and military readiness with Navy  officials at the various locations we visited. These locations included the  Naval Warfare Assessment Station, Corona, Calif.; the Fleet Technical  Support Center, the Naval Air Force, and the Naval Surface Force,  U.S. Pacific Fleet, San Diego, Calif.; the headquarters, U.S. Pacific Fleet  and the Submarine Force, U.S. Pacific Fleet, Pearl Harbor, Hawaii; the  Naval Supply Systems Command, its Naval Inventory Control Point, and  the Naval Sea Logistics Center, Mechanicsburg, Pa.; and Naval Sea  Systems Command and the office of the Chief of Naval Operations,  Washington D.C.
We performed our work from July 2002 to May 2003 in accordance with  generally accepted government auditing standards.
section_title: Appendix II: Navy Work Order Priority Code Descriptions
paragraphs: According to Navy maintenance reporting instructions, Navy ship crews  are required to identify maintenance work order priorities. High-priority  (Priority 1, 2, and 3) work orders affect equipment that is critical,  extremely important, or important for a ship’s operation. Any maintenance  job with one of these three priority codes is required to generate a casualty  report (CASREP). Casualty reports are directly related to a unit’s  readiness reporting and identify the ship’s equipment status and impact on  the ship’s operations and mission readiness.
Priority 1—Mandatory: Critical safety or damage control item.  Required for performance of ship’s mission. Required to sustain  bare minimum acceptable level of human needs and sanitation.  C-4 CASREP (Casualty Report) on equipment.
Priority 2—Essential: Extremely important safety or damage control  item. Required for sustained performance of ship’s mission. Required to  sustain normal level of basic human needs and sanitation. Required to  maintain overall integrity of ship or a system essential to ship’s mission.  Will contribute so markedly to efficient and economical operation and  maintenance of a vital ship system that the pay-off in the next year will  overshadow the cost to accomplish. Required for minimum acceptable  level of preservation and protection. C-3 CASREP on equipment.
Priority 3—Highly Desirable: Important safety or damage control  item. Required for efficient performance of ship’s mission. Required for  normal level of human comfort. Required for overall integrity of equipment  or systems that are not essential, but are required as backups in case of  primary system failure. Will contribute so markedly to efficient and  economical operation and/or maintenance of a vital ship system that  the payoff in the next year will at least equal the cost to accomplish.  Will effect major reduction in future ship maintenance in an area or  system that presently cannot be maintained close to acceptable  standards. Required to achieve minimum acceptable level of appearance.  C-2 CASREP on equipment.
Priority 4—Desirable: Some contribution to efficient performance.  Some contribution to normal level of human comfort and welfare.  Required for overall integrity of other than an essential system or its  backup system. Will contribute to appearance in an important area.  Will significantly reduce future maintenance.
section_title: Appendix III: Navy Reasons for Spare Parts Not Onboard Deployed Ships
paragraphs: Our analysis of the 60,365 unfilled requisitions from the deployments of  six battle groups in fiscal years 1999 and 2000 showed that there are a  number of reasons why the Navy might not stock needed parts on board  ship (see fig. 2). These unfilled requisitions represented 46 percent of all  131,855 requisitions submitted during these deployments. Our analysis of  the reasons identified in the Navy’s database showed that    about 17.3 percent (10,472) of the unfilled requisitions were for parts that  were not on the allowance parts list;    about 44.4 percent (26,787) of the unfilled requisitions were for parts that  were on the allowance parts list but the Navy decided not to carry them on  board; and    about 38.3 percent (23,106) of the unfilled requisitions were for parts that  were on the allowance parts list, the Navy decided to carry them, but they  were not in stock when needed.
section_title: Appendix IV: Comments from the Department of Defense