Defense Inventory: The Army Needs a Plan to Overcome Critical Spare Parts Shortages
Published: 2003-06-27T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: Prior reports and studies have identified major risks in the Department of Defense's (DOD) management, funding, and reporting of spare parts spending programs. Spare parts shortages adversely affect the U.S. Army's operations and can compromise the readiness of weapon systems. To address these issues, Congress has fully funded DOD's requests for spare parts spending and in some instances increased funding for additional spare parts. Yet, the Army continues to experience spare parts shortages. Congress requested that GAO evaluate (1) the Army's strategic plans for reducing spare parts shortages, (2) the likelihood that key initiatives will reduce such shortages, and (3) the Army's capability to identify the impact on readiness of increased investments for spare parts.
section_title: What GAO Found
paragraphs: The Army's logistics strategic plan provides strategic goals, objectives, and milestones for force transformation efforts, but does not specifically address the mitigation of critical spare parts shortages. The Army's Transformation Campaign Plan, published in April 2001, serves as a mechanism to move the Army from its present posture to a more strategically deployable and responsive force. The plan prescribes specific goals and milestones to support the transformation process. However, it lacks objectives and performance measures it could use to show progress in mitigating critical spare parts shortages. The Army's six servicewide logistics initiatives are aimed at enhancing readiness by improving internal business processes that would increase supply availability. However, they were not designed to mitigate spare parts shortages. These processes include those that acquire, repair, and distribute spare parts. Recognizing that the Armywide initiatives were not designed to specifically focus on mitigating critical shortages, the Army recently started a new initiative to address individual spare parts shortages that affect key weapon systems readiness. However, this initiative is not part of the Armywide logistics improvement efforts, and therefore it is not coordinated with other initiatives and its results are not linked with the overall goals and performance measures. Absent this coordination and linkage, any systemic problems that the initiatives identifies may not be elevated to the Armywide initiatives for resolution and its benefit may be limited to improving the availability of only a few parts. The Army has the means to link funding to weapon system readiness, and reports this in its budget justification documents, but it does not report to Congress how additional investments in spare parts would increase readiness. The Army Materiel Systems Analysis Activity can use models to indicate the investment needed to reach a desired level of supply availability, along with the possible corresponding increase in readiness, and it has provided such information to Army units. Additionally, the Army has used consultants to project the impact of additional funding on the readiness of specific weapon systems and provided this to the Army Vice Chief of Staff. For example, the Logistics Management Institute projected that anadditional investment of $331 million for additional spare parts would increase the overall readiness of the Apache and Blackhawk helicopters by approximately 2.6 percent.

section_title: Letter
paragraphs: The Army is now involved in a major effort to transform its forces to be  more deployable and responsive during the 21st century. Equipment  readiness is necessary to support this transformed force posture, and  adequate supplies of spare parts are critical to equipment readiness. The  Army is generally meeting or exceeding the Department of Defense’s  (DOD) overall supply performance goal of having parts available   85 percent of the time when they are requested. However, the Army  continues to experience a shortage of critical spare parts—those that  affect readiness for aviation and ground weapon systems—despite  spending $4.9 billion from its annual operations and maintenance  appropriations and supplemental funding totaling $225 million since fiscal  year 2001. While recognizing that spare parts shortages will never be  eliminated, it is reasonable to expect the services to place a priority on  efforts to mitigate (reduce) those shortages that adversely impact  readiness. This priority should be inherent in their overall planning and  stewardship of funds they request from Congress and their accountability  for making spare parts investment decisions that provide a good readiness  return. Since 1990, we have identified DOD’s inventory management as  high risk, because management systems and procedures were ineffective  and wasteful. In our January 2003 Performance and Accountability Series,  we wrote that DOD was experiencing equipment readiness problems  because of a lack of key spare parts, and we recommended that DOD take  actions to address those shortages. As recently as August 2002, DOD  recognized the need to overcome critical spare parts shortages and  recommended changes to improve the readiness of weapon systems.
This report is one of a series of reports that responds to your request that  we identify ways to improve the availability of high quality spare parts for  aircraft, ships, vehicles, and weapon systems. As agreed, this report  focuses on Army strategic planning efforts and initiatives to mitigate  critical spare parts shortages. More specifically, we focused our review on  the following questions:  1.  Does the Army’s strategic plan address the mitigation of critical spare  parts shortages—those that adversely affect readiness?   2.  Will key Army logistics initiatives likely mitigate spare parts shortages  that affect readiness?  3.  Does the Army have the ability to identify the impact on readiness of  increased investments for spare parts?
To accomplish these objectives, we analyzed Army strategic plans and  major initiatives identified by the Army that pertain to logistics and supply  support. We interviewed officials at Army Headquarters, Army Materiel  Command, Army Aviation and Missile Command, Tank and Automotive  Command, and the Army Materiel Systems Analysis Activity. Our criteria  for evaluating the Army’s strategy and initiatives included the Government  Performance Results Act (GPRA) of 1993, previous GAO reports, and  appropriate DOD reports and guidance.
subsections: section_title: Background
paragraphs: The Army’s vision for the 21st century mandates a land force that can  operate in joint, combined, and multinational formations to perform a  variety of missions, ranging from humanitarian assistance and disaster  relief to major theater wars. The Army’s vision also requires that it be  capable of putting a combat force anywhere in the world within 96 hours.  To meet these objectives, the Army states that it must transform into a  more deployable and strategically responsive force. This transformation  process also dictates that the Army reengineers its logistics processes to  increase responsiveness to its combat units and to provide the spare parts  needed to maintain equipment readiness.
In recent years, Congress has provided increased operations and  maintenance funding for DOD to enable military units to purchase spare  parts from the supply system as needed. For example, during fiscal years  1999-2002, Congress provided supplemental funding totaling $1.5 billion, of  which the Army received $170 million in 1999, $25 million in 2001, and  $200 million in 2002 to address spare parts shortages that were adversely  affecting readiness. The Army now projects that it will spend over   $7 billion during fiscal years 2003-05 to purchase spare parts for its combat  and support systems. The Army Chief of Staff’s list of programs that need  more funding indicates that the Army needs an additional $415 million to  sustain the forces in fiscal year 2003 and $263 million to sustain them in  fiscal year 2004 and according to an Army official, to support operations  Enduring Freedom and Iraqi Freedom. A portion of these amounts would  be used to purchase spare parts, but the Army did not provide a breakout  of how the funds will be allocated.
In July 2001, we reported that spare parts shortages in the Army were  adversely affecting operations, maintenance, and personnel. For example,  we reported that safety concerns and the lack of spare parts in 1999  prevented the Chinook and Apache helicopters from meeting their  mission-capable goals. To compensate for the lack of spare parts,  maintenance personnel used parts cannibalized from other equipment, an  inefficient practice that doubles the time needed for a single maintenance  effort. We also reported that the Army had major initiatives under way to  improve the availability of spare parts as part of an overall strategy to  revolutionize its logistics processes. The initiatives included improving  demand forecasts for spare parts, increasing the visibility and access to  spare parts Armywide, and reducing the time it takes to receive parts after  they have been ordered. At that time, we did not assess the extent to  which the initiatives might mitigate spare parts shortages.
DOD is also concerned about the adverse impact that spare parts  shortages have on the readiness of weapon systems. In an August 2002  report on its inventory management practices, DOD stated a desire to  improve supply management accountability by linking investments in  spare parts to readiness results in order to ensure that resources are  focused on optimal readiness gains. DOD noted that the models it uses to  determine inventory purchases are generally biased toward the purchase  of low-cost items with high demands instead of the items that would  improve readiness the most. The report recommended that the services  improve their ability to make inventory investment decisions based on  weapon system readiness. It also recommended that the services’ requests  for funds to increase inventory investments be justified based on the  corresponding increase in weapon system readiness.
section_title: Strategic Plan Addresses Transformation, but Not Mitigation of Critical Spare Parts Shortages
paragraphs: The Army’s current strategic plan provides strategic goals, objectives,  milestones, and performance measures for force transformation efforts.  However, it does not address how the service expects to mitigate critical  spare parts shortages that degrade equipment readiness. As shown in  figure 1, the Army published two plans during 2000 that were subsumed  into a single plan in April 2001. These plans provided guidance for  transforming the Army’s logistics to support forces that will be more agile  and responsive.
The Army’s Strategic Logistics Plan, published in May 2000, was designed  to implement the guidance in the Army Chief of Staff’s vision for its forces  in the 21st century. This plan outlined the major logistical requirements for  achieving a joint, combined, or multinational force that can be used for a  variety of missions, ranging from humanitarian assistance to major theater  wars. For example, a major goal of the plan was to achieve total asset  visibility, which was intended to give inventory managers information on  the location, quantity, condition, and movement of parts worldwide. Total  asset visibility would therefore allow managers to access and redistribute  parts in the Army’s inventory to meet immediate spare parts requirements.
In March 2000, DOD issued the Defense Reform Initiative 54, which  required each military service to submit an annual logistics transformation  plan. The Army’s effort was published in July 2000 as the Army Logistics  Transformation Plan. The purpose of this plan was to document, on an  annual basis, the planned actions and related resources for implementing  the Army Strategic Logistics Plan. Generally, the logistics transformation  plan outlined the interrelated activities necessary to support DOD’s four  intermediate objectives: (1) establish customer wait time as a supply  performance measure; (2) adopt a priority system that provides assets to  the commander by the required delivery date; (3) achieve accurate total  asset visibility of existing spare parts; and (4) field a Web-based system  that provides seamless, interoperable, real-time logistics information.
In April 2001, the Army published its Transformation Campaign Plan, an  all-encompassing document that serves as a mechanism for integrating  and synchronizing the necessary actions to move the Army from its  present posture to a future force that will be more strategically deployable  and responsive. The plan contains specific goals and objectives to provide  logistical support to deploy and sustain its forces across a full spectrum of  operations, and it incorporates the criteria for an effective strategy  contained in GPRA. Furthermore, according to Army officials, the Army  monitors the progress of its efforts to ensure that logistics decisions,  goals, and milestones complement and support the entire transformation  progress. For example, one strategic goal contained in the plan requires  the Army to be able to deploy a combat brigade in 96 hours. The plan  dictates that the Army measures its ability to deploy combat brigades by  employing major decision points at which senior leaders will evaluate  progress and decide whether adjustments need to be made to the original  combat brigade deployment strategy. However, there are no such strategic  goals, objectives, or performance measures in this Army plan relating to  monitoring and resolving critical spare parts shortages.
As shown in table 1, the plan contains 14 lines of operation—or broad  responsibilities—that describe closely related activities designed to meet  specific transformation objectives by established milestones.
Logistics requirements are addressed by line 9 in the plan, “Deploying and  Sustaining the Force.” Specifically, this line of operation addresses how to  transform Army support elements to make the service more strategically  responsive and reduce the cost for logistics without reducing war-fighting  capability.
section_title: Armywide Initiatives Improve Logistics Business Processes, but Are Not Focused on Mitigating Critical Spare Parts Shortages
paragraphs: The Army’s key logistics initiatives were designed to improve internal  business processes, but not specifically mitigate critical spare parts  shortages. Its ongoing six servicewide initiatives are primarily focused on  improving logistics business processes in the areas of (1) procurement and  repair of spare parts, (2) inventory management, and (3) supply operations  thereby improving supply availability. However, we could not determine  the extent to which they have reduced critical spare parts shortages.   The  Army recently started a separate, non-Armywide readiness enhancement  initiative that includes an effort to mitigate critical spare parts shortages.
subsections: section_title: Armywide Initiatives Are Aimed at Improving Logistics Overall
paragraphs: The Army’s six major initiatives are expected to improve overall logistical  support for its units by focusing on improving logistics processes in order  to be more responsive and effective in meeting customer needs. Table 2  summarizes the Army’s initiatives by focus area along with the expected  improvements to logistics operations.
The Army’s Partnership, Recapitalization, and National Maintenance  Program initiatives are intended to improve the parts supply process,  reduce demand through modernization of major weapon systems, and  provide uniform repair standards. The expected improvements are being  measured in a variety of ways, but none measure or track increases in  supply availability and readiness rates. Without such measures, we could  not determine the extent to which the initiatives have significantly  reduced critical spare parts shortages.
The Army is forming partnerships with manufacturers to provide spare  parts and technical assistance directly to the applicable maintenance  depot in order to improve depot-level repair of selected weapon systems  and to improve the depot’s performance in supplying repaired parts. The  Army has formed partnership agreements with General Electric Aircraft  Engines, Sikorsky Aircraft Corporation, Boeing, Parker-Hannifin,  Honeywell, Rolls Royce, and Bell Helicopters. Some of these companies  have agreed to provide spare parts and technical assistance directly to the  Corpus Christi Army Depot, where depot-level repair is performed for the  Apache and Chinook helicopters. According to an Army official, these  agreements are beneficial for the Army as well as the industry partners.  The Army improves repair operations and saves money by obtaining   hard-to-get, sole-source parts and technical assistance for a negotiated  cost, and the industry partner is able to keep production lines open by  relying on steady demands from the Army. The Army official said that the  partnership initiatives have resulted in significant improvements to its  depot repair operation. For example, the average elapsed time before the  engine in the Apache and Blackhawk helicopters would fail has improved  from about 400 hours to about 1,140 hours. Moreover, the repair-cycle  time for components in the partnership program has decreased from 360  to 95 days, thereby decreasing the demand for spare parts by providing  units with more reliable equipment and achieving more efficient supply  performance. The Army’s Recapitalization Program is expected to return  17 selected legacy weapon systems to like-new condition by rebuilding  and upgrading them at maintenance depots over time as funds become  available. Specifically, the Recapitalization Program is intended to   (1) extend the service life of the equipment; (2) reduce operating and  support costs; (3) improve reliability, maintainability, safety, and  efficiency; and (4) enhance capabilities. The Army began recapitalizing a  limited number of the weapon systems in fiscal year 2002, with full-scale  operation beginning in fiscal year 2003 (see app. I for a list of systems). In  fiscal year 2003, the Army fully funded the initial spare parts requirements  of the Recapitalization Program, investing at least $419.7 million of its  operations and maintenance funding to run the program. An Army official  said that about $200 million was taken from the Recapitalization Program  to help with the Iraq war, but the program will be reimbursed from the  supplemental appropriation. According to Army officials, recapitalizing  Army weapon systems will initially increase the demand for spare parts  because new parts will be used for equipment that is cycled through the  rebuilding and upgrading process. However, in the long term, the like-new  equipment should be more reliable and the demand for spare parts should  decrease.
The National Maintenance Program is expected to establish, by fiscal year  2005, a single national standard for the repair of equipment components  and spare parts. The program’s overhaul standard is generally higher than  the variety of standards held by individual repair units, and consists of  restoring components and spare parts to a nearly like-new condition. This  condition includes the restoration of the part’s original appearance,  performance, and life expectancy. The National Maintenance Program is  intended to help sustain the weapon systems that have undergone  overhauls and rebuilds through the Army’s Recapitalization Program. In  fiscal years 2001 and 2002, the Army obligated $70 million and $16 million,  respectively, for the development of maintenance standards and program  support. The Army has completed overhaul standards for 521 items and is  expected to complete standards for the remaining 272 items by fiscal year  2005. The expected benefit of the National Maintenance Program is that a  single higher repair standard for components and spare parts will enhance  weapon system readiness and reduce the demand for spare parts.
subsections: section_title: Inventory Management Initiatives Are Designed to Improve Visibility and Customer Support
paragraphs: The Army is improving inventory management through its Single Stock  Fund and Logistics Modernization Program initiatives, which are intended  to provide better visibility over spare parts in the inventory, improved  spare parts requirements determination, and an enhanced inventory  distribution process. Like the procurement and repair initiatives discussed  above, these initiatives do not measure progress in reducing critical spare  parts shortages that impact readiness.
In response to a recommendation in our 1990 report, the Army approved  a business process reengineering initiative called the Single Stock Fund in  November 1997. The Single Stock Fund is aimed at improving inventory  management by (1) providing worldwide visibility and access to spare  parts down to the installation level, (2) consolidating separate national and  installation level inventories into a single system, and (3) integrating  logistics automated information systems and financial automated  information systems. The Single Stock Fund streamlines and where  needed, eliminates multiple financial transactions that have previously  caused numerous inefficiencies in duplicate automated legacy systems.  The visibility of worldwide supply items allows managers to calculate  worldwide spare parts requirements and increases the volume of inventory  that is available for redistribution to meet priority readiness requirements.  For example, the Secretary of the Army testified in 2003 before the Senate  Armed Services Committee that from May 2000 through November 2002,  the Single Stock Fund made it possible to redistribute inventory valued at  $758 million. He further stated that the Single Stock Fund reduced  customer wait time by an average of 18.5 percent.
The Logistics Modernization Program is aimed at improving inventory  management by modernizing the Army’s 30-year-old national and retail  logistics automated business processes and practices. The Logistics  Modernization Program is intended to provide an automated system with  real-time capabilities for managing wholesale and retail inventories by  modernizing and integrating about 30 legacy logistics databases. The  program includes about 47 new forecasting methodologies to enable  managers to better forecast demands for spare parts. The Logistics  Modernization Program’s integrated automated systems should reduce  supply-cycle time and provide managers with the ability to better support  customers by tracking spare parts requisitions from the time the  requisition is submitted until the customer receives the part. Moreover, the  program is to work in tandem with the Single Stock Fund to provide  worldwide visibility of supply assets in real time. The Army Materiel  Command plans to roll out the Logistics Modernization Program over the  next several years, with the first phase of implementation scheduled in  early 2003. The program’s measures of success include reducing   supply-cycle time, but not supply availability and equipment readiness.
section_title: Supply Operations Initiative Is Designed to Reduce Spare Parts Delivery Time
paragraphs: The Army is also trying to improve its supply operations and reduce the  time it takes to deliver spare parts to customers through the Distribution  Management initiative. Distribution Management is an Armywide  initiative established in 1995 to improve supply operations by developing a  faster, more flexible, and efficient logistics pipeline. The initiative’s overall  goal is to eliminate the unnecessary steps in the logistics pipeline that  delay the flow of parts through the supply system. Distribution  Management currently uses two teams—the Distribution Process  Improvement Team and the Repair Cycle Process Improvement Team—to  monitor progress and spearhead continuous improvements within their  respective areas of responsibility. However, the extent to which supply  availability has been improved is not clear because neither team tracks  this as measures of success.
The Distribution Process Improvement Team promotes initiatives to  improve the Army’s inventory distribution processes, including customer  response, inventory planning, warehouse management, transportation, and  supply. For example, the team initiated dollar-cost banding, a new stock  determination algorithm that has improved inventory performance.  Traditionally, Army units have used a “one-size-fits-all” approach for  determining whether or not to stock a particular spare part. Consequently,  an item not currently stocked would need nine requests in the prior year to  be stocked on the shelf, regardless of its criticality to equipment readiness.  This criterion was applied equally to a 10-cent screw and to a $500,000  tank engine. The dollar-cost banding approach, however, allowed  inventory managers to stock a mission-critical item with only three  requests, rather than nine. The Army has credited this concept with  decreasing customer wait time and increasing equipment readiness.
The Repair Cycle Process Improvement Team strives to improve the  Army’s maintenance processes through such initiatives as the equipment  downtime analyzer, a computer system that links supply and maintenance  performance to equipment readiness. The analyzer examines equipment  maintenance operations and the supply system to identify problem areas  as well as the functions that are working well in the maintenance process.  This capability enables managers to quickly diagnose the root of the  problems and to develop solutions to help maximize the future  effectiveness of the maintenance process. For example, in one case, the  apparent reason for a tank not being mission ready for 18 days was that  the maintenance personnel were waiting for the supply system to provide  a part. The equipment downtime analyzer revealed the following:  (1) because the supply system initially provided the wrong part, a second  part had to be ordered; (2) because maintenance personnel did not initially  realize that the part was needed, a third part was ordered late; and   (3) maintenance personnel finally decided, on day 18, to stop waiting for  the part to be delivered by the supply system and took action to obtain it  from another tank that was not mission ready in order to complete the  maintenance process.
section_title: A Separate Army Initiative Explicitly Addresses Critical Spare Parts Shortages
paragraphs: Although the Army is generally meeting or exceeding it overall supply  performance goal of having parts available 85 percent of the time when  they are requested, the Army continues to experience critical spare parts  shortages that affect equipment readiness. For example, in a July 2001  report on Army spare parts shortages, we identified 90 components or  assemblies for the Apache, Blackhawk, and Chinook helicopters for which  the Army was experiencing critical spare parts shortages. The Army  began a new initiative, separate and apart of the Armywide initiatives, to  take management action on individual critical spare parts shortages.  However, because it is not a part of the Armywide initiatives, it is not clear  how it will be effectively integrated with them to maximize mitigating  critical spare parts shortages and improve readiness.
The new Army initiative to address spare parts shortages that are most  essential to equipment readiness, entitled the “Top 25 Readiness Drivers,”  began in October 2002. For each of its 18 major combat systems, the Army,  on an ongoing basis, has been identifying the top 25 components or spare  parts that are key to the systems’ readiness. Of the total 450 spare parts,  the Army had identified as critical to equipment readiness in February  2003, 291 or 65 percent of the parts were stocked below the required level.  Twenty-nine percent or 132 of these parts were in the Army’s lowest  inventory category—those for which there is less than 1½ month supply.  Major commands report the inventory status of these spare parts to the  Army Materiel Command, who in turn presents a consolidated report to  the Army Deputy Chief of Staff for Logistics every 2 weeks. A review group  headed by the Deputy Chief of Staff for Logistics initiates possible actions  that can be taken to mitigate the most severe spare parts shortages among  the top spare parts or components.
This new Army initiative is a movement in the right direction to address  critical spare parts shortages; however, it remains unclear the extent to  which this initiative will mitigate critical spare parts shortages and  improve equipment readiness. The initiative’s effectiveness may be limited  because its efforts and results are not linked to or coordinated with the  goals and metrics of the Army’s other initiatives as part of an overall  approach to mitigating critical spare parts shortages in the future.
section_title: Army Can Identify Readiness Impact of Additional Investment and Needs to Report This to Congress
paragraphs: While the Army has the means to link funding to a corresponding level of  readiness and reports this information in budget justification documents  (see app. II), it does not report how additional funding requests for spare  parts might impact readiness to decisionmakers such as Congress. The  Office of the Secretary of Defense has recommended that the services  provide such information when requesting additional funds in the future.
The Army has reported that its models correlate the impact of investments  in spare parts on supply availability. However, because of various other  factors such as maintenance capacity and training requirements that affect  equipment status, the models can only estimate the impact of the  additional investment on weapon system readiness. The Army Materiel  Systems Analysis Activity uses the Supply Performance Analyzer Model  and the Selected Essential-Item Stockage for Availability Method Model to  determine the investment needed to reach a weapon system’s desired  supply availability rate. Information from these models has been supplied  to individual units to assist in inventory investment decisions.  In addition,  the Army used an outside consultant to analyze the impact additional  investment in spare parts would have on readiness. For example, to  support a briefing to the Army Vice Chief of Staff in March 2001, the  Logistics Management Institute completed an analysis for the Army  showing that an additional $331 million for spare parts would increase the  mission-capable rate for the Apache and Blackhawk helicopters by   2.6 percent. According to Army officials, the correlation between  additional investments in spare parts and readiness is not exact because  other factors such as maintenance capacity and training requirements  impact readiness.
Despite having the means to determine how additional funding might  affect readiness, the Army does not provide such analyses to Congress as  part of its funding requests. For example, in the justification for the fiscal  year 2002 budget, the Army requested and received $250 million to  purchase additional spare parts. Moreover, the Army sent correspondence  to the House Committee on Armed Services showing that an additional   $675 million was needed for spare parts during fiscal year 2002. However,  in neither case did the Army provide analysis to Congress showing how  the additional funding might affect readiness. The June 2002 Financial  Management Regulations provided a template for reporting the funds to be  spent on spare parts by weapon system as part of the budget submission.  The benefit of reporting such a link was cited in an August 2002 Office of  the Secretary of Defense study that recommended that future requests for  additional funds to increase spare parts inventories be justified in budget  documents submitted to Congress based on the corresponding increase in  weapon systems readiness.
section_title: Conclusions
paragraphs: The Army’s Transformation Campaign Plan serves as a mechanism to  transform the Army’s forces from its present posture to a more  strategically deployable and responsive force. The plan prescribes specific  goals and milestones to support this transformation process, but it lacks  specific focus on mitigating spare parts shortages.  In addition, the  Armywide initiatives to improve the procurement and repair of spare  parts, inventory management, and supply operations do not focus on  mitigating critical spare parts shortages. Without a strategy or Armywide  initiatives focused on the mitigation of critical spare parts shortages and  their impacts on equipment readiness, the Army cannot ensure that it has  appropriately addressed shortages in those parts that would give them the  greatest readiness return.  Furthermore, while some of the Army’s logistics  initiatives might increase the availability of spare parts in general, the lack  of specific and effective measures of performance will limit the Army’s  ability to ascertain progress in mitigating spare parts shortages that are  critical to equipment readiness. Finally, the Army has the means to  determine how funding might impact parts availability and equipment  readiness as part of its stewardship and accountability for funds, but has  not provided this information to Congress when it requests additional  funding. Without such information that links additional spare parts  funding to readiness and provides assurance that investments are based on  the greatest readiness returns, Congress cannot determine how best to  prioritize and allocate future funding.
section_title: Recommendations for Executive Action
paragraphs: We recommend that the Secretary of Defense direct the Secretary of the  Army to    modify or supplement the Transformation Campaign Plan, or the  Armywide logistics initiatives to include a focus on mitigating critical  spare parts shortages with goals, objectives, milestones, and  quantifiable performance measures, such as supply availability and  readiness related outcomes and  implement the Office of Secretary of Defense recommendation to  report, as part of budget requests, the impact of additional spare parts  funding on equipment readiness with specific milestones for  completion.
section_title: Agency Comments and Our Evaluation
paragraphs: In written comments on a draft of this report, DOD generally concurred  with the intent of both recommendations, but not the specific actions we  recommended.  DOD’s written comments are reprinted in their entirety in  appendix III.
In concurring with the intent of our first recommendation, DOD expressed  concern that because spare parts shortages are a symptom of imperfect  supply management processes, its improvement plans must focus on  improving these processes rather than on the symptoms.  According to  DOD, the Army’s Transformation Campaign Plan correctly focuses on  transforming the Army’s forces and equipment from its present posture to  a more strategically deployable and responsive objective force.   Furthermore, DOD also stated that the Armywide logistics initiatives  correctly focus on improving procurement, repair of spare parts, inventory  management, and supply operations.  DOD also noted it has/is taking  several actions.  The “Top 25 Readiness Drivers” initiative, which  addresses specific stock numbers that affect its major weapon systems,  has been added to the metrics in the Army’s Strategic Readiness System.   Milestones for logistics initiatives would be added to the Army’s  Transformation Campaign Plan. Also, spares shortages will be tracked in  the Strategic Readiness Systems and logistics initiatives will be tracked in  the Transformation Campaign Plan.  Therefore, DOD does not agree that  the Army needs to modify its Transformation Campaign Plan or the  Armywide logistics initiatives to focus on spare parts shortages.
We do not believe that these actions alone are sufficient to meet our  recommendation.  We endorse the Army’s efforts to add related metrics to  its Strategic Readiness System and milestones for its logistics initiatives to  the Transformation Campaign Plan.  Further, our report recognizes that  the Army’s plan focuses on improving the Army’s force transformation  efforts and that improving logistics processes is part of the solution to  mitigating spare parts shortages. However, the intent of our  recommendation was for the Army to include in its Transformation  Campaign Plan or servicewide initiatives a focus on mitigating critical  spare parts shortages. As our report clearly points out, without a focus on  mitigating critical spare parts shortages with goals, objectives, and  milestones included in the strategic plan or Armywide initiatives, we  believe there is increased likelihood that the Army’s progress will be  limited because it efforts may be ineffective or duplicative in mitigating  spare parts shortages that are critical to equipment readiness. Therefore,  we believe implementation of our recommended actions is necessary to  ensure improved readiness for legacy and future weapon systems.
In concurring with the intent of our second recommendation, DOD stated  that the Army would begin implementing the recommendation by  providing mission-capable rates during the upcoming mid-year budget  review consistent with the June 2002 updated budget exhibit in the  Financial Management Regulation.  DOD also states that the Army will  fully comply with the August 2002 inventory management study reporting  recommendation when the required data becomes available.
We support the Army’s effort to report mission-capable rates for its  weapon systems.  However, we are concerned that the Army has not set a  deadline for fully implementing the recommendation. Providing this  valuable information to Congress in a timely manner is an important step  in placing a priority on efforts needed to mitigate spare parts shortages as  part of the Army’s overall stewardship of funds and accountability for  making spare parts investment decisions that provide a good readiness  return. We have therefore modified our second recommendation to  include a provision that the Army establish milestones for fully  implementing the recommendation from the August 2002 inventory  management report.
section_title: Scope and Methodology
paragraphs: To determine whether the Army’s strategic plans address mitigating spare  parts shortages, we obtained and analyzed Army planning documents that  pertained to spare parts or logistics. We focused our analysis on whether  these strategic plans addressed spare parts shortages and included the  performance plan guidelines identified in GPRA. We interviewed officials  in the Office of the Army Deputy Chief of Staff for Logistics, and the Army  Transformation Office to clarify the content and linkage of the various  strategic plans.
To determine the likelihood that Army initiatives will achieve their  intended results and contribute to the mitigation of spare parts shortages  to improve readiness, we obtained and analyzed service documentation  and prior GAO reports on major management challenges and program  risks and on the Army’s major initiatives that relate to spare parts or  supply support. We focused our analysis on whether the initiatives  addressed spare parts shortages and the need for quantifiable and  measurable performance targets as identified in GPRA. We also  interviewed officials in the Supply Policy Division, Army Deputy Chief of  Staff for Logistics; Army Materiel Command; Army Aviation and Missile  Command; Army Tank and Automotive Command; and Combined Arms  Support Command. We obtained and analyzed Army data pertaining to  spare parts availability, spare parts back ordered, and specific spare parts  that are affecting equipment readiness.
To determine the extent to which the Army identifies how additional  investments in spare parts affect supply support and readiness, we  obtained and analyzed documentation on the Army’s needs for additional  funding to purchase spare parts. We analyzed the Army’s budget  justification for the funding needed for spare parts for the years 2004 and  2005. We obtained the results of prior analyses showing how additional  funding might affect readiness. However, we did not independently  validate or verify the accuracy of the Army’s models that show the  relationship between funding, supply performance, and readiness.
We also visited and interviewed officials at the Army Materiel Systems  Analysis Activity and considered DOD’s recommendations in its August  2002 Inventory Management Report.
We performed our review from August 2002 through March 2003 in  accordance with generally accepted government auditing standards.
We are sending copies of this report to the Secretary of Defense, the  Secretary of the Army, and other interested congressional committees and  parties. 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) 512-8365 if you or your staff has any questions  concerning this report. Major contributors to this report are included in  appendix IV.
section_title: Appendix I: Army Recapitalization Systems
subsections: section_title: Aviation
section_title: Combat
section_title: Combat Support
section_title: Combat Service Support
section_title: Appendix II: Army Working Capital Fund Fiscal Year 2004/2005 Biennial Budget Estimates Supply Management
section_title: Appendix III: Comments from the Department of Defense
section_title: Appendix IV: GAO Contacts and Staff Acknowledgments
subsections: section_title: GAO Contacts
section_title: Acknowledgments
paragraphs: In addition to those named above, Robert L. Coleman, Alfonso Q. Garcia,  Susan K. Woodward, Robert K. Wild, Cheryl A. Weissman, Barry L. Shillito,  and Charles W. Perdue also made significant contributions to this report.