Prepositioning is an important part of DOD’s overall strategic mobility framework. It allows DOD to field combat-ready forces in days rather than the weeks it would take if the forces and all necessary equipment and supplies had to be brought from the United States to the location of the conflict. The U.S. military can deliver equipment and supplies in three ways: by air, by sea, or by prepositioning. While airlift is fast, it is expensive to use and impractical for moving all of the material needed for a large-scale deployment. Although ships can carry large loads, they are slower than airlift. Prepositioning lessens the strain of using expensive airlift and reduces the reliance on slower sealift deliveries. The value of prepositioned stocks was demonstrated during operations in Iraq. The military used equipment and supplies stored at land sites in the region and offloaded much of the stocks from its prepositioning ships. Having the equipment prepositioned allowed troops to fly in, deploy rapidly, and train with prepositioned equipment before beginning combat operations in Iraq. As the ongoing war has depleted those items, the Army is in the process of reconstituting its prepositioned equipment and supplies. The Department of the Army provides strategic-level guidance for the Army’s prepositioned stock program and allocates funding for prepositioned stock requirements. The Army Materiel Command provides the overall management of the Army’s prepositioned stocks program. Within Army Materiel Command, the Army Sustainment Command manages the operations and maintenance of the program, and issues the stocks in theater in support of contingency operations or exercises. At each prepositioned stock location, the Army Sustainment Command also provides an Army Field Support brigade and battalion for day-to-day maintenance and operational management of the program. The Army’s prepositioning program involves three primary categories of stocks stored at land sites and aboard prepositioning ships: combat brigade sets, war reserve sustainment stocks, and operational projects as described below. Are designed to support 3,000 to 5,000 soldiers. Include heavy weaponry such as tanks and Bradley fighting vehicles. Include support equipment such as trucks and High Mobility Multi- purpose Wheeled Vehicles. Include spare parts and other sustainment stocks to support the early stages of a conflict. War reserve sustainment stocks include Items to sustain the battle unit until resupply can be ramped up to wartime levels and arrive in theater. War Reserve Secondary Items include rations, clothing and textiles, construction and barrier materiel, medical supplies, repair parts, and major assemblies (reparables and consumables). Authorized material above unit authorizations designed to support Army operations or contingencies. Equipment and supplies for special operations forces, bare base sets, petroleum and water distribution, mortuary operations, and prisoner- of-war operations, among others. The Army’s April 2006 report to Congress on the status of its prepositioned program addressed the areas required by Congress, but the Army has significantly shifted its prepositioning strategy since then. The Army’s report included descriptions of operational capabilities as outlined in the Army Prepositioned Stocks Strategy 2012; addressed the maintenance condition of prepositioned equipment; and noted recent efforts to improve management and maintenance oversight of the program, including forming an independent inspection team. However, since the report’s publication, the Army has begun a reexamination of its overall prepositioning strategy. According to the Army, this shift was based on insights gained from the 2006 Quadrennial Defense Review, but Army officials told us that recent budget reprogramming decisions and worsening Army-wide equipment shortfalls also influenced the reexamination. The Army concluded that its Prepositioned Stocks Strategy 2012 was no longer viable and began work on a revised strategy that was approved by Army leaders in late August 2006 and is expected to be completed by the end of 2006. The Army’s report to Congress addressed the required areas included in the National Defense Authorization Act for Fiscal Year 2006. The Army determined that over $4 billion would be needed to fill equipment, secondary item, and facility shortfalls. The Army reported that additional covered storage and maintenance space was needed at prepositioning sites in Southeast and Northeast Asia as well as at the Charleston, South Carolina, facilities used to maintain afloat stocks envisioned under the 2012 strategy. Further, it indicated that the facilities in Europe would be sufficient to meet the prepositioned requirements once the construction project in Italy was completed. The equipment sets at each location were at a high percentage of mission capability, it reported, with the exception of Kuwait. The equipment sets in Kuwait had been issued in support of Operation Iraqi Freedom and Operation Enduring Freedom, and by 2006 had a low mission-capability rate. It did stipulate, however, that the equipment set was undergoing repair, recapitalization, and replacement. Regarding the program’s management and maintenance oversight, the report acknowledged that weaknesses in the quality control program had been revealed by both internal and external audits, including GAO’s September 2005 report. The Army Sustainment Command created the Logistics Support and Evaluation Team to address identified quality control problems. According to the Army report, the team provides an additional layer of review to ensure that the Army Prepositioned Stock readiness levels reported are accurate and that sufficient quality assurance measures are in place. Since the release of its report to Congress in April 2006, several decisions led the Army to conclude that its existing strategy was no longer viable. In particular, an internal DOD reprogramming action required the Army to offload a Heavy Brigade Combat Team equipment set stored on a prepositioned ship and redistribute it to meet existing equipment shortfalls and reduce costs. The Army had two equipment sets already aboard prepositioned ships and planned to upload a third set in 2013. The reprogramming action directed the Army to offload the third equipment set. However, because the third equipment set had not yet been created, the Army decided to offload one of the existing equipment sets instead to meet the reprogramming guidance. This decision effectively reduced the Army’s program in the near term from two to one heavy brigade combat team afloat, with implications for the operational plans of the regional combatant commanders. Several factors combined to create a ripple effect that impacted the viability of the Army Prepositioned Stocks 2012 Strategy. First, the department told us the Army changed its strategy based on insights gained from the 2006 Quadrennial Defense Review. Also, Army officials told us that equipment shortfalls made it difficult for the Army to meet the requirements in the strategy at least partly because Army prepositioned stock equipment was continuing to be drawn to support ongoing operations. Also, the Army transformation to modularity exacerbated shortfalls in certain types of equipment and created excesses in others. In addition, the Army eliminated most of the remaining facilities and prepositioned stocks from Western Europe but was completing a new maintenance and storage facility in Italy which needed a mission. As a result, the Army’s 2006 report was outdated soon after its publication and should not be used by Congress or DOD for funding decisions. The future success of the Army’s prepositioning program depends not only on how well the Army aligns its efforts with those of the department as a whole, but also on how well long-standing management issues are addressed as the new strategic plan is implemented. The Army expects to finalize its implementation plan for the revised Prepositioned Stocks Strategy 2013 by December 31, 2006, but DOD will not complete its departmentwide strategy before mid-April 2007. Further, problems persist with the Army’s management of its secondary item and operational project stocks programs, including lingering questions about the overall requirements and the lack of reliable readiness measures for these programs. In addition, the lack of a comprehensive prepositioning storage and maintenance facilities plan contributes to increased maintenance costs and uncertain future facility requirements. Finally, the Army has not demonstrated adequate oversight to ensure the proper maintenance condition of prepositioned stocks. The Army is developing a new prepositioning strategy to address recent decisions that have affected the viability of its existing plan. According to Army officials, the new strategy is intended to promote greater flexibility in the use of prepositioned stocks while concurrently increasing the Army’s access to unstable areas. While continuing to rely on stocks in South Korea, the proposed strategy includes significant changes to the program—among them, less reliance on heavy combat equipment afloat and expanded reliance on heavy equipment in Kuwait, Qatar, and Italy. The Army’s draft revisions to its prepositioning strategy were approved by the Army Vice-Chief of Staff in late August 2006. The Army established an Integrated Process Team to develop a comprehensive implementation plan for the new strategy and to provide direction to working groups that would assess the areas of strategy, capabilities, equipping, facilities, and funding. The Army plans to have this task completed by late December 2006. However, since the Army’s Integrated Process Teams were still performing their work, we could not evaluate progress at the time we completed our review. DOD has efforts underway that will address gaps identified in GAO’s September 2005 report but have implications for the Army’s efforts. First, to address gaps in departmentwide oversight, DOD convened a working group that includes representatives from the Office of the Secretary of Defense, Joint Staff, Defense Logistics Agency, the Army, Joint Forces Command, and the other services to develop joint doctrine for the prepositioning programs. This group was also working to update the departmental-level directive that describes responsibilities and provides broad guidance to the services during our review. While the efforts begun by this group represent progress, DOD had not yet developed joint doctrine for the program at the time we completed our work. Second, DOD also initiated a study in the spring of 2006 to address the need for a departmentwide prepositioning strategy to guide the department’s future prepositioning efforts. This study was a follow-on to the 2005 Mobility Capabilities Study that, while identifying the importance of prepositioning in meeting mobility objectives, along with interrelated airlift, sealift, and basing decisions, recognized the need for further analysis of prepositioning. Thus, the DOD-wide prepositioning study will determine how and what prepositioned equipment should be used and whether the prepositioned assets are in the best locations to support the department’s priorities and posture plans. According to DOD officials, this DOD-wide prepositioning study was not scheduled to be finished until the spring of 2007 at the earliest. However, on October 17, 2006, Public Law 109-369 was enacted directing the Secretary of Defense to complete its DOD-wide prepositioning strategy by mid-April 2007. DOD and Army officials told us during the course of our review that they discuss such strategy issues during their joint working group meetings and felt that they have coordinated their prepositioning plans. However, if the two strategies are not synchronized, DOD could be limited in developing an optimal DOD-wide strategy because the Army strategy already exists. Alternatively, the Army could be at risk of filling requirements that will be superseded when the DOD-wide strategy is ultimately issued. In fact, DOD anticipates that when the DOD-wide strategy is issued the Army will have to modify its service-specific prepositioning strategy to align with the new requirements. Finally, since prepositioning is interconnected with airlift, sealift, and overseas basing, the Army’s decisions will have an as-yet undetermined effect on lift requirements and basing. Despite recent efforts to improve requirements setting, the Army has not yet determined reliable secondary item and operational project requirements. In its efforts to reassess secondary item requirements, the Army ran its requirements-determination model, called the Army War Reserve Automated Process, in 2005. It had not previously run the model since 1999, even though Army guidance at that time called for requirements to be updated every 2 years. Because the model yielded questionable outputs, Army officials told us they were conducting a management review to scrub the requirements and help to determine investment priorities. Army officials said they expect requirements to be significantly adjusted as a result of their reviews. For example, the Army has already lowered the U.S. Army Europe meals-ready-to-eat stockage levels to match the smaller force structure there. This action resulted in over 1 million meals being made available to fill other high-priority requirements. In addition, the Army War Reserve Automated Process that is used for computing secondary item requirements will now be updated annually instead of biennially. Addressing these problems is critical for ensuring Army readiness in future conflicts. Experiences in Iraq showed that prepositioned secondary item stocks did not adequately support the troops in combat operations. Secondary items encompass a wide range of inventory, including critical readiness-enabling spare parts. In 2005, we reported that inaccurate requirements and insufficient funding led to shortages in critical items during Operation Iraqi Freedom. For example, demand for nonrechargeable lithium batteries and track shoes for armored vehicles were more than three times greater than the stated requirements for those items. We concluded that these shortfalls were directly traceable to problems in requirements computation. In addition to critical shortfalls, lessons learned also show considerable mismatches between what was available in prepositioned stocks and what units actually needed. In retrospect, the Army did a poor job in forecasting what it would need. As a result, it had to use scarce and expensive airlift to get needed stocks to the troops in the field, essentially defeating the purpose of prepositioning such items in the first place. Subsequent analyses have detailed the extent of the mismatches between stock levels, requirements, and actual usage. For example, most of the 16,000 different spare parts that were actually positioned in Kuwait were ultimately shipped back from the theater because they were not needed by the forces there, according to a RAND study commissioned by the Army. Most spare parts had to be airlifted to the theater, according to RAND. In addition, RAND compared the Army’s requirements for prepositioned spare parts to the actual demands during 2003 in Kuwait and found considerable mismatches. Only about half of the spare parts the Army thought would be required for prepositioned stocks were actually demanded in theater by Army units during 2003. According to Army officials, secondary items have historically not been fully funded at least partially because of concerns over the accuracy of the requirements. As shown in Operation Iraqi Freedom, inaccurate requirements resulted in limited demand for some items and excessive demand for others, greatly surpassing the on-hand inventory. The Army had to employ high-cost air transportation to bring needed items to the warfighter. As with secondary item requirements, long-standing issues exist within the operational project program—which includes important items like chemical defense equipment, pipeline systems, mortuary units, and bare base sets for housing soldiers in austere environments, among other items not typically part of unit equipment. These sets are typically kept to meet the specific needs of regional combatant commanders, and Army regulations require that they be revalidated every 5 years to ensure that the sets are still needed for an operational plan. Despite this requirement, the most recent revalidation for many of the projects was conducted in 1998. However, in response to our recommendation in 2005 that this long- standing problem be addressed, the Army initiated a revalidation of its Operational Project Stocks in April 2006. By October 2006, when we completed our work, the Army had queried Army commands worldwide to revalidate the needs for the various sets and had obtained validations for most of the sets. However, Army officials told us that they have already taken actions to eliminate projects that are no longer needed and are planning to conduct a management review of this program to further refine the requirements. To date, the Army has consolidated some projects and has cancelled other projects that were no longer needed. For example, three projects to support aerial delivery operations were cancelled because they were no longer required to support current operational plans. In addition, United States Army, Europe has cancelled two projects for bridging and aircraft matting because they no longer meet current operational requirements. One of the most significant consequences of having questionable requirements underpinning the programs is that it makes it difficult to assess their overall readiness, and the risk associated with shortfalls. Typically, the Army measures readiness of prepositioned equipment programs by assessing the inventory levels against requirements as well as the maintenance condition of on-hand equipment. However, the Army does not routinely measure or report readiness for the secondary item and operational project programs. According to Army and DOD officials, shortfalls in secondary items and some operational projects are identified in combatant command priority lists and through joint quarterly readiness reports to the Joint Staff, but not as part of the Army’s readiness reporting system. This situation is largely unchanged since 1998, when we recommended that the Army fix requirements problems and develop readiness-reporting mechanisms for these programs. Despite their lower priority relative to combat equipment programs, secondary item and operational project programs can be critical during a war. They contain items such as spare parts that are essential to keep the combat equipment operational, as well as chemical defense equipment and other items likely to be needed during the early stages of a conflict. The budgetary stakes are high: according to the April 2006 report to Congress, the Army estimated that it had a shortfall of about $1.7 billion in secondary items alone. Without sound requirements, the Army cannot reliably assess the readiness of its programs. Once sound requirements are set, the Army will need reporting mechanisms to assess their readiness and the impact of any shortfalls. In the absence of such mechanisms, the Army cannot make sound risk-based decisions about what investments it should make in the programs in the future. Although the Army reported maintenance and storage facility shortages to Congress, it lacks a comprehensive plan for maintenance and storage facilities for prepositioned stocks. According to Army officials, facility shortfalls are a concern in Kuwait and Korea, while facility excesses were an issue in Italy. Army policy recommends storing prepositioned equipment in controlled-humidity storage facilities, since outdoor storage results in increased maintenance costs. However, requirements for these facilities are currently uncertain. Until the Army develops a comprehensive plan that identifies how prepositioned equipment will be utilized and where it will be located for the long term, the existing facilities problems can not be addressed. The Army’s lack of adequate storage facilities for prepositioned equipment has led to equipment being stored outdoors, leaving it relatively unprotected from moisture, sand, and other elements and thus contributing to a number of maintenance problems, including corrosion. Army Regulation 740-1 stipulates that prepositioned equipment should be stored in controlled-humidity storage facilities. If controlled-humidity storage is not available, then covered storage space is preferred. More frequent inspections are required for equipment stored outside. Inadequate storage facilities in both South Korea and Kuwait have resulted in outdoor storage of prepositioned equipment. Figure 1 shows the storage situation in Kuwait, with prepositioned equipment stored at outside locations. Outdoor storage accelerates equipment deterioration and increases costs due to additional maintenance requirements. For example, if tanks are stored outside, preventive maintenance inspections must be performed every 30 days. If they are stored in controlled-humidity warehouses, inspections are only performed every 6 months. According to Army officials, maintenance inspections and repairs for equipment stored outdoors cost about four times that of equipment being stored in controlled-humidity warehouses. Army officials estimate that it costs an additional $24 million per year per heavy brigade combat team to maintain the equipment in outdoor storage. Facility requirements for the Army’s prepositioning program depend on equipment requirements, and as was discussed above, these have not yet been established. Consequently, facility requirements are uncertain. Prepositioned equipment can be used as rotational—that is, equipment provided to units arriving in theater for deployment; training—that is, equipment provided to units for training exercises but then returned to the storage location; or simply as stored prepositioned—equipment that is stored for undetermined future use. According to Army officials, there will be increased maintenance and maintenance facilities requirements if prepositioned equipment is to be used for training or to support a rotational presence in the region. Concurrently, there may be a decreased requirement for humidity-controlled storage space, depending on how the rotation is scheduled. Rotational unit equipment will have more repair requirements than stored units, due to damage and wear. If the prepositioned equipment is maintained solely for future use, more storage facilities and less maintenance capability will be needed. In Kuwait, the Army has not determined whether the prepositioned equipment will be used for units rotating in and out of theater, used as a combat brigade team training set, or stored. Storage facilities in Kuwait will likely be needed, but until Army officials decide how the equipment in Kuwait will be used, they will not be able to determine the type and amount of facilities needed. Storage facilities intended for prepositioned equipment at Camp Arifjan are currently being used as headquarters buildings for Army Central Command, and it is not clear when these buildings will revert to their storage function. While the Army is exploring numerous options for providing covered storage of the equipment in Kuwait, ranging in cost from $20 million to $37 million, none are currently funded. Additional maintenance and storage facilities are needed in South Korea to support the prepositioned equipment at Camp Carroll. The Army has already broken ground on a new maintenance facility that is expected to be operational in November 2007. The Army has plans to build an additional 200,000 square feet of storage space at a cost of $18.6 million. This project is currently unfunded, yet it has a target completion date of 2012. However, while the Army is addressing the prepositioning facility shortfalls at Camp Carroll, it is considering relocation of the set to another site near a port further south. Army officials believe it would provide for more flexible use of the prepositioned assets. If the Army decides to move the equipment set, the additional covered storage at Camp Carroll may be unnecessary. The Army’s new strategy also includes a plan to store heavy equipment at a newly constructed Italian site, to make use of a facility that previously had no mission. When initially approved, the construction project was intended to support the storage of a prepositioned combat brigade team equipment set, but this plan was eliminated in the 2012 strategy. However, since the contract for this project had already been awarded and construction was underway, the Army decided to complete the construction. Army officials stated that it would be more costly to cancel the project than to finish it. The cost for the initial phases of the construction project is approximately $48 million. A $5 million ammunition maintenance and storage facility is also planned as part of this construction project. Figure 2 shows the new facility, including seven controlled-humidity warehouses, a maintenance facility, an administration building, and a brake test facility and wash rack. The new Army strategy includes a prepositioned combat brigade team equipment set at Livorno with the intention of using the port to upload the prepositioned equipment onto ships as needed. The Army has also been discussing using the equipment in Livorno for rotational training exercises in Eastern Europe in locations like Bulgaria and Romania. However, specific plans for this had not been developed. Afloat stocks are reduced in the Army’s new 2013 prepositioning strategy, but the Army plans to continue to utilize the Charleston, South Carolina, prepositioning facility to unload, repair, and reload prepositioned equipment from afloat prepositioning ships. The facility was originally used to maintain Polaris missiles and was converted by the Army to provide maintenance support of the prepositioned afloat fleet. According to Army officials, upgraded maintenance and storage facilities will be required to support the facility’s prepositioning mission but the implications of the new strategy on facilities have not yet been determined. Table 1 shows the current status of maintenance and storage facilities at selected Army prepositioning locations. Management oversight of the maintenance of equipment in Korea has improved since we published our report in 2005. Previously, significant issues and problems were found with the mission capability of stocks in South Korea. We stated that despite reports of high mission capability, the majority of the stocks in South Korea were not mission capable. During our May 2006 visit to South Korea, we observed that the Army had hired additional personnel to bring the equipment up to full mission capability and ensure that the equipment was properly maintained. A new organizational structure was established that created clear lines of responsibility and standard operational procedures for each aspect of the cyclic maintenance program. A training program for production control was established for both U.S. and South Korean employees, and there was a continued emphasis on the need for oversight. While the problems we identified in 2005 in South Korea have been corrected, recent inspections of contractor-maintained equipment in Kuwait revealed a high percentage of equipment failure, indicating that maintenance oversight is a continuing problem. Analyzing data available at the site, we found that 28 percent of the prepositioned equipment in Kuwait submitted for government acceptance had failed quality assurance testing between June 2005 and June 2006. However, the maintenance battalion had not routinely tracked this information or monitored this important performance measure. Additionally, much of the equipment recently certified by the contractor during preventative maintenance inspections failed random governmental checks. Beginning in May 2006, the quality assurance team began performing random preventative maintenance checks on equipment items inspected and certified by the contractor within the previous 10 to 14 days. Nearly half of the 49 pieces of equipment sampled during May and June 2006 by the quality assurance inspectors had nonmission-capable faults needing repair. We accompanied inspectors on three random inspections. The nonmission-capable faults we observed included inoperable lights, fluid leaks, lack of battery power, and an inoperable rear door on a Bradley Fighting Vehicle. Army officials told us this failure rate was not acceptable and that they had informed the contractor it needed to improve performance. Yet Army officials recently reported successful issuance in August 2006 of some of the prepositioned equipment for units heading to Iraq. This inspection failure rate raises questions about the true mission capability of the prepositioned equipment, and it demonstrates the need for rigorous management oversight of the maintenance contractor in Kuwait. Without improved oversight of maintenance, prepositioned equipment and supplies could be less than mission capable when needed. While prepositioning is considered critical to DOD’s ability to meet its mobility needs, the department does not yet have a clear strategy laid out that identifies the role that prepositioning will play in the 21st century. The Army took steps to revise its prepositioning strategy in the latter part of 2006; however, its efforts are not fully synchronized with the evolving DOD-wide strategy. The Army’s decisions today have profound future implications for the entire department and potentially affect our ability to respond to conflict. The primary risk of having the Army develop its strategy in advance of a DOD-wide strategy is that the Army could develop plans without an understanding of how the Army and other services’ programs will fit together or, alternatively, limit the options of the department because it must incorporate the Army’s plans into the overall strategy. The importance that prepositioned stocks are envisioned to have in the future underscores the need for DOD-wide consensus on the direction and priority for the programs, and the necessity of strong leadership and direction from the top levels of DOD. The choices may well be difficult. Unlike the period following the end of the Cold War, the Army no longer has an excess of relatively modern combat and support equipment. Depending on the strategy that is eventually chosen, billions of investment dollars could be required to recapitalize prepositioning programs and build an infrastructure to support them. Alternatively, should the Army and DOD decide to focus less on prepositioned stocks, this decision will likely have a ripple effect on airlift and sealift needs. A DOD-wide strategy would become the foundation for an investment plan that balances costs and risks and would guide the department as it chooses where it will invest in an environment that is increasingly becoming resource constrained. Setting and aligning broad strategies, however, will not be enough to ensure success in the Army’s program over the longer term. Once the DOD-wide strategy is set and the Army’s efforts are aligned with it, the Army must turn its attention to the fundamentals of program management. Dozens of reports from GAO and other organizations point to pervasive management problems in determining requirements and ensuring program readiness, as well as in providing adequate storage and maintenance for prepositioned equipment. To its credit, the Army recognizes this and has taken critical first steps toward redefining its prepositioning program and building a plan for its implementation. However, focused and sustained attention will be required to overcome these long-standing issues. We recommend that the Secretary of Defense direct the Secretary of the Army to take steps to synchronize the Army’s prepositioning strategy with the DOD-wide strategy to ensure that future investments made for the Army’s prepositioning program align with the anticipated DOD-wide prepositioning strategy. Once the strategic direction is aligned with the DOD strategy, we recommend that the Secretary of the Army develop an implementation plan that completes ongoing reevaluation of the secondary item and operational project stock requirements as well as establishes systematic readiness measurement and reporting of secondary items and operational project stock programs, identifies the optimal mix of storage and maintenance facilities at each location to support the emerging strategy, and prescribes oversight requirements for the maintenance of prepositioned equipment to ensure that equipment is ready for combat. In written comments on a draft of this report, DOD generally concurred with our recommendations but stated that it had already taken steps to address the recommendations and that further actions are not needed. We acknowledge that the Army and the department have taken some initial steps; however, we continue to believe that our recommendations have merit and that additional actions and sustained management attention will be needed to ensure the viability of the Army’s prepositioning program as part of the overall departmentwide effort to meet mobility needs. DOD also commented that our report contained misleading information and provided technical comments to improve the accuracy and clarity of the report. We disagree that the facts in our report are misleading and have addressed each of the department’s technical comments in appendix III. DOD partially concurred with our first recommendation that the Secretary of Defense take steps to synchronize the Army’s prepositioning strategy with the emerging DOD-wide strategy, and stated that the Army had developed a service-specific strategy that is being incorporated into ongoing mobility studies and the emerging DOD-wide effort. The department stated that, since the Army is participating in ongoing studies, further direction is not required. Some of the technical comments DOD provided also addressed the strategy-setting issue, but seemed to contradict the overall response. For example, DOD stated that the timing of the two strategies could cause “disconnects” and that the Army will have to modify its strategy when the DOD-wide strategy is issued. Since DOD’s comments lack internal consistency, it is not clear to us what the department intends to do to address the recommendation. As our report points out, successful management practices dictate that strategy setting should begin at the top, and that strong leadership will be needed from the department to ensure that the programs of the Army—as well as other military services—are aligned with the overall departmentwide strategy, not the reverse. Moreover, taking a service-centric approach to prepositioning may preclude opportunities for innovation, or lead to duplication across the department. Prepositioning should be viewed in a joint context, as part of broader mobility objectives. The ultimate departmentwide strategy should not just cobble together the plans of the individual services into a departmentwide strategy. In our view, as it develops the DOD-wide strategy, the department should take advantage of the opportunity to reexamine its approach to prepositioning as part of broader mobility considerations including its interrelationship with airlift and sealift. In the technical comments, the department also stated that the Army should not be criticized for its timing and lack of synchronization with a DOD strategy that had not yet been issued. The Army did expedite its strategy revision during the course of our review, completing it from start to finish in the latter half of 2006. The Army completed this revision while a broader strategy effort—specifically, a follow-on to the Mobility Capabilities Study focused on the future of prepositioning—was ongoing but had an unclear completion date. In a September 2005 report, we recommended that DOD develop a departmentwide strategy to set direction for and underpin the prepositioning programs of the services but this has still not been completed. Underscoring its interest in prepositioning—and consistent with our previous recommendation—the John Warner National Defense Authorization Act for Fiscal Year 2007 required the department to finalize a departmentwide prepositioning strategy by April 2007. Had the department implemented our recommendation in a more timely fashion, this synchronization concern would be moot and DOD may not have been called upon to establish a strategy for the department’s prepositioning programs. The department concurred with our second recommendation that, once the Army’s strategy is aligned with the DOD-wide strategy, the Secretary of the Army should develop an implementation plan to address the requirements, readiness reporting, facilities, and maintenance oversight issues that we identified in our report. The department stated that the Army had included an implementation plan in its revised prepositioning strategy that addressed these issues and that the implementation plan had been aligned with a joint staff instruction published in November 2006 that provides logistics planning guidance for prepositioning and a department directive dated December 2003 that provides war reserve materiel policy. As a result, the department stated that no additional direction is required. We disagree. The Army’s implementation plan was to have been completed in December 2006, but was still unavailable as of the end of January 2007. As a result, GAO could not determine whether the elements of our recommendation have been addressed. However, we reviewed the recent logistics planning guidance and while the instruction provides general logistics planning guidance for prepositioned stocks, there are few specifics about requirements setting and readiness reporting for secondary items and operational project stocks, facilities, or maintenance oversight. We also reviewed the identified department guidance. While it does require the determination of war reserve materiel requirements, and annual reports of the existing levels of these items, we do not believe this is a systematic reporting of readiness. In fact, our 2005 report found that the department was not enforcing the readiness-reporting provision, and planned to rescind it. Neither Instruction addresses the optimum mix of storage and maintenance facilities or prescribes oversight requirements for the maintenance of prepositioned equipment to ensure that it is combat ready. Moreover, since these issues have been long-standing, recognized both in prior GAO reports and assessments made by the Army’s own audit organizations, we continue to believe that additional direction is needed. We will send copies of this report to the Secretary of Defense and the Secretary of the Army. We will also make copies available to others upon request. In addition, this report will be available at no charge on the GAO Web site at http://www.gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. If you or your staff has any questions, please contact me at (202) 512-8365. Key contributors to this report are listed in appendix IV. To assess whether the Army’s report comprehensively addressed the required reporting areas in Public Law 109-163, we reviewed the Army’s prepositioned stocks program. We obtained the Army’s report and reviewed and compared it to the legislative mandate as well as other documents including Department of Defense (DOD) regulations, Army regulations that govern storage and maintenance of prepositioned stocks, and the Army Prepositioned Stocks Strategy 2012. We also reviewed Inspector General and Army Audit Agency reports on prepositioning issues as well as any relevant GAO reports. We interviewed officials in the Department of Defense Joint Staff, Department of the Army, Army Materiel Command, and the Army Sustainment Command and its subordinate units at each prepositioning location. We also collected and analyzed internal Army reports on inventory and readiness to verify the reported inventory levels and readiness rates of prepositioned stocks. To assess the major challenges facing the Army as it revises and implements its prepositioning program, we reviewed the Army Prepositioned Stocks Strategy 2012 and DOD regulations and documents pertaining to a joint prepositioning strategy, along with relevant past GAO, Inspector General, and Army Audit Agency reports. We interviewed officials from the Department of the Army, the Office of the Secretary of Defense for Policy, the Department of Defense Joint Staff, the Army Materiel Command, and the Army Sustainment Command and its subordinate units at prepositioning locations in Europe, South Korea, South Carolina, and Kuwait. We conducted site visits to Army prepositioned stock facilities at each location to observe firsthand the current status of their storage and maintenance facilities and also reviewed existing maintenance and storage procedures and oversight processes. We also examined the Army’s planned revisions to its existing Army Prepositioned Stocks Strategy 2012 and the efforts on behalf of DOD to develop an overarching prepositioning strategy. We examined the level of coordination between the Army and DOD with regard to the new prepositioning strategies currently under development. We could not fully assess these strategies, as they are still in the process of being developed. We also documented current inventory levels, funding for the program, and equipment readiness rates by collecting and analyzing internal Army reports on inventory, funding, and readiness. We reviewed past reports prepared by GAO, the Army Audit Agency, the Army Materiel Command Inspector General, and the Army Logistics Support and Evaluation Team that identified problems with the prepositioning program. We conducted our review from February 2006 through October 2006 in accordance with generally accepted government auditing standards. We reviewed available data for inconsistencies and also verified with the Army information technology contractor in Kuwait that they review and validate the input data we used in the report. We determined that the data we used were sufficiently reliable for the purpose of this report. We interviewed officials, and obtained documentation when applicable, at the following locations: U.S. Army Headquarters, Washington, D.C. U.S. Army Material Command, Ft. Belvoir, Virginia. U.S. Army Forces Command, Ft. McPherson, Georgia. U.S. Army Central Command, Ft. McPherson, Georgia. U.S. Army Sustainment Command, Rock Island, Illinois. U.S. Army Europe, Campbell Barracks, Germany. 8th U.S. Army, Yongsan Garrison, South Korea. U.S. Army Field Support Brigade, Seckenheim, Germany. Material Support Center – Korea, Camp Carroll, South Korea. U.S. Army Field Support Battalion – Livorno, Camp Livorno, Italy. U.S. Army Field Support Battalion – Northeast Asia, Camp Carroll, Korea. U.S. Army Field Support Battalion – Southwest Asia, Camp Arifjan, Kuwait. U.S. Army Field Support Battalion- Afloat – Charleston, South Carolina. U.S. Forces Europe, Patch Barracks, Germany. U.S. Forces Korea, Yongsan Garrison, South Korea. Joint Chiefs of Staff, J-4, Washington, D.C. The Army’s prepositioning program has faced a number of long-standing challenges including inadequate oversight and management; equipment and facility excesses and shortfalls; and invalid, inaccurate, poorly defined, and otherwise questionable requirements. In addition to problems with the prepositioning program, the Army has also had difficulty associated with the successful implementation of strategic plans and programs. GAO, the Army Audit Agency, Army’s and the Department of Defense’s (DOD) Inspector Generals along with others have called attention to these problems in products issued over the years. Table 2 provides summaries of the challenges to the Army and DOD’s prepositioning programs along with program implementation concerns identified in past GAO reports and testimonies issued between January 1996 and September 2006. Table 3 provides summaries of similar issues identified in select products released by other organizations during the same time period. 1. DOD comments indicate that the reason the Army shifted its prepositioning strategy in 2006 was not due to budget reprogramming decisions; instead it was due to the 2006 Quadrennial Defense Review. We interviewed Army officials during the summer of 2006 who told us that the budget reprogramming decision and equipment shortfalls throughout the Army were the main impetus of the strategy review. We have added the Army’s assertion that the quadrennial review influenced the decision to the text. 2. DOD indicates that the DOD policy under development “will result in the Army creating/modifying its strategy in accordance with the guidance in the DOD policy” when issued. We have added the department’s assertion to the text. We agree that having an Army implementation plan in place before the DOD policy is issued will result in the need to modify the Army’s strategy. However this is an apparent inconsistency with the main text of the department’s comments stipulating that the Army’s completed strategy will be incorporated into the DOD-wide strategy. As a result, we continue to believe that additional department-level direction is needed to ensure that future investments made by the Army are aligned with DOD policy. 3. We believe that strategy is a better description as it provides linkage to the recommendation in our 2005 report calling for a DOD-wide prepositioning strategy. 4. The department stated that the Army should not be criticized for creating an implementation strategy before the DOD policy is issued. Our intent was not to criticize but to demonstrate the potential risks associated with individual service strategies being implemented before the department’s strategy is issued. In a September 2005 report GAO recommended that DOD develop a departmentwide strategy to set direction for and underpin the prepositioning programs of the services but this has still not been completed. The Army can ill afford to invest scarce resources to meet requirements that will not be aligned with the DOD policy when issued. 5. The department disagreed with several aspects of our description of the operational project and secondary item programs. We have included additional information to the report that, in response to a past GAO recommendation, the Army has conducted revalidations of most operational project stocks. Further, the Army asserted that it tracks the funding of the prepositioned secondary items and operational project stocks as part of the Army’s Strategic Management System and that this constitutes readiness reporting. We disagree. The requirements underpinning these programs are questionable, and funding information is inadequate for determining readiness. 6. We have changed the text to reflect the department’s definition of war reserve sustainment stocks. 7. Since the Army strategy evolved during our review, we continue to believe our caption better reflects the substance. 8. See comment 1. 9. We have changed the text to delete “reset”. 10. We have changed the text to insert “DOD”. 11. We have made changes to the text to reflect the role of Combatant Commanders in operational planning. 12. The department’s suggested language indicated that the shift in strategy was the result of the 2006 Quadrennial Review. We have reflected this throughout the report. The department also suggested deleting language in the draft report concerning the lack of mission in Italy in the previous Army strategy but offered no reason why this information should be deleted. When initially approved, the $55 million construction project in Italy was intended to support the storage of a prepositioned combat brigade team equipment set there, but this requirement had been eliminated in the 2012 strategy leaving the facility with no mission. The Army decided to complete the construction as it was more costly to cancel than complete, and the Army’s 2013 strategy indicates placing a combat brigade team equipment set at that location even though existing operational and contingency plans for the area do not require this type of equipment. We have retained this information in the report because we believe this information illustrates the need for better facilities planning by the Army. 13. We have made changes to the text to include the Joint Forces Command in DOD’s working group. 14. We added information to reflect the facilities in Qatar. In addition to the contact named above, John Pendleton, Assistant Director, Jeff Kans, Travis Thomson, Jennifer Jebo, Erika Prochaska, and Cheryl Weissman also made key contributions to this report.

Summary: Prepositioned military equipment and supplies on ships and overseas on land have become an integral part of the U.S. defense strategy. However, the Army's program has faced long-standing management challenges, including equipment excesses and shortfalls, invalid or poorly defined requirements, and maintenance problems. In Public Law 109-163, Congress required the Army to conduct an assessment of its prepositioning programs and required GAO to assess (1) whether the Army's report addressed the areas required by Congress, and (2) the major challenges the Army continues to face in its prepositioning program. GAO analyzed the Army's report and other information it obtained from the Joint Staff, the Army, and its subordinate commands to identify the issues affecting the Army's prepositioning program. GAO also visited prepositioned equipment sites in South Carolina, Europe, South Korea, and Kuwait. The Army's April 2006 report on the status of its prepositioning program addressed the areas required by Congress; for example, it included descriptions of operational capabilities, as well as inventory shortfalls expressed in terms of procurement costs. However, the Army significantly shifted its prepositioning strategy in the latter part of 2006, since that report was issued. According to the Army, this shift was based on insights gained from the 2006 Quadrennial Defense Review, but Army officials told us that budget reprogramming decisions and worsening Army-wide equipment shortfalls also influenced the expedited strategy revision. The Army's revised strategy proposes less reliance on heavy combat equipment afloat and the expansion of heavy equipment in Kuwait and Italy. As a result, the Army's April 2006 report to Congress is outdated, and neither Congress nor DOD should base funding decisions on it. The Army faces several major strategic and management challenges as it revises and implements its prepositioning program. From a strategic perspective, the Army cannot gauge how well its emerging strategy will align with DOD plans currently under development. The Army plans to begin implementing its revised strategy by the end of 2006. DOD has a departmentwide prepositioning study underway intended to set strategy and joint doctrine, but this will not be completed for several months and it anticipates that the Army will have to modify its prepositioning strategy when the DOD-wide strategy is issued. As a result, the Army is at risk of resourcing requirements that may be superseded by the DOD strategy. Moreover, because prepositioning is linked to airlift, sealift, and basing, the Army's decisions will have an as-yet undetermined effect on these areas. In addition to these strategic concerns, the Army faces three key management challenges. First, the Army has yet to determine sound secondary item and operational project stock requirements, and to systematically measure and report readiness. While the Army has been taking steps to address long-standing requirements-determination problems in certain parts of its program, the effort was not finished when GAO completed its work. Without accurate requirements and systematic readiness reporting, Army managers are not able to determine the extent to which the existing inventory reflects what the Army needs. Second, the Army lacks a comprehensive plan for maintenance and storage facilities for prepositioned stocks, resulting in uncertain future facility requirements. In the interim, prepositioned stocks are being stored outside, resulting in higher maintenance costs. Finally, inadequate maintenance oversight of the Army's prepositioning program has raised concerns about the true condition of the equipment at some locations. Until these strategic and management challenges are addressed, the Army will face uncertain risks should new conflicts occur.