To establish and manage its inventories, the Coast Guard must comply with the criteria contained in federal property management regulations and with the Department of Transportation’s (DOT) policy. Federal property management regulations state that each agency shall establish and maintain control of inventories to ensure that total costs will be kept to a minimum consistent with the needs of the agency’s programs. DOT’s policy states that inventories will be established and maintained only when it is more costly to purchase items on a case-by-case basis or when the items are so critical that a delay in delivery would negatively affect an agency’s mission. The policy also states that inventories must be managed in an effective manner to ensure that timely and adequate support is rendered and that optimum inventory levels are maintained. Within the Coast Guard, supply centers located at Curtis Bay and Baltimore, Maryland, stock about 18,000 different parts, including mechanical, electrical, radar, communication, computer, and hull items; these parts are valued at about $140 million. In addition, the Coast Guard authorizes each cutter to maintain a parts and supplies inventory that ranges in value from a few thousand dollars to over a million dollars, depending on the cutter’s size, missions, and operating area. However, individual purchases are restricted to established price thresholds that vary, depending on the cutter’s class; the thresholds range up to $5,000 for large cutters. (Table II.1 lists the 41 different classes of Coast Guard cutters.) For example, the cutters usually purchase such items as nuts and bolts, valves, seals, gaskets and other minor repair parts with their operating budgets. According to Coast Guard officials, about 55 percent of the cutters’ parts and supplies are purchased directly from commercial contractors and about 45 percent are purchased from the federal supply system. The cutters’ purchases from the federal supply system are divided between orders from the two Coast Guard supply centers and orders from other government agencies. Such other agencies as the Defense Logistics Agency; the Departments of the Army, Navy, and Air Force; and the General Services Administration fill about 90 percent of orders for parts from the federal supply system, while the Coast Guard’s two supply centers in Maryland fill the remaining 10 percent. Since storage space is limited on most vessels, cutters also store some of their parts at individual onshore storage facilities, including movable storage in tractor trailers, as well as at typical warehouse-type buildings. The Coast Guard does not have the organizational structure or computer systems necessary to effectively manage its parts and supplies inventory for its cutters. As a result, the Coast Guard does not know the value, type, quantity, and condition of many of the spare and repair parts in the overall inventory. In addition, the Coast Guard does not know whether cutters have a shortage or an excess of parts or whether the parts are available when needed. Management responsibilities for buying, storing, issuing, and tracking parts and supplies in the Coast Guard’s inventories are spread across various internal and external organizations. For example, the Maintenance and Logistics Commands at Alameda, California, and Governors Island, New York, manage the parts used during overhauls of cutters; the Coast Guard’s two supply centers in Maryland manage the unique parts needed by the cutters they support; and individual cutters manage parts they need to keep them operationally ready. However, no one organization or individual is responsible for consolidating inventory data and tracking the type, quantity, condition, or value of the Coast Guard’s total cutter inventory. The Coast Guard’s fragmented management structure also limits the agency’s ability to determine whether cutters have a shortage or an excess of parts and whether the parts are readily available when needed. We found, for example, that one cutter had 34 excess fuel injector nozzles (above its allowance of 16 nozzles), which cost about $580 each, and two excess starters (above its allowance of one starter), which cost approximately $6,600 each. During our visits to other cutters, we noted many other such excess items as drill presses, main engine cylinder heads, insulation, computer monitors, and galley equipment. Supply officials on the cutters told us that the excesses in their inventories were the result of several factors. For example, sometimes cutters procured larger quantities than needed to take advantage of volume discounts. However, if the Coast Guard centrally managed—at headquarters, a Maintenance and Logistics Command, or a supply center—the total cutter inventory, wherever located, it might be able to transfer excess items to cutters that have shortages of those items. For example, the Atlantic Coast Maintenance and Logistics Command purchased more than 15 new starters in 1 year, while one cutter had 2 excess starters in its inventory. Despite these excesses, officials responsible for the individual cutters’ inventories told us that they also had shortages of parts. For example, one cutter had parts shortages totaling $250,000 for such electronic items as circuit boards for radar and communication systems. According to these officials, these kinds of shortages occurred primarily because funding was not available to replenish the cutters’ parts or because the required parts were never issued when the cutters were first commissioned. If the Coast Guard centrally managed its total cutter inventory, some of these shortages might have been filled with excess items from other vessels’ inventories. The cutter officers noted, however, that although the shortages had not significantly affected their missions, they had resulted in costly emergency purchases that would not have been necessary if the parts had been in the cutters’ inventories, as required. During our visits, we found that many items in the cutter inventories were not available to the vessels when they were at sea. Each of the cutters we visited stored a portion of its inventory in its own individual onshore storage facility. Since no one was available to issue parts from these individual storage facilities when the cutters were at sea, these inventories were not fully utilized. We noted such useful items as valves, filters, engine and hydraulic oil, mooring lines, and damage control equipment—fire hoses and nozzles, submersible pumps, shoring, plugs, and oxygen canisters—in the individual onshore facilities. Unlike the Coast Guard, the Navy stores parts for its ships in centralized base supply centers and does not maintain individual onshore storage facilities for its ships. According to Navy officials, the centralized base supply centers provide more effective support than individual storage facilities because personnel are available at the centers to issue parts to the ships whenever the parts are needed. The centers can, for example, send the needed parts to ships at sea via another ship or an aircraft. When a Coast Guard cutter is at sea, no one is available to issue parts from the cutter’s individual onshore storage facility. According to Coast Guard officials, the agency is studying the use of regional support centers, but it does not expect to consolidate the individual onshore storage facilities before fiscal year 2002, when it expects to have total “visibility” of its cutters’ individual inventories. The Coast Guard uses several different systems to manage the cutters’ individual inventories. For example, during our visits to nine cutters, we observed a manual and three different computerized inventory control systems. However, the three automated systems that we observed could not exchange data with each other or with the systems at headquarters, the Maintenance and Logistics Commands, or the supply centers. To help ensure effective inventory management and to distribute parts more efficiently, the Coast Guard plans to implement a single automated system, CMplus, on its 101 largest cutters. The Coast Guard expects this system to integrate inventory and maintenance information into a larger fleet logistics system that will enable cutter crews to share data with each other, headquarters, the Maintenance and Logistics Commands, and the supply centers by the year 2002. According to Coast Guard officials, they expect to spend over $27 million to install the CMplus system on the cutters. Although we agree with the goals of the CMplus system, the Coast Guard can take interim actions to enhance the distribution of its inventory between now and the year 2002, when CMplus will be fully implemented. For example, the Coast Guard can utilize the most widely used, existing inventory system to enhance the distribution of parts by sending the inventory information to headquarters and to the Maintenance and Logistics Commands for analysis. In 1993, Coast Guard headquarters and one Maintenance and Logistics Command analyzed the inventories held by all of the 270-foot cutters. Because all 13 of these cutters used the same computer system, the Coast Guard was able to consolidate their inventory data. The data showed that the 13 cutters had more than $11 million worth of excess parts in their inventories and that $3 million of the excess could be redistributed among the cutters to offset their parts allowance shortfalls and reduce future acquisitions. The Coast Guard incurred minimal time and costs (less than 1 staff year) to perform the analysis because all of the 270-foot cutters had conducted full physical inventories of their parts and supplies and implemented a computerized inventory control program. Moreover, the payoff was significant and could be increased if the Coast Guard conducted similar analyses for most other classes of cutters because they have also already conducted full physical inventories when they implemented their computerized inventory control systems. Although such analyses could greatly improve the distribution of parts and supplies, they could not themselves ensure the optimal distribution of inventories for two reasons. First, because the cutters cannot directly transmit inventory data to the Maintenance and Logistics Commands conducting the analysis, the consolidated inventory information would not be current when the cutters began to redistribute their parts. Second, the Maintenance and Logistics Command conducted the redistribution study on a single class of cutters because conducting a fleetwide study would have taken much longer using current computer resources. If future analyses are conducted for only one class of cutter at a time, parts and supplies will not be redistributed between classes.