DLA is DOD’s combat support agency under the supervision, direction, authority, and control of the Under Secretary of Defense for Acquisition, Technology, and Logistics. DLA’s mission is to provide best-value logistics support to America’s armed forces, in peace and in war, around the clock, and around the world. In carrying out its mission, DLA manages inventory valued at about $83 billion, consisting of more than 5 million consumable (expendable) items, including commodities such as fuel, food, clothing and other textiles, medical supplies, industrial use items, and spare and repair parts supporting over 1,400 weapon systems. DLA also buys and distributes hardware and electronic items that are used in maintenance and repair of equipment and weapons systems. In fiscal years 2002 and 2003, DLA expenditures related to sales and services amounted to over $46.5 billion, including about $36 billion for commodity purchases and about $600 million for DRMS excess property disposal services. DLA and DRMS operate under the Defense-wide Working Capital Fund. DLA is financed through user charges to cover costs, and DRMS is financed through user charges and excess property and scrap sale proceeds. DLA activities related to this report fall into two main areas: (1) commodity acquisition and management and (2) excess property disposals by DRMS and DLA- managed supply distribution depots (referred to as DLA supply depots). DLA commodity acquisition and management functions discussed in this report are carried out by three Defense supply centers, which are located in Columbus, Ohio; Richmond, Virginia; and Philadelphia, Pennsylvania. The DLA acquisition process focuses on (1) the acquisition of inventory requisitioned by customers for immediate use and (2) routine inventory replenishment. Defense Supply Center item managers initiate commodity procurements based on military unit requirements for materiel and supplies and military unit requisitions (supply orders). Supply center item managers consolidate the requirements and work with buyers to procure requested items. Items for which there are immediate needs are delivered directly to a military unit by the commercial vendor, and items needed to support anticipated operations (referred to as the requirements objective) are stored at DLA supply depots for later issue. The DLA Defense Distribution Center uses a total of 26 DLA supply depots located throughout the United States and Europe, as well as in Guam and Kuwait, to store commodities and other items that are classified by over 5 million different NSNs. This inventory includes commodities, such as clothing and other textiles; electronics; industrial, general, and construction supplies; subsistence items; and medical supplies and equipment. Figure 1 illustrates the DLA commodity acquisition and distribution process. When there is an urgent customer requirement and items are on back order, DLA item managers or expediters may check DRMS excess property inventory and service-level inventory to locate available items to fill an order. The Federal Property and Administrative Services Act of 1949, as amended, places responsibility for the disposition of surplus government real and personal property with the General Services Administration (GSA), which has delegated responsibility for disposal of DOD property to the Secretary of Defense. In accordance with federal regulations governing property management and department policy in DOD 4160.21-M, Defense Materiel Disposition Manual, DOD agencies and military services are responsible for determining whether property they hold is considered excess. Federal regulations also require executive agencies to ensure that personal property not needed by their activity is offered for use elsewhere within the agency. In accordance with federal regulations, DOD 4160.21-M, chapter 5, calls for reutilization of excess property to the extent feasible to fill existing needs and to satisfy additional needs before initiating new procurement or repair. All DOD activities are required to screen available excess assets to identify items that could satisfy valid needs, and the military services have programs for reutilizing property by redistributing excess property across their units to meet ongoing operational needs. DLA has overall responsibility for property that is excess to military and DOD units. DLA has placed responsibility for excess property disposals with DRMS. When a military service or DOD agency has property that it no longer needs, it turns the property over to a DRMS field warehouse location—or reutilization facility—referred to as a DRMO. During fiscal year 2004, DRMS managed 93 DRMOs, including 39 central DRMOs, 54 satellite DRMOs, and 35 receipt in place locations referred to as RIPLs. Reported excess property turn-ins are entered into the DRMS Automated Information System (DAISY). DRMS then posts descriptive information about the excess property to a Web page that lists property that is available for reutilization by DOD units and specially designated programs, transfer to federal agencies, and donation to states. DRMS has two organizational elements that manage and oversee excess property disposals. DRMS National is responsible for daily operations inside the continental United States. DRMS International is responsible for daily DRMS activities located outside the continental United States. DRMS International has field offices in Belgium, Germany, Guam, Hawaii, Italy, Japan, Korea, Portugal, Spain, Thailand, Turkey, the United Arab Emirates, and the United Kingdom, and it supports the task force in the Balkans. During fiscal years 2002 and 2003, the military services, DLA supply depots, and DOD agencies turned in excess commodities with a reported acquisition value of approximately $31 billion and disposed of excess property valued at $18.6 billion. This property included everything from office equipment, medical supplies, and clothing to scrap from naval ships, military equipment, and hazardous materials. The condition of the property ranges from being well-used or damaged property that has little value to new, unused items that sometimes are still in the original manufacturer’s packaging. DRMS bills DOD units and other federal agencies for disposal services based on turn-in volume. DRMS bills the military services and other DOD agencies a prorated amount for disposal costs net of scrap and liquidation sale proceeds. Table 1 shows DRMS’s reported revenue for excess property disposal services, including billings to the military services. Turn-ins of excess property are reported on DOD Form 1348, Disposal Turn-in Document, using a hard copy form that accompanies physical turn- ins of property at DRMOs or electronic reporting. In accordance with DOD 4160.21-M, Materiel Disposition Manual, upon arrival at a DRMO, excess items are to be inspected and the item descriptions, quantities, condition codes, and demilitarization codes are to be verified. Based on the item type and condition, a decision is made as to whether the item should be made available for reutilization. For excess property in new, usable, or repairable condition, redistribution from one DOD unit to another allows the government to make full use of its resources, avoids unnecessary procurement of property, and results in economy and efficiency of operations. Transfers and donations of excess DOD property to special programs, federal agencies, and states help to conserve their budgetary resources. Unusable items are generally sold as scrap. Department policy in DOD 4160.21-M-1, Defense Demilitarization Manual, calls for identifying and controlling items that have a significant military or commercial technology application to prevent improper use or release of these items outside of DOD. DOD’s Demilitarization Manual establishes specific codes that are designed to indicate whether DOD property is available for reuse without restriction or whether specific restrictions apply, such as removal of classified components, destruction of sensitive military technology, or trade security control. Any residual excess property that is not reused, transferred, or donated may be sold as scrap or sent to a landfill or other appropriate site for final disposal. Figure 2 illustrates the excess property turn-in and disposal process. Excess DOD property is available for reutilization, transfer, and donation during a 49-day screening period following turn-in to DRMS. It may take up to a week to record excess property receipts into DRMO inventory. Once excess property receipts are recorded, DOD units and specially designated programs may screen for and select items for reutilization. Special programs consist of entities that directly support DOD’s mission, customers that have statutory authorization to receive excess DOD property, and customers that have been specially designated by DOD to receive excess property items. Special programs share screening priority with DOD, and DRMS accounts for special program requisitions of DOD excess property as DOD reutilization. A description of the special programs is included in appendix IV. If excess property is still available after the DOD and special program screening period (the end of the first 21 days), the property is made available for transfer to other federal agencies through the GSA Federal Disposal System (FEDS) Web site known as GSAXcess for a 21-day period. Excess DOD property is available to DOD agencies during the GSA federal agency screening phase. DOD entities and others can specify their excess property needs on a “want list” and DAISY and GSA FEDS will send notices when such property becomes available. Property that is not reutilized by DOD or transferred to federal agencies after 42 days is considered surplus to the federal government and can be donated to state and local governments and other qualified organizations, or if not donated, it can be sold to the public after the 49-day screening period has expired. Government Liquidation, LLC is the DRMS commercial venture partner (contractor) for liquidation sales of excess property. Excess property at DRMOs is transferred to a liquidation contract sales site co-located with a DRMO. DLA supply depot excess property to be sold to the public is sent to one of two national liquidation sales locations.