Essentiality Is Not Validated

Significant numbers of nonessential parts and supplies continue to be stocked as insurance items because ASO and DISC do not have the internal controls to periodically review insurance items to identify those that are unneeded because they do not meet essentiality criteria. DOD downsizing and weapon system obsolescence and retirement also contributed to the stock buildup. First, contrary to DOD regulations, ASO has established retention levels for many insurance items that exceed the allowed stockage quantity of one unit. While it is difficult to precisely determine the costs to manage and maintain nonessential and excessive insurance stocks, our review and DOD’s comments indicate that these costs would be millions of dollars a year. Recommendations

We recommend that the Secretary of Defense direct the Secretary of the Navy and the Director, Defense Logistics Agency, to (1) periodically review insurance items to ensure that they are mission essential and stocked in allowable quantities and (2) dispose of existing nonessential and excess insurance stock. GAO Comments

1. 2. 3. 4. 5.
Why GAO Did This Study

GAO reviewed the Navy's and the Defense Logistics Agency's (DLA) management of their spare parts and supplies inventories, focusing on whether their insurance stocks are limited to: (1) mission-essential parts; and (2) one replacement unit as required by Department of Defense (DOD) regulations.

What GAO Found

GAO found that: (1) the Navy and DLA stock millions of dollars of unnecessary insurance items that are not mission-essential; (2) the Navy and DLA frequently exceed their authorized maximum stock levels, contrary to DOD regulations; (3) the Navy and DLA do not periodically review insurance items to ensure that they are mission-essential and stocked in appropriate quantities because they lack the internal controls necessary to prevent excessive stock buildup; (4) DOD downsizing, weapon system obsolescence and retirement, and stock retention policies have also contributed to excessive inventories; and (5) the excessive inventories cost DOD millions of dollars to procure, manage, and maintain.