Passive and active RFID tags physically differ from one another, as figure  1 shows. Although the military components have begun  acquiring and funding the infrastructure needed for passive RFID  implementation, existing infrastructure is minimal because  implementation did not begin until January 1, 2005. DOD Has Developed Policy and Guidance and the Military Components Are Developing Plans to Implement Passive RFID Technology

Since 2003, the Office of the Under Secretary of Defense (Acquisition,  Technology, and Logistics) has developed policy and guidance to  implement a potentially promising technology, known as passive RFID  into their supply chain operations. Although DOD plans to begin implementing the use of  passive RFID to all classes of all commodities, excluding bulk  commodities, shipped to all locations by January 1, 2007, it will be fiscal  year 2016—and beyond for the Army—before passive RFID will be fully  implemented into supply chain operations, according to Navy and Army  funding projections. DOD Is Using Pilot Projects and Initial Implementations to Test the Application of Passive RFID Technology

DOD is using several pilot projects and has begun initial implementation at  several receiving and distribution facilities to better understand passive  RFID technology and test its application to their business processes. Additionally,  the projected cost for passive RFID implementation—about $437 million  from fiscal years 2006 through 2011—includes costs for purchasing  passive RFID equipment such as tags, readers, and writers, and costs  associated with installation and maintenance, but does not include the  cost of system interoperability, which officials estimate to be the most  expensive element of implementation. As of January 2005, DOD and its military components had  spent about $7.4 million on passive RFID technology. DOD’s Implementation of Passive RFID Technology Lacks a Comprehensive Strategic Management Approach

While DOD has taken a number of actions to guide and direct the  implementation of passive RFID into the supply chain process, passive  RFID could be more efficiently and effectively implemented if DOD  developed a comprehensive strategic management approach to ensure that  implementation efforts are guided by sound management principles. Because the military components are developing  implementation plans to support DOD’s RFID policy, the development of a  comprehensive strategic management approach that fully incorporates  these key management principles could provide decision makers in both  DOD and the military components with a framework to guide RFID  implementation efforts and the means to determine whether these efforts  are achieving the desired results. DOD Has Identified Several Challenges for Passive RFID

DOD officials have identified a broad spectrum of challenges concerning  passive RFID that remain to be resolved before passive RFID technology  can be fully implemented into DOD operations, but their RFID  implementation planning does not include any actions to mitigate these  challenges. First, passive RFID technology  is a new technology that is evolving. Until DOD and the military  components identify actions to mitigate these implementation challenges,  their progress in resolving these challenges will be impeded. Although DOD and its military components have  incorporated some of these key management principles in their RFID  policy and guidance, many of these principles are missing or are only  partially present. However, we continue to believe  that the challenges identified in the report remain, and that the department  needs to develop a mitigation plan to address these challenges.
Why GAO Did This Study

The Department of Defense (DOD) has had problems with tracking and identifying inventory for many years, most recently in Operation Iraqi Freedom. One of several tools DOD is using to address these inventory problems is radio frequency identification (RFID). RFID technology consists of passive or active tags that are attached to equipment and supplies that are shipped from one location to another. Although DOD did not begin official implementation of passive RFID technology until January 1, 2005, DOD has been using active RFID technology since the early 1990s and began developing policy and pilot testing passive RFID in 2003. As of January 1, 2007, all commodities, excluding bulk commodities, are to have passive RFID tags. Full implementation of passive RFID is estimated to cost hundreds of millions of dollars. This report (1) provides information on the status of passive RFID implementation, (2) addresses the extent to which DOD has developed a strategic approach for implementing passive RFID, and (3) highlights challenges DOD recognizes it faces in implementing passive RFID and any plans developed by DOD to mitigate these challenges.

What GAO Found

Since 2003, DOD and the components have taken actions to begin using a potentially promising technology, known as passive RFID, throughout their supply chain operations. These actions include development of policy and guidance and the use of pilot projects and initial implementation to test the technology's application to their business processes. In addition, infrastructure and funding have been provided, but this has been minimal because implementation did not officially begin until January 2005. Future funding requirements are expected to increase sharply as full implementation proceeds--from $6.6 million as of January 2005 to about $472 million projected from fiscal years 2006 through 2011. This $472 million projection does not include the cost of system interoperability, which officials believe will be the most expensive element of implementation. Full implementation of passive RFID in supply operations is not anticipated until 2016 or beyond. While DOD has taken a number of actions to direct the implementation of passive RFID, it has not yet developed a comprehensive strategic management approach that incorporates sound management principles. The planning by DOD and its components lacks or only partially incorporates several key management principles needed to effectively guide, monitor, and assess implementation. The development of a comprehensive strategic management approach that fully incorporates these principles could provide decision makers with a framework to guide RFID implementation efforts and the means to determine whether these efforts are achieving the desired results. This affects both DOD and its components because the components are developing implementation plans to support DOD's RFID policy. DOD has identified several challenges that will need to be resolved before passive RFID can be fully implemented, but it has not yet developed a mitigation plan to address these challenges. Some challenges relate to the fact that passive RFID is a new and evolving technology, while other challenges derive from operational issues and obtaining adequate funding. Furthermore, certain regulatory and administrative obstacles remain. Until DOD and the components identify actions to mitigate these implementation challenges, their progress in resolving these challenges may be impeded.