DOD’s 2016 Report Did Not Fully Address Two of Four Elements in the Senate Report Direction and Did Not Include Information That Would Have Provided Further Insight into Risks

		DOD’s Report Fully Addressed Two Elements, Partially Addressed One Element, and Did Not Address One Element

DOD’s October 2016 report on single source of supply risks fully  addressed two elements of the direction in the Senate Report, partially  addressed one element, and did not address one element. While DOD is not required to update its 2016 report on  single source of supply risks, the department regularly reports information  to congressional committees on the defense industrial base, such as  through an annual report. This DOD  organic asset was not included in the October 2016 report. Without information about DOD organic facilities that are critical  single sources of supply, such as TCAs, including the potential effects on  defense capabilities and risk mitigation actions, congressional and DOD  decision makers may not be fully aware of, and prepared to address,  potential risks associated with the loss of facilities that are single sources  of supply for weapon systems. In addition,  service officials from the offices above for the nine selected programs  were not aware that the program had an item supplied by a TCA. Having relevant information  generated through the annual CAIP, such as the type of information  included in the October 2016 report, would help program managers to be  aware of parts supplied by a single source that is considered to be a most critical risk (i.e., a TCA), and thus have complete and current information  that could provide important focus for managing these risks. Program Offices May Have Limited Information from Contractors on Single Source of Supply Risks

Program offices often rely heavily on the prime contractor to identify  existing and potential single source of supply risks, among other types of  risks, but in some cases they may have limited information from  contractors to help them be aware of and manage those risks. However, DOD has not  developed a mechanism to ensure the timely and comprehensive sharing  of information on single-source risks from contractors to program offices. Timely and  comprehensive information from contractors about single source of  supply risks would help program offices be aware of risks early enough to  take proactive steps to understand and, where necessary, mitigate those  risks. DOD has reported cost savings from proactive DMSMS management. The official leading DMSMS  stated that a DMSMS policy could require a service-specific, dedicated  lead for DMSMS, the development of a DMSMS plan for each program  office throughout the acquisition life cycle, and the use of consistent  metrics for monitoring the program. Without more complete  information, such as the risks to and effects from potential losses of  commercial and organic single sources, congressional and DOD decision  makers do not have a full understanding of potential risks associated with  the loss of facilities that are single sources of supply for weapon systems. Second, program offices often rely  heavily on the prime contractor to identify single source of supply risks,  but DOD does not have a mechanism to ensure that program offices  obtain information on risks from contractors. Third, the DMSMS program  is intended to provide information regarding the loss of suppliers and  parts shortages and to proactively manage these risks, but program  offices varied in their implementation of this program due to the lack of a  department-wide policy, such as an instruction, that clearly defines  requirements or procedures for DMSMS management by program offices. Identify major defense acquisition programs with operational  implications. 2. To determine the extent to which DOD’s weapon systems program offices  have information for identifying and managing single source of supply  risks, we reviewed DOD and military department guidance related to  acquisitions, program management, and risk mitigation, as well as  guidance regarding the Diminishing Manufacturing Source and Material  Shortages (DMSMS) program.
Why GAO Did This Study

DOD has an extensive network of suppliers that provide millions of parts needed to sustain its weapon systems. Some parts are provided by a single source of supply (e.g., one manufacturing facility), and if that single source were no longer able to provide the part, DOD could face challenges in maintaining systems. Senate Report 114-49 directed DOD to report on risks associated with single sources of supply. DOD completed its report in October 2016.
House Report 114-102, accompanying a bill for the National Defense Authorization Act for Fiscal Year 2016, included a provision that GAO review single sources of supply for major defense acquisition programs. This report evaluates the extent to which (1) DOD's 2016 report addressed the direction in the Senate report and (2) DOD's weapon systems program offices have information for identifying and managing single source of supply risks. GAO reviewed DOD policy and procedures, analyzed DOD's report, and interviewed officials from a non-generalizable selection sample of nine program offices.

What GAO Found

The Department of Defense's (DOD) 2016 report on risks associated with single sources of supply did not fully address two of the four elements directed by a Senate report and did not include other information that would have provided further insight into those risks. DOD included information on major defense acquisition programs and supporting parts provided by each single source of supply. However, DOD did not include implementation plans and timelines for risk mitigation actions or information about the effects of the loss of suppliers, as directed. In addition, complete information about DOD organic facilities was not included. While DOD is not required to update its report, it regularly reports industrial base information to congressional committees. Without complete information about critical suppliers, congressional and DOD decision makers do not know all potential risks and effects associated with the loss of single sources of supply for weapon systems.
Program offices do not have complete information to fully identify and manage single source of supply risks. First, program officials GAO spoke with were not aware of DOD's 2016 report, and thus did not have information about parts from single-source suppliers that are considered to be most critical, which could provide important focus for managing these risks. Second, program offices often rely on the prime contractor to identify single source of supply risks, among other types of risks, and GAO found that program offices in some instances had limited information to manage those risks because DOD does not have a mechanism to ensure program offices obtain complete information from contractors. Without such a mechanism, program offices may not be aware of risks early enough to take proactive actions to understand and, as appropriate, mitigate those risks. Third, DOD has a program intended to provide information regarding the loss of suppliers and shortages and to proactively manage these risks, called the Diminishing Manufacturing Sources and Material Shortages (DMSMS) program, but GAO found that DMSMS implementation varied at selected program offices. DOD is taking steps toward improving DMSMS management, but there is no department-wide policy that clearly defines the requirements for DMSMS implementation at the program office level throughout the acquisition life cycle. Without such a policy there is no clearly defined requirement for program managers to proactively manage DMSMS issues.

What GAO Recommends

GAO is recommending that DOD provide complete information to decision makers on risk mitigation plans and timeframes, potential effects from losses, and all critical facilities, commercial and organic, regarding risks from single sources of supply; share information on critical risks with program offices; develop a mechanism to ensure program offices obtain complete information; and issue a DMSMS policy. DOD concurred with GAO's six recommendations.