Navy's Budget Requests for Revised Shipboard Allowances Are Overstated

GAO completed a survey of the economy and effectiveness of the Navy's planned revision of its shipboard stockage criteria. The Navy estimated that the revised criteria would result in additional items being stocked that would require increased budget requests of over $200 million. The Navy planned to implement the new criteria in fiscal year 1983. While it has not yet officially adopted the new stockage criteria, the Navy has submitted funding requests to implement the change.

The GAO survey indicated that the Navy's request for funding to implement the revised criteria is significantly overstated because the Navy did not consider inventories of items already on board the ships. About one-half of the items demanded annually on board the typical ship can be satisfied from inventories stockpiled on the ship. To improve readiness, the Navy wanted a higher shipboard issue rate for repairs and important equipment and proposed that: (1) items deemed essential to a ship's ability to perform its mission should be stocked based on a criterion of one predicted failure in 10 years; and (2) items deemed essential to the ship's mission with demands of two to four in 1 year should have their allowances increased from one to two minimum replacement units. To determine the amount of additional funding required by the revised stockage criteria, Navy personnel increased, by a specific percentage, the average cost of ship allowances computed under the current method of determining allowances. It was determined that increases of 37 percent would occur for combatant ships and 14 percent for noncombatant ships. A GAO review of stock records of one of the combatant ships included in a Navy study showed that items valued at 29 percent of the increased value were already on board the ship in sufficient quantities to satisfy the increased allowance. GAO discussed the budget estimate with Navy personnel, and they agreed to consider these available assets in future budget estimates.

Recommendations

Our recommendations from this work are listed below with a Contact for more information. Status will change from "In process" to "Open," "Closed - implemented," or "Closed - not implemented" based on our follow up work.

Director: Henry W. Connor Team: General Accounting Office: Procurement, Logistics, and Readiness Division Phone: (202) 275-4141