Property Management

DOD Can Increase Savings by Reusing Industrial Plant Equipment Gao ID: NSIAD-93-8 November 6, 1992

Because the military's industrial plant divestiture practice allows the sale of government-owned, contractor-run plants containing equipment that may be needed elsewhere in the Defense Department, the government may end up having to buy replacement equipment at higher cost. For example, in 1989 the Air Force sold an industrial plant, including land, buildings, and 513 pieces of industrial plant equipment, to the contractor--General Electric--for $18.1 million. At the time, other military locations needed 174 pieces of the plant equipment with an estimated replacement value of $26 million. Within a few months after purchasing the plant, General Electric sold several pieces of plant equipment to third parties. Selling the plant to General Electric was contrary to the Pentagon's industrial policy, which encourages the reuse of existing idle or excess plant equipment to minimize new procurements.

GAO found that: (1) the Department of Defense's (DOD) plant divestiture practices allowed the military to sell government-owned, contractor-operated plants to government contractors; (2) the government may have to purchase replacement equipment sold in divestitures at increased costs; (3) in 1989, the Air Force sold an industrial plant for $18.1 million to a government contractor; (4) DOD had outstanding requirements for 174 pieces of plant equipment valued at $26 million; (5) the contractor sold several pieces of plant equipment to third parties after it purchased the facility; (6) industrial plant equipment policy encouraged the reuse of previously idle or excess plant equipment to minimize new procurements; (7) DIPEC rebuilt and overhauled plant equipment to like-new condition and saved half of the proposed replacement costs; and (8) DIPEC redistributed over 1,000 pieces of equipment costing $60 million, which displaced the purchase of about $125 million of new equipment.

Recommendations

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