Navy Supply

Material management practices at naval shipyards have improved since GAO's last review in 1985, but further improvements are possible. The shipyards' material requirements determination process still is not working as intended. As a result, shipyards ordered more material than was needed to repair ships and the shipyards had unused material on hand after the repairs were completed. The quantity of unused material exceeded the Navy goal and had to be written off as a loss when it was unneeded elsewhere. In fiscal years 1991 through 1993, the shipyards wrote off $88 million in losses for unused material, including $56 million in items sent to disposal. Excess material orders resulted from several factors, including the lack of analysis into reasons for unused material and the absence of historical material usage data to help determine requirements. Also, because adequate management controls were not in place, the shipyards maintained inventories of material that went unrecorded on official inventory records, issued more shop store material than was needed for repairs, and did not ensure compliance with policies to eliminate excess inventories and protect material from loss.

GAO found that: (1) the Navy has improved material management at naval shipyards, but further improvements are needed; (2) the shipyards' material requirements determination process is not working as intended and shipyards are ordering more material than they need; (3) the quantity of unused material exceeds the Navy's goal and results in waste that cannot be returned to the supply system or vendor; (4) the quantity of unused material is generally underreported because of limitations in the shipyards' information systems; (5) the Navy has directed the shipyards to revise their material management information systems to improve reporting of unused materials; (6) factors causing excessive material orders include the shipyards' failure to analyze the reasons for unused material, the absence of historical usage data, questionable material ordering decisions, workers' use of unrecorded material to complete repairs, changes in or cancellations of repair orders after the material is ordered, and unanticipated changes in material specifications; (7) the shipyards maintain excessive amounts of unrecorded material; and (8) the shipyards' inventory records are incomplete because of inadequate management controls to ensure compliance with inventory policies and to safeguard material assets.

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.

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