Defense Inventory

The Defense Department (DOD) reports that the nominal value of the secondary item inventory decreased by nearly $32 billion between fiscal years 1989-93. However, after adjusting DOD's secondary inventory for accounting changes and valuing it all at the latest acquisition cost, GAO estimates that the total inventory decreased by about $11 billion during that period. The value of items in the potential reutilization/disposal category rose by $7 billion. However, by revaluing the latest acquisition values of DOD's inventory to reflect needed repair costs and scrap values of potential reutilization/disposal stock, GAO found that inventory values decreased by $15 billion between fiscal years 1989-93 and potential reutilization stocks increased by less than $200 million. Actual obligations for secondary item inventory were $35.6 billion in fiscal year 1991, $27.9 billion in fiscal year 1992, and $24.7 billion in fiscal year 1993. According to DOD, the fiscal year 1991 amount was higher than subsequent years because of high fuel costs and funding for Operation Desert Storm. Current budget estimates for secondary inventory for fiscal years 1994 and 1995 are about $25 million for each year. Actual and estimated Defense Business Operations Fund obligational authority for purchasing secondary inventory items is more than $19 billion for fiscal years 1993, 1994, and 1995. DOD uses secondary item inventory to support military forces, including military personnel, fighter aircraft, and ships. These forces have all decreased since fiscal year 1991 and are projected to continue decreasing through fiscal year 1995.

GAO found that: (1) according to DOD reports, the DOD secondary supply inventory decreased $31.9 billion between FY 1989 and FY 1993, but accounting changes render present and past inventory values uncomparable; (2) in real terms, the total DOD secondary supply inventory decreased $11.2 billion during that time frame; (3) when repair costs and scrap values were considered, the decrease was $15.0 billion; (4) budget obligations for secondary inventory items ranged from $35.6 billion in FY 1991 to $24.7 billion in FY 1993; (5) FY 1991 obligations were higher than subsequent years because of high fuel costs and funding for Operation Desert Storm; and (6) current budget estimates for secondary inventory for FY 1994 and FY 1995 are about $25 billion per year.