Federal Property Disposal

This briefing report provides information on the Defense Department's (DOD) personal property disposal process. In fiscal year 1996, the Defense Reutilization and Marketing Service disposed of millions of items with a reported acquisition value of nearly $24 billion. GAO discusses (1) the way the disposal process works, (2) DOD's rate of return when it sells this property and the private sector's rate of return on certain sales, and (3) the best business practices and innovative techniques that DOD is using or considering for use in disposing of unwanted personal property.

GAO noted that: (1) the DOD disposal process, which is governed by numerous laws and regulations, starts when DOD activities turn in items to the Defense Reutilization and Marketing Offices (DRMO) for disposal; (2) upon receipt, DRMO personnel inspect the items for condition, acquisition value, and special handling requirements such as those for pilferable or militarily sensitive items; (3) items are accumulated for 14 to 28 days and then processed together; (4) the Defense Reutilization and Marketing Service's (DRMS) disposition priorities are to reutilize property within DOD, transfer items to other federal agencies and organizations with equivalent priority for the purpose of obtaining excess property, and donate the remaining items to eligible entities such as state and local governments, among many others; (5) items that remain after these priorities have been served are sold to the general public or disposed of, primarily through service contracts; (6) DRMS' overall rate of return on the reported acquisition value of all usable property it sold in fiscal year 1996 was 1.97 percent; (7) when compared with the private sector's rate of return for similar items, DRMS' rates are low; (8) there are many reasons for DRMS' lower rate of return; (9) for example, many of the aircraft parts it disposes of only have military application, and those with commercial application are not certified by the Federal Aviation Administration, a requirement for commercial use; (10) another factor lowering DRMS' rate of return is that the best items are reutilized, transferred, or donated, leaving the least marketable items available for sale; (11) the volume of items DRMS disposes of annually also make it difficult for DRMS to develop expertise or to tailor disposal strategies for individual items like the private sector does; (12) moreover, the quantities, constant influx of items, and time limits on the various phases of the process drive DRMS' emphasis on moving items through the process quickly to make room for incoming items; (13) DOD is seeking to improve its process by using more commercial practices and making greater use of the private sector in disposing of property; and (14) among the key initiatives it is employing or considering include contracting with private auctioneering companies to conduct property sales, using the Internet to advertise available property, selling the property to private contractors that will then dispose of it and share the proceeds with DOD, and restructuring DRMS' organization to operate and compete more like a private enterprise.