Defense Inventory

As part of its ongoing analysis of the Defense Department's (DOD) secondary inventory, GAO has updated its earlier analyses of the military's reported on-hand and on-order inventory. GAO discusses whether DOD (1) had on-hand inventory exceeding current requirements as of September 30, 1996, and 1997 and (2) was buying inventory for which it had no current requirement as of those dates. GAO's analyses are based on reported secondary inventory data on spare and repair parts, clothing, medical supplies, and other items used to support U.S. troops.

GAO noted that: (1) DOD reported reducing the secondary inventory GAO analyzed from about $69.7 billion as of September 30, 1996, to $65.8 billion as of September 30, 1997; (2) about $39.4 billion of this inventory exceeded DOD's requirements and represented about 60 percent of DOD's total on-hand inventory; (3) the percentage of inventory that exceeded current requirements remained about the same for the two periods GAO analyzed and was about the same as of September 30, 1995; (4) DOD could potentially reduce inventory that exceeded current requirements when it is economical to do so; (5) DOD had no demand for about $11 billion, or 29 percent, of $37 billion of the inventory that exceeded requirements as of September 30, 1997, but did have customer demands for the remaining $26 billion; (6) assuming customer demands remain unchanged, $3.4 billion of this inventory would last 20 or more years and $658 million would last more than 100 years; (7) some portion of this inventory is more economical to retain than to dispose of and possibly repurchase; (8) however, to the extent it is economical to dispose of the inventory, DOD's cost of operations could be reduced; (9) DOD must continue to purchase additional inventory to replenish supply shortages; (10) however, DOD also ordered inventory that, if received, would add to the amount that exceeded requirements as defined by DOD and GAO; (11) as of September 30, 1997, DOD did not need about $1.5 billion, or 18 percent, of the inventory it had ordered to meet requirements; (12) the requirements for these inventories frequently change after the items are ordered; and (13) however, while the services cancel some of the on-order inventory that is not needed, they miss many opportunities to cancel additional orders.