Army Logistics

The Pentagon has embarked on a strategy to reengineer its logistics support for weapon systems by relying more on the private sector. The military has selected the Apache AH-64 helicopter as a pilot for implementing this new strategy. At the same time, the Army has been considering a logistics support concept called prime vendor support for the Apache. Prime vendor support is a contractor's proposal to use commercial practices to reengineer logistics support, improve readiness, reduce life-cycle costs, and provide savings that can be used to modernize the helicopter. The program will rely on private-sector capital to upgrade Apache components and to manage the parts pipeline. DOD is prohibited from entering into a prime vendor contract for depot maintenance and repair of a weapons system until 30 days after the military submits a report to Congress describing the competitive procedures used to select the awardee and provides a cost analysis that shows the savings to the government over the life of the contract. This report determines the status of the Apache prime vendor support proposals. GAO discusses the evolution of the prime vendor support concept and the financial and operational issues that have been raised over whether the Army should implement the concept.

GAO noted that: (1) the Apache PVS concept began as an unsolicited contractor proposal whose scope has evolved over time; (2) as would be expected when a new concept of this magnitude is introduced, there are significantly different views about various aspects of the proposal; (3) although the Apache PVS proposal is viewed by various Office of the Secretary of Defense and Army officials as a key effort to test improved weapon system logistics support, the proposal remains under study within the Army to address unresolved issues; (4) the Army does not know when a decision will be made on whether or not the program will go forward; (5) key questions remain regarding how certain cost factors should be considered in evaluating the PVS proposal; (6) estimates of the cost differences between PVS and the government's best-case cost study of the in-house approach vary significantly, and each is considered the most cost-effective depending on which assumptions, including program requirements, are used; (7) also, a number of questions have been raised about the potential operational impact of PVS on meeting war-fighters' logistics support needs; (8) because of uncertainties and differing views and issues that have emerged, the Under Secretary of the Army directed in January and March 1999 that more rigorous and comprehensive analyses be conducted of cost, operational, and requirement issues; and (9) these efforts are still underway.