Defense Inventory

The Department of Defense (DOD) began implementing the Defense Logistics Agency's maintenance, repair, and operations prime vendor program in fiscal year 1999. More than 100 customers placed orders with these vendors for a total of about $59 million, or less than 10 percent of the estimated $670 million that DOD spent on facility maintenance supplies that year. Use of the program varied widely among the 11 installations GAO examined. At seven installations, base personnel ordered, on average, about 55 percent of facilities maintenance supplies from the prime vendor during fiscal year 1999. Of the four other installations, three did not use the program and one could not quantify the extent to which the prime vendor was used. DOD has no way to evaluate the extent to which the prime vendor program has been used to streamline logistics operations or increase overall logistics system effectiveness. It has also not determined how the program should be used in conjunction with other procurement methods. At some installations, ineffective working relationships among the agency, the prime vendors, and the installations have limited the program's use. Often, the prime vendors' prices for facilities maintenance supplies were higher than items bought directly from a local merchant.

GAO noted that: (1) DOD has begun implementing the Defense Logistics Agency's (DLA) maintenance, repair, and operations prime vendor program, but in fiscal year (FY) 1999, it covered only a small portion of business operations; (2) DLA has awarded prime vendor contracts to support military installations nationwide and at some overseas locations, and over 100 customers placed orders with these vendors in FY 1999; (3) these orders represented about $59 million, or less than 10 percent of the estimated $670 million DOD spent on facility maintenance supplies during that year; (4) use of the program varied widely among the installations; (5) at 7 of the 11 installations GAO examined, base personnel ordered, on average, about 55 percent of facilities maintenance supplies from the prime vendor during FY 1999; (6) of the other four installations, three did not use the program in FY 1999 and one could not quantify the extent to which the prime vendor was used; (7) DOD does not have a mechanism to evaluate the extent to which the prime vendor program has been used to streamline logistics operations or increase overall logistics system effectiveness; (8) in addition, DOD has not determined how the program should be used in conjunction with the other procurement methods to provide installations with the most efficient and effective supply system; (9) furthermore, DLA and the military departments have encountered significant issues while implementing the program that should be addressed for the program to operate as intended; (10) for example, at some installations, ineffective working relationships among DLA, the prime vendors, and the installations have limited the program's use; and (11) another issue raised by installation officials was that the prime vendors' prices for facilities maintenance supplies were often higher than the price the installation would pay if the items were purchased directly from a local merchant.

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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