Defense Inventory
DOD and Prime Contractors Adhered to Requirements in Selected Contracts for Overseeing Spare Parts Quality Gao ID: GAO-05-73 December 20, 2004In the 2004 Defense Appropriations Act, Congress mandated that GAO examine and report on the oversight of prime contractors by the Department of Defense (DOD) and the oversight of subcontractors by the prime contractors. Contract quality assurance oversight is intended to assess whether contractors are capable of and are providing supplies or services that meet contract quality and technical requirements. Providing effective oversight is challenging. DCMA recognizes that the risk of nonconforming parts reaching end users exists, given the diversity of contracts, parts, and products used to meet weapon systems requirements and uses a risk management process to guide its efforts. For fiscal year 2003, government quality assurance oversight was required for approximately 273,000 contracts. GAO determined (1) whether DOD provided quality assurance oversight and enforcement over its spare parts prime contractors, (2) if prime contractors provided quality assurance oversight over their subcontractors, and (3) how DOD held prime contractors accountable for overseeing the subcontractors' work. To address these objectives, GAO judgmentally selected and reviewed 15 contracts awarded to 11 prime contractors by the services and the Defense Logistics Agency. In commenting on a draft of this report, DOD provided one technical comment, which GAO incorporated as appropriate.
GAO's review of the 15 contracts showed that quality assurance personnel within the Defense Contract Management Agency (DCMA)--DOD's primary organization for providing quality assurance oversight--generally followed established policies, guidance, regulations, and contract requirements in performing oversight and enforcement over spare parts prime contractors. This oversight ranged from conducting physical inspection of parts, such as testing the measurements and functions of a part to evaluating contractor production processes to observing the outer appearance and counting the number of parts for compliance with contract requirements. When one of the prime contractor's processes and another contractor's parts did not meet contract requirements, DCMA used its enforcement system by issuing requests for corrective action by the prime contractors. GAO found that the 11 prime contractors reviewed provided quality assurance oversight over their subcontractors' work in accordance with industry standards and contract requirements. The contractors used at least two and up to four methods in providing quality assurance oversight over their subcontractors. These methods included evaluating potential subcontractors for placement on an Approved Supplier List, requiring certifications of parts and processes, testing parts and processes, and tracking and monitoring subcontractor's performance. The primary methods of oversight were evaluating subcontractors for placement on an Approved Supplier List and requiring certifications that parts and processes conform to contractual specifications. Establishing an Approved Supplier List served to identify subcontractors capable of producing needed parts or processes in accordance with industry standards and contractual specifications. In GAO's review of the 15 contracts, DCMA held prime contractors accountable for their subcontractors' work by requiring that the prime contractors adhere to contract clauses concerning oversight responsibility. Most of the contracts included either clauses stating that the prime contractor shall provide supplies that conform to contract requirements or clauses related to other quality requirements. When nonconformance was reported, DCMA quality assurance personnel and the prime contractor determined if the deficiency was due to contractor nonconformance and assigned responsibility for corrective action. GAO identified one deficiency from the 15 contracts that the prime contractor was responsible for and DCMA held the prime contractor accountable for the part. While GAO did not identify any major deficiencies from the contracts and practices it reviewed, GAO recognizes that the risk of nonconforming spare parts reaching end users exists. Compliance by contractors, DCMA, and other DOD agencies with established internal controls helps mitigate against this risk.
GAO-05-73, Defense Inventory: DOD and Prime Contractors Adhered to Requirements in Selected Contracts for Overseeing Spare Parts Quality
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Report to the Senate and House Subcommittees on Defense, Committees on
Appropriations:
United States Government Accountability Office:
GAO:
December 2004:
Defense Inventory:
DOD and Prime Contractors Adhered to Requirements in Selected Contracts
for Overseeing Spare Parts Quality:
GAO-05-73:
GAO Highlights:
Highlights of GAO-05-73, a report to the Senate and House Subcommittees
on Defense, Committees on Appropriations:
Why GAO Did This Study:
In the 2004 Defense Appropriations Act, Congress mandated that GAO
examine and report on the oversight of prime contractors by the
Department of Defense (DOD) and the oversight of subcontractors by the
prime contractors. Contract quality assurance oversight is intended to
assess whether contractors are capable of and are providing supplies or
services that meet contract quality and technical requirements.
Providing effective oversight is challenging. DCMA recognizes that the
risk of nonconforming parts reaching end users exists, given the
diversity of contracts, parts, and products used to meet weapon systems
requirements and uses a risk management process to guide its efforts.
For fiscal year 2003, government quality assurance oversight was
required for approximately 273,000 contracts. GAO determined (1)
whether DOD provided quality assurance oversight and enforcement over
its spare parts prime contractors, (2) if prime contractors provided
quality assurance oversight over their subcontractors, and (3) how DOD
held prime contractors accountable for overseeing the subcontractors‘
work. To address these objectives, GAO judgmentally selected and
reviewed 15 contracts awarded to 11 prime contractors by the services
and the Defense Logistics Agency.
In commenting on a draft of this report, DOD provided one technical
comment, which GAO incorporated as appropriate.
What GAO Found:
GAO‘s review of the 15 contracts showed that quality assurance
personnel within the Defense Contract Management Agency (DCMA)”DOD‘s
primary organization for providing quality assurance oversight”
generally followed established policies, guidance, regulations, and
contract requirements in performing oversight and enforcement over
spare parts prime contractors. This oversight ranged from conducting
physical inspection of parts, such as testing the measurements and
functions of a part to evaluating contractor production processes to
observing the outer appearance and counting the number of parts for
compliance with contract requirements. When one of the prime
contractor‘s processes and another contractor‘s parts did not meet
contract requirements, DCMA used its enforcement system by issuing
requests for corrective action by the prime contractors.
GAO found that the 11 prime contractors reviewed provided quality
assurance oversight over their subcontractors‘ work in accordance with
industry standards and contract requirements. The contractors used at
least two and up to four methods in providing quality assurance
oversight over their subcontractors. These methods included evaluating
potential subcontractors for placement on an Approved Supplier List,
requiring certifications of parts and processes, testing parts and
processes, and tracking and monitoring subcontractor‘s performance. The
primary methods of oversight were evaluating subcontractors for
placement on an Approved Supplier List and requiring certifications
that parts and processes conform to contractual specifications.
Establishing an Approved Supplier List served to identify
subcontractors capable of producing needed parts or processes in
accordance with industry standards and contractual specifications.
In GAO‘s review of the 15 contracts, DCMA held prime contractors
accountable for their subcontractors‘ work by requiring that the prime
contractors adhere to contract clauses concerning oversight
responsibility. Most of the contracts included either clauses stating
that the prime contractor shall provide supplies that conform to
contract requirements or clauses related to other quality requirements.
When nonconformance was reported, DCMA quality assurance personnel and
the prime contractor determined if the deficiency was due to contractor
nonconformance and assigned responsibility for corrective action. GAO
identified one deficiency from the 15 contracts that the prime
contractor was responsible for and DCMA held the prime contractor
accountable for the part.
While GAO did not identify any major deficiencies from the contracts
and practices it reviewed, GAO recognizes that the risk of
nonconforming spare parts reaching end users exists. Compliance by
contractors, DCMA, and other DOD agencies with established internal
controls helps mitigate against this risk.
www.gao.gov/cgi-bin/getrpt?GAO-05-73.
To view the full product, including the scope and methodology, click on
the link above. For more information, contact William M. Solis at (202)
512-8365 or solisw@gao.gov.
[End of section]
Contents:
Letter:
Results in Brief:
Background:
DCMA Provided Quality Assurance Oversight and Enforcement over
Contractors:
Prime Contractors Adhered to Industry Standards in Providing Quality
Assurance Oversight over Subcontractors:
DCMA Held Prime Contractors Accountable by Requiring Adherence to
Contract Clauses:
Concluding Observations:
Agency Comments and Our Evaluation:
Appendix I: Scope and Methodology:
Appendix II: DCMA Offices and Contractors Reviewed:
Appendix III: Comments from the Department of Defense:
Appendix IV: GAO Contact and Staff Acknowledgments:
Tables:
Table 1: Types of Inspections Performed by DCMA Quality Assurance
Specialists for the Contractors We Reviewed:
Table 2: Methods of Quality Assurance Oversight over Subcontractors
Provided by the Prime Contractors We Reviewed:
Abbreviations:
DCMA: Defense Contract Management Agency:
DLA: Defense Logistics Agency:
DOD: Department of Defense:
United States Government Accountability Office:
Washington, DC 20548:
December 20, 2004:
The Honorable Ted Stevens:
Chairman:
The Honorable Daniel Inouye:
Ranking Minority Member:
Subcommittee on Defense:
Committee on Appropriations
United States Senate:
The Honorable Jerry Lewis:
Chairman:
The Honorable John Murtha:
Ranking Minority Member:
Subcommittee on Defense:
Committee on Appropriations:
House of Representatives:
Military personnel rely upon weapon systems such as aircraft and tanks
to successfully perform their missions on the battlefield. These
systems contain numerous individual parts and assemblies produced by
many different contractors and subcontractors. For example, an engine
for an F-15 aircraft has approximately 16,000 parts and 1,600 different
part numbers.[Footnote 1] Although there is one prime contractor
responsible for producing this engine, there are numerous
subcontractors supplying the parts and assemblies required to build the
engine under numerous contracts, and quality assurance is required
throughout the production process. While the military services'
contracting offices oversee a small percentage of the Department of
Defense's (DOD) contracts for acquiring the parts, the Defense Contract
Management Agency (DCMA), through its quality assurance specialists,
provides quality assurance oversight over the majority of these
contracts. Quality assurance oversight is defined as the various
functions, including inspections, performed to determine whether a
contractor has fulfilled the contractual obligations related to quality
and quantity. This oversight is intended to assess whether contractors
are capable of and are providing supplies or services that meet
contract quality and technical requirements.
Providing effective oversight is challenging, and DCMA recognizes that
the risk of nonconforming parts reaching end users exists, given the
diversity of contracts, parts, and products used to meet weapon
systems requirements. For fiscal year 2003, DCMA was responsible for
performing government quality assurance oversight over approximately
273,000 contract actions.[Footnote 2] To help mitigate risks inherent
with spare parts acquisitions, DOD developed a risk management guide
that discusses risk and risk management, examines risk management
concepts, and provides a practical reference for dealing with
acquisition risk. DCMA used this guide in developing its Risk
Assessment and Management Program that is used to assess the risk of a
contractor providing nonconforming parts. According to DCMA officials,
for the majority of spare parts prime contractors that had contracts
requiring oversight by DCMA and used subcontractors in providing the
parts, DCMA relied upon the prime contractors to oversee their
subcontractors. In accordance with the Federal Acquisition Regulation,
DCMA is only responsible for providing quality assurance oversight over
subcontractors when required to do so in the government's interest.
When DCMA provides quality assurance oversight over subcontractors, the
prime contractor is not relieved of any quality assurance oversight
responsibilities under the contract.
This report responds to the mandate in section 8143 of the 2004 Defense
Appropriations Act that GAO examine and report on the oversight of
prime contractors by DOD and the oversight of subcontractors by prime
contractors.[Footnote 3] Our review focused on whether DCMA and spare
parts prime contractors are fulfilling their quality assurance
oversight responsibilities as required by regulations, policies,
procedures, and contract provisions. Specifically, our objectives were
to determine whether:
1. DCMA provided quality assurance oversight and enforcement over its
spare parts prime contractors in accordance with established policies,
procedures, and guidance; and:
2. prime contractors provided quality assurance oversight over their
subcontractors' work related to producing spare parts in accordance
with industry standards and contract requirements.
We also reviewed how DCMA held prime contractors accountable for
overseeing their subcontractors' work.
To address our objectives, we reviewed regulations, policies, and
procedures related to the quality assurance oversight over spare parts
contractors provided by DCMA and prime contractors and the enforcement
actions available to assure compliance. In addition, we reviewed 15
contracts awarded to 11 prime contractors and any reports on product
quality deficiency for these contracts[Footnote 4]. Specifically:
* To assess whether DCMA provided quality assurance oversight over the
prime contractors, we compared the quality assurance provisions
included in the 15 contracts to oversight actions performed by DCMA
quality assurance specialists.[Footnote 5] In assessing whether DCMA
used enforcement actions, we looked for instances of spare parts
nonconformance related to these contracts and determined if DCMA levied
any enforcement actions against the prime contractors.
* To assess prime contractors' oversight of their subcontractors, we
interviewed representatives from the 11 prime contractors and
determined if the prime contractors used subcontractors. For those that
used subcontractors, we held discussions with prime contractor
personnel related to the level of quality assurance oversight they
performed over the subcontractors and reviewed their processes for
managing suppliers and subcontractors. We also gathered documentation
from the prime contractors on test results of parts produced by
subcontractors.
* To assess how DCMA held prime contractors accountable for the work of
their subcontractors, we reviewed the 15 contracts to determine if they
included clauses holding the prime contractor responsible for the spare
parts provided to the government. For the instances of nonconforming
parts reported against these contracts, we reviewed how DCMA handled
the reported nonconformance and whether DCMA held the prime contractor
responsible for correcting the nonconformance. More detailed
information about our scope and methodology is contained in appendix I.
We conducted our review from November 2003 through October 2004 in
accordance with generally accepted government auditing standards.
Results in Brief:
In our review of the 15 contracts, DCMA quality assurance specialists
followed established policies, procedures, and guidance in performing
quality assurance oversight and enforcement over the spare parts prime
contractors. DCMA's oversight was provided through inspections that
included: (1) physical inspection of parts such as testing the
measurements and functions of parts, (2) evaluation of the prime
contractors' processes to determine compliance with established
contract requirements and production procedures, and (3) observation of
the outer appearance of spare parts and taking a physical count of the
parts to ensure that the proper number of parts are being shipped to
the end user. When one of the prime contractor's processes and another
contractor's parts did not meet contract requirements, DCMA used an
enforcement system that involved issuing requests for corrective action
by the prime contractors. Corrective actions involved requiring the
prime contractor to make corrections or changes to the production
process and demonstrating how processes would be improved to prevent
further instances of nonconformance. According to DCMA, it was not
necessary to levy severe enforcement actions such as penalties and
debarment from conducting business with the federal government against
any of the contractors that we reviewed.
The prime contractors we reviewed provided quality assurance oversight
over their subcontractors' work related to producing spare parts in
accordance with accepted industry standards and contract requirements.
Based on industry standards, prime contractors used at least two and up
to four methods in providing quality assurance oversight over their
subcontractors' work. These methods included (1) evaluating and
visiting potential subcontractors for placement on a list of approved
suppliers for a particular part, (2) requiring certifications from the
subcontractors that the parts or processes were produced in accordance
with established industry standards and contract requirements,
(3) performing periodic testing of parts produced by subcontractors,
and (4) tracking and monitoring approved subcontractors' past
performance. The primary methods of oversight used were evaluating
subcontractors for placement on the prime contractor's Approved
Supplier List and requiring certifications that their parts and
processes conform to contractual specifications. Establishing an
Approved Supplier List served to identify qualified subcontractors
capable of producing needed parts or processes in accordance with
industry standards and contractual specifications. Industry standards,
developed and voted upon by a group of technical experts representing
standards organizations such as Aerospace Standards and International
Organization of Standardization, allowed prime contractors flexibility
in providing quality assurance oversight over subcontractors
considering the type and size of the organization and the product(s)
produced.
In our review of the 15 contracts, DCMA held prime contractors
accountable for overseeing their subcontractors' work by requiring that
the prime contractors adhere to contract clauses concerning oversight
responsibility. Most of the contracts we reviewed included either the
Federal Acquisition Regulation clause stating that the prime contractor
shall tender to the government for acceptance only supplies that
conform with contract requirements or other clauses related to quality
assurance requirements. When instances of product quality deficiency
were reported, the DCMA quality assurance specialist and the prime
contractor determined if the deficiency was due to contractor
nonconformance and assigned responsibility for corrective action. For
the 15 contracts we reviewed, we identified one deficiency that was
determined to be the responsibility of the prime contractor and DCMA
held the prime contractor accountable for the part. DCMA also performed
reviews of subcontractors' certifications to the prime contractor that
the parts and processes produced by the subcontractor were manufactured
in accordance with the contract requirements. These reviews served as a
check by DCMA to determine whether the prime contractors' quality
assurance systems were adequate for oversight of their subcontractors'
work. During our review, service officials provided us with examples of
other contracts in which nonconforming parts reached end users. DCMA
followed its procedures for evaluating the causes of these
nonconforming parts. The reasons for the nonconformance varied for each
part.
We are not making any recommendations in this report. While we did not
identify any major deficiencies from the contracts and practices we
reviewed, we recognize that the risk of nonconforming spare parts
reaching end users exists. Compliance by contractors, DCMA, and other
DOD agencies with established internal controls helps mitigate against
this risk.
In written comments on a draft of this report, DOD provided one
technical comment, which we incorporated as appropriate. The
department's comments and our evaluation are on page 17 of this report.
Background:
The Federal Acquisition Regulation is the primary regulation for use by
all federal agencies in acquiring supplies and services. Sections 46
and 52, which discuss and set forth quality assurance and contract
clauses, respectively, provide guidance in determining quality
assurance responsibilities. According to the Federal Acquisition
Regulation, government contract quality assurance is defined as the
various functions, including inspections, performed by the government
to determine whether a contractor has fulfilled the contract
obligations pertaining to quality and quantity. These inspections can
either be conducted at the contractor's place of manufacture and
production (source) or at the receiving location for the parts
(destination).
DOD's Quality Assurance Oversight for Contracts Is Provided Primarily
by DCMA:
DCMA is DOD's primary organization for performing quality assurance
oversight for contracts and this oversight responsibility typically
only covers prime contractors. DCMA's execution of its quality
assurance responsibility is primarily through its source inspection
program. Source inspections are defined as inspections at the point
where goods are manufactured or assembled. There are three types of
source inspections: physical inspection; contractor process reviews;
and kind, count, and condition. Physical inspection involves inspecting
parts by comparing the parts to a specification, drawing, or other
instruction. Contractor process reviews are inspections of processes
and procedures for establishing confidence that the procured parts will
produce a desired outcome. Inspections involving kind, count, and
condition are inspections intended to visually identify and verify the
quantity and exterior appearance of a part to determine if it visually
meets contract specifications.
During fiscal year 2003, DCMA was responsible for government source
inspection for approximately 273,000 contracts. The Federal Acquisition
Regulation requires that contracts include inspection and other quality
requirements that will protect the interest of the government. It also
provides guidance in establishing which clauses to include in the
various types of contracts. The clauses included in each contract
dictate the type and level of quality assurance oversight to be
performed. DCMA quality assurance specialists are expected to follow
the inspection and acceptance provisions in each contract in
determining whether they are required to perform quality assurance
oversight. If the contract states that inspection and acceptance will
be at destination, then DCMA does not perform any quality assurance
oversight. End users within military units, such as Army battalions and
Air Force squadrons, perform inspection and acceptance for these
contracts.
Questions have been raised about the efficiency of DCMA's quality
assurance oversight program. In October 2003, the DOD Inspector General
reported that of the 518 contracts requiring DCMA source inspection
that they reviewed, at least 172 of the inspections provided either
nominal or no value to the DOD quality assurance process.[Footnote 6]
The DOD Inspector General also pointed out concerns in the DOD quality
assurance program, including (1) ambiguity in the level and extent of
requested source inspections; (2) inconsistent and unclear application
of items defined as critical or having a critical application;
(3) inconsistent implementation of inspection procedures for items
considered commercial, off-the-shelf; and (4) arbitrary and
inconsistent inspection procedures for items purchased from
distributors.
DCMA Provided Quality Assurance Oversight and Enforcement over
Contractors:
In our review of 15 contracts awarded to 11 contractors, DCMA provided
quality assurance oversight and enforcement over these spare parts
prime contractors. DCMA used three types of inspections to perform
quality assurance oversight over the contractors. DCMA adhered to the
Federal Acquisition Regulation, contract quality requirements, and DCMA
guidance in providing quality assurance oversight over these prime
contractors. Federal Acquisition Regulation clauses included in the
contracts guide whether or not DCMA would perform quality assurance
oversight. DCMA provides oversight for those contracts requiring
inspection at the place of manufacture of the parts. Enforcement of
spare parts quality and safety during the production process was
achieved through the issuance of corrective action requests.
DCMA Used Three Types of Inspections to Perform Quality Assurance
Oversight over Contractors:
DCMA quality assurance specialists followed established policies,
procedures, and guidance in performing their oversight over the spare
parts prime contractors in our review. As shown in table 1, the quality
assurance specialists performed one or a combination of three types of
inspections over prime contractors. The three types of inspections
include: physical inspection to measure the dimensions of parts or to
test the parts; process reviews; or an observation of the kind, count,
and condition of the parts. At 7 of the 11 contractor locations , DCMA
quality assurance specialists performed both process reviews and
physical inspections.
Table 1: Types of Inspections Performed by DCMA Quality Assurance
Specialists for the Contractors We Reviewed:
1;
Prime contractor: Contractor A;
Physical inspection: Yes;
Process reviews: Yes;
Kind, count, & condition: No.
2;
Prime contractor: Contractor B;
Physical inspection: Yes;
Process reviews: Yes;
Kind, count, & condition: No.
3;
Prime contractor: Contractor C;
Physical inspection: Yes;
Process reviews: Yes;
Kind, count, & condition: No.
4;
Prime contractor: Contractor D;
Physical inspection: Yes;
Process reviews: Yes;
Kind, count, & condition: No.
5;
Prime contractor: Contractor E;
Physical inspection: No;
Process reviews: No;
Kind, count, & condition: Yes[A].
6;
Prime contractor: Contractor F;
Physical inspection: Yes;
Process reviews: Yes;
Kind, count, & condition: Yes.
7;
Prime contractor: Contractor G;
Physical inspection: Yes;
Process reviews: No;
Kind, count, & condition: No.
8;
Prime contractor: Contractor H;
Physical inspection: Yes;
Process reviews: Yes;
Kind, count, & condition: No.
9;
Prime contractor: Contractor I;
Physical inspection: No;
Process reviews: Yes;
Kind, count, & condition: No.
10;
Prime contractor: Contractor J;
Physical inspection: No;
Process reviews: No;
Kind, count, & condition: Yes[B].
11;
Prime contractor: Contractor K;
Physical inspection: Yes;
Process reviews: Yes;
Kind, count, & condition: No.
Source: GAO analysis.
[A] Various types of inspections were performed at subsidiaries of this
contractor.
[B] This contractor is a distributor of parts made by other
manufacturers.
[End of table]
For physical inspection of spare parts, the quality assurance
specialist selects a sample of the parts from various production runs
and inspects them by comparing the parts to a specification, drawing,
or other instruction. For example, at one location, the prime
contractor had procured the part from a subcontractor and required the
subcontractor to provide test data related to the part. The quality
assurance specialist reviewed the test data and compared it to the part
specifications. Also, the quality assurance specialist inspected the
number imprinted on the parts, exterior painting, and workmanship of
the received parts to ensure they complied with contract
specifications.
The second type of inspection involves evaluating the prime
contractors' processes to determine compliance with established
contract requirements and production procedures. During these
inspections the quality assurance specialist assesses the prime
contractor's processes and production line procedures in relation to
established industry practices and provides the contractor an early
opportunity to make corrections or improvements, if necessary. For
example, at one prime contractor location, the quality assurance
specialist monitored the prime contractor's key processes during the
production, including the cleaning, painting, welding, and final
quality inspection of the product. To help ensure a comprehensive
quality assurance check, the quality assurance specialist performed his
daily quality checks at different phases of the production process.
Also, the quality assurance specialist reviewed the prime contractor's
procedures for selecting its subcontractors to determine if the
subcontractors were certified in accordance with the applicable
industry standards.
The third type of inspection consists of observing the kind, count, and
condition of the parts. Observation of the kind of part includes visual
identification of at least one part for each different part being
procured under the contract and verifying the part number against the
number required in the contract. Counting the parts involves visual
confirmation of the contents of one package per line item and counting
the number of packages received. The quality assurance specialists
verify the physical appearance of the parts to assess their condition.
For example, at one location, the quality assurance specialist
performed a kind, count, and condition inspection to confirm that the
contractor had the correct part by verifying the part number, checking
to ensure the contractor had the proper quantity of parts, and
inspecting the outward appearance of the parts.
DCMA Adhered to the Federal Acquisition Regulation, Contract Quality
Requirements, and DCMA Guidance in Providing Quality Assurance
Oversight over Prime Contractors:
DCMA's quality assurance oversight over the 11 spare parts prime
contractors in our review was in accordance with the Federal
Acquisition Regulation, contract quality requirements, and DCMA's One
Book guidance. Each contract we reviewed designated the location of
inspection and acceptance by contract line item. Contracts that were
designated for inspection and acceptance at the contractor's place of
manufacture and production received DCMA quality assurance oversight.
When contracts are designated for inspection and acceptance at the
receiving location for the parts, the end user is responsible for
inspecting the procured part and the DCMA quality assurance specialist
typically does not get involved with the contract.
Of the 15 contracts we reviewed, DCMA provided quality assurance
oversight for the 13 contracts that were designated for inspection and
acceptance at source. The other two contracts were designated for
inspection and acceptance at destination and did not require DCMA
quality assurance oversight. In accordance with the One Book guidance,
quality assurance specialists performed inspections and acceptance for
its customers to ensure supplies were in compliance with contract
requirements. According to a DCMA official, this guidance allows DCMA
quality assurance specialists flexibility in providing quality
assurance oversight over prime contractors. For example, the guidance
does not include standard requirements for the number of tests, site
visits, or inspections that the DCMA quality assurance specialists
should perform while providing quality assurance oversight. When
contracts were designated for inspection and acceptance at source,
quality assurance specialists typically reviewed contract
requirements, assessed the contractor's risks of producing
nonconforming parts, determined what needed to be done to mitigate the
risks, and applied quality assurance oversight, including inspections,
based on the contractor's risk level.
Enforcement of Spare Parts Quality and Safety during the Production
Process Was Achieved through Corrective Action Requests:
During the production process, when a prime contractor's processes or
spare parts did not meet contract requirements, DCMA used an
enforcement system that involved issuing requests for corrective action
by the prime contractor. According to the Federal Acquisition
Regulation, contractors must be given an opportunity to correct or
replace nonconforming supplies. Contractors are notified about
nonconformance through corrective action requests issued by DCMA or
product quality deficiency reports issued by the end user. When there
is contractual nonconformance during the production process, DCMA may
issue the prime contractor a corrective action request to formally
communicate the deficiency and request corrective action on the part of
the prime contractor. When the prime contractor does not take
corrective actions, contractual remedies available to procuring
contracting officers include suspension of progress payments,
termination for default, and penalties such as suspension or debarment
from holding contracts with the government.
Only 2 of the 11 prime contractors that we reviewed received corrective
action requests related to the contracts in our review. According to
DCMA officials, the remaining contractors did not warrant corrective
action requests related to the contracts we reviewed. Our review of
DCMA files related to these contractors also did not identify any need
for corrective actions by the prime contractors. Corrective actions
identified by the two contractors involved the prime contractor making
corrections or changes to its production processes and demonstrating
how processes would be improved to prevent further instances of
nonconformance. For example, DCMA issued a corrective action request to
a prime contractor identifying loose insulation, an inactive gear, poor
painting quality, and parts that did not meet surface finish
specification requirements as nonconforming items. The prime contractor
corrected the nonconformance and DCMA accepted the product. To prevent
reoccurrence of the deficiencies, the prime contractor reported that it
had taken the following actions: (1) discontinued the use of material
that caused the loose insulation, (2) instructed operators to ensure
that gears were properly adjusted, (3) arranged a meeting with all
contractor paint personnel advising them on the importance of attention
to detail, and (4) agreed to provide their quality assurance
representatives with acceptable and unacceptable finish samples as
visual standards to meet customer expectations.
For the other prime contractor, DCMA issued a corrective action request
because the contractor used the wrong procedure to receive approval for
a major waiver from contract requirements.[Footnote 7] The request for
major waiver was supposed to go through an array of signatures and DCMA
approvals, whereas a minor waiver could be submitted and approved
electronically, requiring fewer signatures and approvals. However, the
prime contractor downgraded the waiver request from major to minor
without the appropriate concurrence and approval of DCMA and submitted
the request through the electronic system. According to the prime
contractor, their personnel had conflicting procedures describing how
to process waivers. To prevent reoccurrence of incorrect processing of
major waivers, the contractor planned to review its current procedures
for processing waivers. Also, the contractor planned to train its
quality assurance staff to ensure they understand the correct
procedures for processing waivers.
Prime Contractors Adhered to Industry Standards in Providing Quality
Assurance Oversight over Subcontractors:
The prime contractors in our review adhered to industry standards in
providing quality assurance oversight over their subcontractors' work.
Based on industry standards, prime contractors performed at least two
or up to four methods to provide quality assurance oversight over their
subcontractors, as shown in table 2. The primary methods of oversight
used were evaluating subcontractors for placement on an Approved
Supplier List and requiring certifications of parts and processes.
Industry standards, such as the International Organization for
Standardization 9001 and Aerospace Standards 9100, require that an
organization have a quality management system in place to ensure that
it will produce high quality products that will serve their intended
purpose. The standards are broad and are intended to be applicable to
all organizations, regardless of type, size, and product provided.
Table 2: Methods of Quality Assurance Oversight over Subcontractors
Provided by the Prime Contractors We Reviewed:
1;
Prime contractor: Contractor A;
Evaluated potential subcontractors for their approved supplier list:
Yes;
Required certifications: Yes;
Tested parts and processes produced: Yes;
Tracked and monitored subcontractors' performance: No.
2;
Prime contractor: Contractor B;
Evaluated potential subcontractors for their approved supplier list:
Yes;
Required certifications: Yes;
Tested parts and processes produced: Yes;
Tracked and monitored subcontractors' performance: No.
3;
Prime contractor: Contractor C;
Evaluated potential subcontractors for their approved supplier list:
Yes;
Required certifications: Yes;
Tested parts and processes produced: No;
Tracked and monitored subcontractors' performance: Yes.
4;
Prime contractor: Contractor D;
Evaluated potential subcontractors for their approved supplier list:
Yes;
Required certifications: Yes;
Tested parts and processes produced: No;
Tracked and monitored subcontractors' performance: Yes.
5;
Prime contractor: Contractor E;
Evaluated potential subcontractors for their approved supplier list:
Yes;
Required certifications: Yes;
Tested parts and processes produced: Yes;
Tracked and monitored subcontractors' performance: Yes.
6;
Prime contractor: Contractor F;
Evaluated potential subcontractors for their approved supplier list:
Yes;
Required certifications: Yes;
Tested parts and processes produced: Yes;
Tracked and monitored subcontractors' performance: Yes.
7;
Prime contractor: Contractor G;
Evaluated potential subcontractors for their approved supplier list:
Yes;
Required certifications: Yes;
Tested parts and processes produced: Yes;
Tracked and monitored subcontractors' performance: Yes.
8;
Prime contractor: Contractor H;
Evaluated potential subcontractors for their approved supplier list:
Yes;
Required certifications: Yes;
Tested parts and processes produced: Yes;
Tracked and monitored subcontractors' performance: Yes.
9;
Prime contractor: Contractor I;
Evaluated potential subcontractors for their approved supplier list:
Yes;
Required certifications: Yes;
Tested parts and processes produced: Yes;
Tracked and monitored subcontractors' performance: Yes.
10;
Prime contractor: Contractor J;
Evaluated potential subcontractors for their approved supplier list:
Yes;
Required certifications: Yes;
Tested parts and processes produced: No;
Tracked and monitored subcontractors' performance: No.
11;
Prime contractor: Contractor K;
Evaluated potential subcontractors for their approved supplier list:
Yes;
Required certifications: Yes;
Tested parts and processes produced: Yes;
Tracked and monitored subcontractors' performance: No.
Source: GAO analysis.
[End of table]
All of the prime contractors that we reviewed evaluated potential
subcontractors prior to the contract award for placement on their
Approved Supplier List. The purpose of establishing an Approved
Supplier List is to identify qualified subcontractors capable of
producing needed parts or processes in accordance with industry
standards and contractual specifications. When evaluating a potential
subcontractor for inclusion on their Approved Supplier List, some prime
contractors periodically visited their subcontractors' production
facilities, requested that subcontractors complete surveys containing
questions regarding the subcontractors' capabilities and
qualifications necessary to produce parts and processes, or examined
information about the technical skills and qualifications of
subcontractor personnel, past performance for producing similar
products, and applicable certifications related to the subcontractors'
operations. Six of the 11 prime contractors said they periodically
visited potential subcontractors prior to contract award.
All of the prime contractors that we reviewed required certifications
such as independent, third-party certifications or certificates of
conformance from their subcontractors to certify that their parts and
processes are in accordance with contract requirements and industry
standards.[Footnote 8] Independent, third-party certifications and
certificates of conformance served as verification that the
subcontractors could produce parts and processes that conformed to
contractual specifications. Prime contractors required certifications
from their subcontractors for different phases of the production
process. For example, one contractor used steel to fabricate parts and
required a certification from the steel subcontractor that the steel
had been produced according to specifications. In this instance, the
prime contractor did not use the steel provided by the subcontractor
until they received the certificate of conformance verifying that the
product was in accordance with industry standards and contractual
requirements.
Eight of the 11 prime contractors we reviewed periodically tested parts
or processes produced by their subcontractors. Prime contractors tested
the subcontractors' parts or processes at either the manufacturing site
or the receiving point to determine whether products or processes met
contractual specifications. For example, one prime contractor performed
mechanical and electrical tests on all materials received from
subcontractors to ensure that the materials met contract
specifications. If the materials did not meet contract specifications,
the prime contractor's review board, which included the government
quality assurance specialist, made a determination concerning the
disposition of the materials. Disposition options included using the
material "as is" or scrapping it.
Seven of the prime contractors that we reviewed tracked and monitored
the performance of their subcontractors by establishing performance
goals, assessing and rating the subcontractors' performance, or
recommending corrective and preventive actions when subcontractors
produced nonconforming parts. The seven prime contractors established
performance goals and rated their subcontractors on a routine and
periodic basis using various performance metrics, such as product
quality and on-time deliveries. For example, one contractor kept track
of the number of nonconforming parts provided by each subcontractor in
relation to the total number of parts provided. When a subcontractor's
nonconformance rate exceeded the prime contractor's acceptable goal,
the prime contractor placed the subcontractor on probation.
DCMA Held Prime Contractors Accountable by Requiring Adherence to
Contract Clauses:
In our review of the 15 contracts, DCMA held prime contractors
accountable for overseeing their subcontractors' work by requiring that
prime contractors adhered to contract clauses concerning oversight
responsibility. When instances of nonconformance were reported through
product quality deficiency reports, the DCMA quality assurance
personnel and the prime contractor determined if the deficiency was due
to contractor nonconformance and assigned responsibility for corrective
action. For the 15 contracts we reviewed, one deficiency was determined
to be the responsibility of the prime contractor and DCMA held the
prime contractor accountable for the part. During our review, service
officials provided us with examples of other contracts in which
nonconforming parts reached end users. DCMA followed its procedures for
evaluating the causes of these nonconforming parts. The reasons for the
nonconformance varied for each part.
Most of the 15 contracts we reviewed included Federal Acquisition
Regulation clause 52.246-2, Inspection of Supplies--Fixed Price, which
states that the prime contractor shall tender to the government for
acceptance only supplies that have been inspected in accordance with
the inspection system and found by the contractor to be in conformity
with contract requirements. This contract clause also states that the
contractor is not relieved of its oversight responsibility when
government quality assurance over subcontractors is required. The
remaining contracts included other quality clauses or did not specify
quality requirements because the contractors had quality systems that
had been previously approved by the procuring contracting officers.
DCMA also performed reviews of subcontractors' certifications to the
prime contractor that the parts and processes produced by the
subcontractor were manufactured in accordance with the contract
requirements. DCMA quality assurance specialists periodically reviewed
third-party certifications and contractors' documents related to site
visits, receiving inspections, and other oversight of subcontractors.
These reviews provided a technique for DCMA to determine whether the
contractors' quality assurance systems were adequate for oversight of
subcontractors. For example, at one contractor location, the quality
assurance specialist obtained copies of certifications that steel was
produced and heat-treated in accordance with standards. The specialist
also reviewed copies of test records maintained by the contractor
during the production process.
After parts are provided to end users within military units, such as
Army battalions and Air Force squadrons, instances of nonconforming
parts are reported through product quality deficiency reports. End
users issue product quality deficiency reports to identify deficiencies
in parts that may indicate nonconformance with contractual or
specification requirements. When the end user identifies a
nonconforming product, the user issues a product quality deficiency
report that is sent to the applicable DCMA contract management office
and distributed to the quality assurance specialist responsible for
overseeing the contractor that produced the item. The quality assurance
specialist notifies the contractor of the report. The contractor may
request that the part be returned to its facility for testing to
determine whether the problem that has been identified by the user can
be duplicated. The DCMA quality assurance specialist and the prime
contractor also determine if the deficiency was due to contractor
nonconformance with contract requirements and assign responsibility for
corrective action. DCMA writes the final disposition of the product
quality deficiency report based on the results of the tests completed
by the contractor and the assessment of who was responsible for the
deficiency. In those cases where the deficiency was determined to be
the responsibility of the prime contractor, DCMA held the prime
contractor accountable for the part. If the cause of the deficiency was
tied back to a subcontractor, DCMA held the prime contractor
responsible for correcting the deficiency and ensuring that the
subcontractor's processes were modified to correct the cause of the
nonconformance.
During our review, service officials provided examples of other
contracts in which nonconforming parts reached end users for various
reasons. DCMA and prime contractors followed their procedures in
evaluating causes for the nonconformance. For example, in March 2004
one prime contractor was notified that five wiring harnesses,
manufactured by one of their approved subcontractors, were defective.
Investigations showed that the prime contractor's quality oversight
system did not detect the problem because its personnel were unfamiliar
with drawings, specifications, or electrical wiring harness
fabrications. After the problem was identified, the prime contractor
provided training related to drawings and proper manufacturing
processes to its quality assurance personnel as well as subcontractor
personnel. However, according to the prime contractor, the
subcontractor still could not produce the wiring harnesses correctly.
As a result, the prime contractor selected another subcontractor to
manufacture the wiring harnesses.
In another case, the contract was for a survival kit that included
critical safety items. The nonconformance related to an O-ring
lubricant that was allowing oxygen pressure to be released prematurely.
Based on the deficiency report, the contractor began using another
lubricant for the O-ring that eliminated the problem. For this
contract, DCMA recommended that government source inspection be added
at the subcontractor level because no prior government source
inspection was required.
Yet in another example, an axle component manufactured by a
subcontractor broke on an aircraft landing gear because the dimensions
of the axle component were incorrect. Incorrect dimensions resulted
from the subcontractor's improper grinding process; yet, the
subcontractor never reported the discrepancies to the prime contractor.
Since the incident, the prime contractor has placed the subcontractor
on probation within the prime contractor's quality approval system. The
subcontractor will remain on probation until an audit is performed by
the end users of the axle to verify that all corrective actions are in
effect.
Concluding Observations:
DCMA and the prime contractors we reviewed utilized a number of
processes to provide quality assurance oversight over the production of
spare parts for the military. The processes included conducting
physical inspections of parts produced by contractors, reviewing prime
contractor's processes, evaluating potential subcontractors for
placement on an Approved Supplier List, requiring certifications of
parts and processes, testing parts and processes, and tracking and
monitoring subcontractor's performance. These processes are founded
upon contractual requirements, DCMA policies, and industry standards
for quality assurance. In addition, there are enforcement procedures
that DCMA uses when nonconforming spare parts reach end users.
However, despite these quality assurance controls, some risk still
exists. For example, while we did not identify any major deficiencies
from the contracts and practices we reviewed, service officials
provided examples of nonconforming parts related to contracts not
included in our review that reached end users for various reasons.
Furthermore, given the vast number of contracts and contractors
involved in providing spare parts to the government, we recognize that
the risk of nonconforming spare parts reaching end users exists.
Compliance by contractors, DCMA, and other DOD agencies with
established internal controls helps mitigate against this risk.
Agency Comments and Our Evaluation:
In written comments on a draft of this report, DOD provided one
technical comment, which we incorporated as appropriate. DOD did not
provide any additional comments. DOD's written comments are reprinted
in their entirety in appendix III.
We are sending copies of this report to the Secretary of Defense; the
Secretaries of the Army, the Navy, and the Air Force; the Director of
the Defense Contract Management Agency; the Director of the Defense
Logistics Agency; and other interested parties. We will also make
copies available to others upon request. In addition, the report will
be available at no charge on the GAO Web site at http://www.gao.gov.
Please contact me at (202) 512-8365 if you or your staffs have any
questions concerning this report. Major contributors to this report are
included in appendix IV.
Signed by:
William M. Solis, Director:
Defense Capabilities and Management:
[End of section]
Appendix I: Scope and Methodology:
To address our objectives, we judgmentally selected for review
11 contracts awarded to 11 prime contractors. During the course of our
review, Defense Contract Management Agency (DCMA) and the prime
contractors provided four additional contracts awarded to some of these
same contractors that had nonconforming parts that reached end users,
bringing the total number of contracts we reviewed to 15. Given the
small number of contracts we reviewed, our results cannot be used to
make inferences about the entire population of contracts requiring
government quality assurance. We included the following kinds of
contracts as candidates for our study: contracts, purchase orders,
basic ordering agreements, delivery orders against existing contracts,
and contract modifications for existing contracts. We included
contracts that were large and small dollar value, from DCMA's East and
West regions, and from the Army, Navy, Air Force, and the Defense
Logistics Agency (DLA). Eleven of these contracts were judgmentally
selected: three from information provided by the Navy and Air Force on
nonconforming parts and 8 from DCMA. To select the eight contracts, we
obtained a query from DCMA's Mechanization of Contract Administration
Services system of contracts for October 1, 1999, through September 30,
2003. Because of the large number of contracts in the database and
because we wished to examine recent contract quality assurance
oversight practices, we sorted the query to only identify contracts for
fiscal year 2003. From this query, we sorted the contracts into four
groups according to whether they were associated with the Army, the
Navy, the Air Force, or the Defense Logistics Agency. We randomly
sampled contracts from each of these four groups. Then, we judgmentally
selected a subset of contracts from our random samples in such a way to
obtain a set of eight contracts that spanned the various military
commands and DCMA's East and West regions. The breakout of the eight
contracts included three Army, two Air Force, two Navy, and one Defense
Logistics Agency.
To assess the reliability of data from DCMA's Mechanization of Contract
Administration Services system we (1) performed electronic testing of
required data elements, (2) reviewed existing information about the
data and the system, and (3) interviewed agency officials knowledgeable
about the data. We determined DCMA's Mechanization of Contract
Administration Services system data to be reliable for the purposes of
our review.
To assess whether DCMA provided quality assurance oversight and
enforcement over its spare parts prime contractors in accordance with
established policies, procedures, and guidance, we compared contract
quality assurance provisions and requirements to oversight actions
performed by DCMA for the 15 contracts. Specifically, we reviewed the
Federal Acquisition Regulation, the DCMA One Book, and the contracts to
determine quality assurance oversight responsibilities and enforcement
actions available to assure contractor compliance. We compared these
policies, procedures, and contract requirements to the three types of
inspections performed by DCMA quality assurance specialists to assess
if DCMA provided appropriate oversight. For each of the contracts, we
met with officials at the DCMA contract management offices identified
on the contracts to determine quality assurance oversight actions
performed by DCMA personnel. As part of this assessment, we determined
which of the three types of inspections were performed for each
contractor. We sent letters to officials at the DOD contracting offices
to obtain and review documentation related to the pre-award process,
quality assurance requirements, and the contracting officers'
interaction with DCMA prior to contract award. In assessing whether
DCMA used enforcement actions, we reviewed the product quality
deficiency reports included in our review to determine if DCMA levied
enforcement actions against the prime contractor when necessary. We
also reviewed prior DOD and GAO reports related to DCMA's execution of
its quality assurance oversight over prime contractors and DOD's
implementation of its deficiency reporting system.
To assess whether prime contractors provided quality assurance
oversight over their subcontractors' work related to producing spare
parts and followed industry standards and contract requirements, we
identified prime contractor quality assurance oversight actions
performed over subcontractors. We reviewed Aerospace Standard 9100 and
prime contractor quality manuals to determine requirements for
establishing contractor quality management systems and ensuring that
their subcontractors are providing quality parts.[Footnote 9] We
visited and interviewed representatives at the prime contractor
locations as shown in appendix II, and determined whether the prime
contractors used subcontractors. For those that used subcontractors, we
identified the level of quality assurance oversight performed by these
prime contractors over the subcontractors. We discussed whether the
prime contractors performed supplier ratings of their subcontractors,
tested parts or processes provided by their subcontractors, or
conducted site visits at their subcontractors' facilities. At the prime
contractor facilities, we observed the prime contractors' processes for
manufacturing or repairing parts to determine the quality assurance
performed by the prime contractor throughout the production process.
To assess how DCMA held prime contractors accountable for the work of
their subcontractors, we reviewed the 15 contracts to determine if the
contracts included clauses holding the prime contractor responsible for
the spare parts provided to the government and whether instances of
nonconformance had occurred. For the reported instances of
nonconformance, we looked at whether DCMA held the prime contractor
responsible for correcting the nonconformance and what types of actions
were performed by DCMA. We also reviewed the Federal Acquisition
Regulation to determine contract clauses that require the prime
contractor to ensure that parts furnished to the government conform to
contract requirements. We reviewed the contracts to determine if they
included clauses that the prime contractor was responsible for the
spare parts being provided.
We also visited or obtained information from representatives at the
following organizations:
* U.S. Air Force, Office of the Assistant Secretary, Contracting
Operations Division, Rosslyn, Va;
* U.S. Air Force Materiel Command, Wright Patterson Air Force Base,
Ohio;
* U.S. Army Materiel Command Headquarters, Fort Belvoir, Va;
* U.S. Army, Aviation and Missile Command, Redstone Arsenal,
Redstone, Ala;
* U.S. Army, Communications Electronics Command, Fort Monmouth, NJ;
* U.S. Army, Research Development and Engineering Command, Armament
Research, Development and Engineering Center, Rock Island, Ill;
* U.S. Army, Research Development and Engineering Command, Edgewood
Chemical Biological Center, Rock Island, Ill;
* U.S. Army, Secretary of the Army for Acquisition, Logistics, and
Technology, Arlington, Va;
* U.S. Army, Tank Automotive and Armaments Command, Warren, Mich;
* U.S. Navy, Naval Air Systems Command, Patuxent River Naval Air
Station, Patuxent River, Md;
* U.S. Navy, Office of the Assistant Secretary, Research, Development,
and Acquisition, Washington, D.C;
* U.S. Defense Logistics Agency Headquarters, Fort Belvoir, Va;
* U.S. Defense Contract Management Agency Headquarters, Alexandria,
Va;
* Office of the Under Secretary of Defense for Acquisition, Technology,
and Logistics, Alexandria, Va; and:
* Aerospace Industries Association, Arlington, Va.
We performed our review from November 2003 through October 2004 in
accordance with generally accepted government auditing standards.
[End of section]
Appendix II: DCMA Offices and Contractors Reviewed:
1;
DCMA Contract Management Offices: Boston;
DCMA District: East;
Prime contractor: Contractor K;
Number of contracts: 1.
2;
DCMA Contract Management Offices: Dayton;
DCMA District: East;
Prime contractor: Contractor H;
Number of contracts: 2.
3;
DCMA Contract Management Offices: Long Island;
DCMA District: East;
Prime contractor: Contractor G;
Number of contracts: 1.
4;
DCMA Contract Management Offices: Maryland;
DCMA District: East;
Prime contractor: Contractor C;
Number of contracts: 2.
5;
DCMA Contract Management Offices: Philadelphia;
DCMA District: East;
Prime contractor: Contractor B;
Number of contracts: 3.
6;
DCMA Contract Management Offices: Philadelphia;
DCMA District: East;
Prime contractor: Contractor F;
Number of contracts: 1.
7;
DCMA Contract Management Offices: South Florida;
DCMA District: East;
Prime contractor: Contractor J;
Number of contracts: 1.
Total East Region contracts: 11.
8;
DCMA Contract Management Offices: Long Beach;
DCMA District: West;
Prime contractor: Contractor E;
Number of contracts: 1.
9;
DCMA Contract Management Offices: Los Angeles;
DCMA District: West;
Prime contractor: Contractor D;
Number of contracts: 1.
10;
DCMA Contract Management Offices: Phoenix;
DCMA District: West;
Prime contractor: Contractor A;
Number of contracts: 1.
11;
DCMA Contract Management Offices: Santa Ana-Irvine;
DCMA District: West;
Prime contractor: Contractor I;
Number of contracts: 1.
Total West Region contracts: 4.
Source: GAO analysis.
[End of table]
[End of section]
Appendix III: Comments from the Department of Defense:
OFFICE OF THE UNDER SECRETARY OF DEFENSE:
ACQUISITION TECHNOLOGY AND LOGISTICS:
3000 DEFENSE PENTAGON:
WASHINGTON, DC 20301-3000:
DEC 06 2004:
Mr. William M. Solis:
Director, Defense Capabilities and Management:
U.S. Government Accountability Office:
Washington, D.C. 20548-0001:
Dear Mr. Solis:
This is the Department of Defense (DoD) response to the GAO draft
report, GAO-05-73, "DEFENSE INVENTORY: DoD and Prime Contractors
Adhered to Requirements in Selected Contracts for Overseeing Spare
Parts Quality," dated November 10, 2004 (Code 350460). The draft report
did not contain any recommendations for the DoD.
Page 7 of the report discussed the DoD Inspector General (DoDIG) audit
regarding source inspection performed in 2003 and states that the DoDIG
"pointed out weaknesses in the management of DCMA's inspection
program." The DoDIG report highlighted concerns with DoD at the program
office, procurement activity, and quality assurance activity levels and
did not isolate weaknesses with DCMA activities.
Therefore, the DoD recommends that the text "...pointed out weaknesses
in the management of DCMA's inspection program" be changed to
"...pointed out concerns in the DoD quality assurance program."
My point of contact is Lt Col Nannette Benitez who can be reached at
(703) 695-8567 or via e-mail at nannette.benitez@osd.mil.
Signed by:
Deidre A. Lee:
Director, Defense Procurement and Acquisition Policy:
[End of section]
Appendix IV: GAO Contact and Staff Acknowledgments:
GAO Contact:
David A. Schmitt (757) 552-8124:
Acknowledgments:
In addition to the individual named above, Connie W. Sawyer, Jr;
Tracy Whitaker; Leslie West; Renee McElveen; Minette Richardson;
Kenneth Patton; Sidney Schwartz; and Douglas Cole made key
contributions to this report.
FOOTNOTES
[1] A part number is a combination of numbers, letters, and symbols
assigned by a designer and used by a manufacturer or vendor to identify
a specific part or item of material.
[2] Contract actions include issuing new contracts, purchase orders, or
basic ordering agreements; modifying existing contracts; and issuing
orders for parts included in existing contracts. In this report, we
refer to all of these actions as contracts.
[3] The act (Pub. L. No. 108-87, § 8143 (2003)) also mandated that the
Secretary of Defense report by March 31, 2004, on (1) how to implement
a system for tracking safety-critical parts so that parts discovered to
be defective can be identified and found; (2) appropriate standards and
procedures to ensure timely notification of contracting agencies and
contractors about safety issues including parts that may be defective,
and whether the Government Industry Data Exchange Program should be
made mandatory; (3) efforts to find and test airplane parts that have
been heat-treated by companies alleged to have done so improperly; and
(4) whether contracting agencies and contractors have been notified
about alleged improper heat treatment of airplane parts. The
Secretary's report was submitted on June 30, 2004, and included
numerous actions DOD had taken or plans to take to address the issues
included in the mandate.
[4] Details about our selection of the contracts are included in the
scope and methodology section of this report.
[5] DCMA has issued broad guidance, referred to as the One Book, to
assist quality assurance specialists in executing their oversight
responsibilities.
[6] ACQUISITION: Government Source Inspections (D-2004-011) October 15,
2003.
[7] A waiver is a deviation from contract requirements and can be
considered major or minor.
[8] Third-party certification is performed by a registered external
auditing organization and provides verification and assurance that
products or processes are consistent with established standards.
[9] Aerospace Standard 9100 includes the International Organization for
Standardization 9001 quality assurance requirements.
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