Defense Logistics
Better Strategic Planning Can Help Ensure DOD's Successful Implementation of Passive Radio Frequency Identification Gao ID: GAO-05-345 September 12, 2005The Department of Defense (DOD) has had problems with tracking and identifying inventory for many years, most recently in Operation Iraqi Freedom. One of several tools DOD is using to address these inventory problems is radio frequency identification (RFID). RFID technology consists of passive or active tags that are attached to equipment and supplies that are shipped from one location to another. Although DOD did not begin official implementation of passive RFID technology until January 1, 2005, DOD has been using active RFID technology since the early 1990s and began developing policy and pilot testing passive RFID in 2003. As of January 1, 2007, all commodities, excluding bulk commodities, are to have passive RFID tags. Full implementation of passive RFID is estimated to cost hundreds of millions of dollars. This report (1) provides information on the status of passive RFID implementation, (2) addresses the extent to which DOD has developed a strategic approach for implementing passive RFID, and (3) highlights challenges DOD recognizes it faces in implementing passive RFID and any plans developed by DOD to mitigate these challenges.
Since 2003, DOD and the components have taken actions to begin using a potentially promising technology, known as passive RFID, throughout their supply chain operations. These actions include development of policy and guidance and the use of pilot projects and initial implementation to test the technology's application to their business processes. In addition, infrastructure and funding have been provided, but this has been minimal because implementation did not officially begin until January 2005. Future funding requirements are expected to increase sharply as full implementation proceeds--from $6.6 million as of January 2005 to about $472 million projected from fiscal years 2006 through 2011. This $472 million projection does not include the cost of system interoperability, which officials believe will be the most expensive element of implementation. Full implementation of passive RFID in supply operations is not anticipated until 2016 or beyond. While DOD has taken a number of actions to direct the implementation of passive RFID, it has not yet developed a comprehensive strategic management approach that incorporates sound management principles. The planning by DOD and its components lacks or only partially incorporates several key management principles needed to effectively guide, monitor, and assess implementation. The development of a comprehensive strategic management approach that fully incorporates these principles could provide decision makers with a framework to guide RFID implementation efforts and the means to determine whether these efforts are achieving the desired results. This affects both DOD and its components because the components are developing implementation plans to support DOD's RFID policy. DOD has identified several challenges that will need to be resolved before passive RFID can be fully implemented, but it has not yet developed a mitigation plan to address these challenges. Some challenges relate to the fact that passive RFID is a new and evolving technology, while other challenges derive from operational issues and obtaining adequate funding. Furthermore, certain regulatory and administrative obstacles remain. Until DOD and the components identify actions to mitigate these implementation challenges, their progress in resolving these challenges may be impeded.
RecommendationsOur 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.
Director: Team: Phone:GAO-05-345, Defense Logistics: Better Strategic Planning Can Help Ensure DOD's Successful Implementation of Passive Radio Frequency Identification
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Report to Congressional Committees:
United States Government Accountability Office:
GAO:
September 2005:
Defense Logistics:
Better Strategic Planning Can Help Ensure DOD's Successful
Implementation of Passive Radio Frequency Identification:
GAO-05-345:
GAO Highlights:
Highlights of GAO-05-345, a report to congressional committees:
Why GAO Did This Study:
The Department of Defense (DOD) has had problems with tracking and
identifying inventory for many years, most recently in Operation Iraqi
Freedom. One of several tools DOD is using to address these inventory
problems is radio frequency identification (RFID). RFID technology
consists of passive or active tags that are attached to equipment and
supplies that are shipped from one location to another. Although DOD
did not begin official implementation of passive RFID technology until
January 1, 2005, DOD has been using active RFID technology since the
early 1990s and began developing policy and pilot testing passive RFID
in 2003. As of January 1, 2007, all commodities, excluding bulk
commodities, are to have passive RFID tags. Full implementation of
passive RFID is estimated to cost hundreds of millions of dollars. This
report (1) provides information on the status of passive RFID
implementation, (2) addresses the extent to which DOD has developed a
strategic approach for implementing passive RFID, and (3) highlights
challenges DOD recognizes it faces in implementing passive RFID and any
plans developed by DOD to mitigate these challenges.
What GAO Found:
Since 2003, DOD and the components have taken actions to begin using a
potentially promising technology, known as passive RFID, throughout
their supply chain operations (see figure below). These actions include
development of policy and guidance and the use of pilot projects and
initial implementation to test the technology‘s application to their
business processes. In addition, infrastructure and funding have been
provided, but this has been minimal because implementation did not
officially begin until January 2005. Future funding requirements are
expected to increase sharply as full implementation proceeds”from $6.6
million as of January 2005 to about $472 million projected from fiscal
years 2006 through 2011. This $472 million projection does not include
the cost of system interoperability, which officials believe will be
the most expensive element of implementation. Full implementation of
passive RFID in supply operations is not anticipated until 2016 or
beyond.
While DOD has taken a number of actions to direct the implementation of
passive RFID, it has not yet developed a comprehensive strategic
management approach that incorporates sound management principles. The
planning by DOD and its components lacks or only partially incorporates
several key management principles needed to effectively guide, monitor,
and assess implementation. The development of a comprehensive strategic
management approach that fully incorporates these principles could
provide decision makers with a framework to guide RFID implementation
efforts and the means to determine whether these efforts are achieving
the desired results. This affects both DOD and its components because
the components are developing implementation plans to support DOD‘s
RFID policy.
DOD has identified several challenges that will need to be resolved
before passive RFID can be fully implemented, but it has not yet
developed a mitigation plan to address these challenges. Some
challenges relate to the fact that passive RFID is a new and evolving
technology, while other challenges derive from operational issues and
obtaining adequate funding. Furthermore, certain regulatory and
administrative obstacles remain. Until DOD and the components identify
actions to mitigate these implementation challenges, their progress in
resolving these challenges may be impeded.
Projected Supply Chain Distribution Process:
[See PDF for image]
[End of figure]
What GAO Recommends:
To ensure that passive RFID is effectively implemented, GAO is making
three recommendations. DOD concurred with one and did not concur with
two of our recommendations.
www.gao.gov/cgi-bin/getrpt?GAO-05-345.
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:
DOD and Its Military Components Have Taken Actions to Implement Passive
RFID Technology:
DOD's Implementation of Passive RFID Technology Lacks a Comprehensive
Strategic Management Approach:
DOD Has Identified Several Challenges for Passive RFID:
Conclusions:
Recommendations for Executive Action:
Agency Comments and Our Evaluation:
Appendix I: Scope and Methodology:
Appendix II: Examples of Passive and Active RFID Equipment:
Appendix III: Comments from the Department of Defense:
Appendix IV: GAO Contact and Staff Acknowledgments:
Tables:
Table 1: Examples of DOD's Ongoing, Completed, and Terminated Passive
RFID Pilot Projects and Initial Implementations as of January 2005:
Table 2: Quantities of Passive RFID Infrastructure Items Reported by
Major Department of Defense Component as of January 2005:
Table 3: Reported Passive RFID Expenditures by Major DOD Component as
of January 2005:
Table 4: Passive RFID Projected Costs by Major DOD Component and Year
for Fiscal Years 2006 through 2011:
Table 5: Comparison of Key Management Principles to DOD's and Its
Military Components' Passive RFID Policies and Implementation Plans:
Figures:
Figure 1: Passive and Active RFID Tags:
Figure 2: Projected Supply Chain Distribution Process:
Figure 3: Timeline of Major DOD Actions to Implement Passive RFID:
United States Government Accountability Office:
Washington, DC 20548:
September 12, 2005:
Congressional Committees:
The Department of Defense (DOD) has had problems with tracking and
identifying inventory for many years. Since at least 1990, we have
considered DOD's inventory management to be a high-risk area because
inventory management systems and procedures are ineffective. Continued
lack of visibility over inventory and equipment shipments increases
vulnerability to undetected loss or theft and substantially heightens
the risk that millions of dollars will be spent unnecessarily.
Furthermore, it potentially compromises cargo security and the
readiness of the warfighters. DOD has been using active radio frequency
identification (RFID) technology for over a decade as a tool to help
resolve this problem. More recently, DOD has also begun to use passive
RFID technology. Both passive and active RFID technologies are part of
a family of automatic information technologies used to enable hands-off
identification of cargo and inventory. RFID technology consists of
active or passive electronic tags that are attached to equipment and
supplies that are shipped from one location to another. Full
implementation of RFID technology into DOD's supply chain will require
an investment estimated to cost hundreds of millions of dollars.
DOD's use of active and passive RFID technology is evolving.[Footnote
1] DOD began using active RFID in the early 1990s as a tool to help
resolve visibility problems experienced during Operations Desert Shield
and Desert Storm. Active RFID technology is intended to provide nearly
real-time, in-transit visibility of shipments. During Operation Iraqi
Freedom, active technology was used to track parts and supplies shipped
to and within theater, although not entirely successfully because some
of the same visibility problems that occurred during Operations Desert
Shield and Desert Storm were repeated, as we have previously reported
and other DOD and military service after-action studies have
documented.[Footnote 2]
DOD has just begun implementing passive RFID, envisioned to ultimately
work in conjunction with active RFID, to better enable inventory
management and accountability. Passive RFID, which appears to be
promising, is an emerging technology for both commercial and defense
applications, and DOD logistics leadership views it as a key factor in
transforming DOD logistics. Passive RFID is intended to facilitate
accurate, efficient, hands-free data capture of shipping contents to
improve item-level visibility. In October 2003, DOD developed initial
RFID policy establishing business rules and requirements for
implementing passive RFID technology in an integrated DOD supply chain
enterprise. DOD's final RFID policy, dated July 30, 2004, directs the
implementation of passive RFID technology for solicitations issued on
or after October 1, 2004, for delivery of materiel on or after January
1, 2005. As part of this implementation process, DOD stipulated that
its vendors and two of its distribution depots be required to use
passive RFID technology as of January 1, 2005. DOD met the January 1,
2005, date through its initial implementation of passive RFID at the
Defense Logistics Agency's (DLA) San Joaquin, California, and
Susquehanna, Pennsylvania distribution depots.
This report addresses the status of DOD's passive RFID implementation
and was prepared under the authority of the Comptroller General and is
being addressed to the committees of jurisdiction. We focused on
passive RFID because of its newness and potential high costs, and
because it is just beginning to be implemented throughout DOD. We are
providing you with this report because of your oversight
responsibilities for defense issues. It addresses three key objectives:
(1) to provide information on the status of passive RFID implementation
in DOD, (2) to identify the extent to which DOD has developed a
strategic approach for implementing passive RFID technology, and (3) to
highlight a broad spectrum of challenges that DOD recognizes it faces
with the ongoing implementation of passive RFID technology and any
plans developed by DOD to mitigate these challenges.
For this report, we obtained and analyzed DOD's and various DOD
military components' RFID guidance; readily available literature that
describes the technology; funding, expenditures, and future projections
data and requirements; and infrastructure being used and required for
implementing the technology throughout DOD. We also reviewed studies
initiated by DOD or its various military components. We interviewed
knowledgeable officials from the Office of the Secretary of Defense,
the four military services, DLA, the U.S. Transportation Command, the
Joint Forces Command, and members of Joint Staff directorates.
Additionally, we observed passive RFID technology being used at DLA's
distribution depot in Susquehanna, Pennsylvania and at the Navy Ocean
Terminal in Norfolk, Virginia. Because DOD is just beginning to
implement passive RFID technology, we did not verify the data provided
and considered the data sufficiently reliable for the purposes of this
review. We conducted our work from July 2004 through August 2005 in
accordance with generally accepted government auditing standards. Our
scope and methodology are discussed in further detail in appendix I.
Results in Brief:
Since 2003, the Office of the Under Secretary of Defense (Acquisition,
Technology, and Logistics), the military services, DLA, and U.S.
Transportation Command have taken actions to implement a potentially
promising technology, known as passive RFID, into their operations.
These actions include the development of overall policy and operational
guidance, the use of pilot projects and initial implementation at
several receiving and conveyor locations, and providing infrastructure
and funding. The Under Secretary of Defense developed interim and final
policy and operational guidance establishing requirements effective
January 1, 2005, for the implementation of passive RFID technology in
the DOD supply chain. This policy and guidance establishes requirements
for tagging cases and pallets, contract requirements, technical
specifications, architecture and integration, security, and funding.
The military services, DLA, and U.S. Transportation Command have also
developed respective operational plans to guide their implementation of
DOD's overall policy. In addition, DOD has conducted several pilot
projects to test the technology's application to their business
processes and has implemented some passive RFID capability at two DLA
distribution depots and at one Navy ocean terminal. Additional passive
RFID capability will be added to these locations as requirements are
determined. Reports regarding the results of some of the completed
pilot projects cite lessons learned that focus largely on the technical
aspects of implementing the passive technology. Furthermore, minimal
infrastructure and funding exists because passive RFID is an emerging
technology and existing infrastructure and funding has primarily been
in connection with the pilot projects and initial implementation. A
sharp increase in expenditures--including costs for purchasing passive
RFID equipment such as tags, readers, and writers, and costs associated
with installation and maintenance--is expected as full implementation
proceeds as directed by DOD's RFID policy and guidance. However, the
cost projections made by DOD's military components, which reflect large
increases in funding requirements, are probably lower than actual
requirements will be because the services have had difficulty in
determining cost estimates due to the evolving nature of the
technology. Additionally, these cost projections do not include the
cost of systems interoperability, which officials believe will be the
most expensive element of implementation.
While DOD has taken a number of actions to guide and direct the
implementation of passive RFID, it has not yet developed a
comprehensive strategic management approach that incorporates sound
management principles and could ensure that passive RFID is efficiently
and effectively implemented. Existing passive RFID implementation
policy and operational guidance for both DOD and its military
components lack or only partially incorporate several key management
principles, such as those used by leading organizations and embodied in
the Government Performance and Results Act of 1993[Footnote 3] (GPRA),
that are needed to effectively guide, monitor, and assess
implementation. Among the key management principles that are missing or
are only partially present are (1) general and long-term goals and
objectives, (2) a description of specific actions to support goals and
objectives, (3) performance measures to evaluate specific actions, (4)
schedules and milestones for meeting deadlines, (5) identification of
total resources needed and annual cost estimates for passive RFID
implementation into the supply chain, and (6) evaluation of the overall
program with specific processes to allow for adjustments and changes.
Inclusion of these elements in planning and guidance could better guide
implementation efforts and provide DOD decision makers with a means for
determining whether their efforts achieve the desired results in
implementing passive RFID into the DOD logistics supply chain. For
example, detailed identification of resources needed could enable DOD
and its military components to determine whether they are making the
right investments, targeted to their needs, resulting in a sound return
on investment. This affects both DOD and its military components,
because the military components are developing implementation plans to
support DOD's RFID policy. Without an improved strategic management
approach that would incorporate these management principles, DOD and
its military components cannot ensure that their implementation of
passive technology into the DOD supply chain will be successful.
DOD has identified several challenges that will need to be resolved
before passive RFID technology can be fully implemented in its supply
chain processes, but the department has not yet developed a mitigation
plan to resolve them. Some challenges relate to the fact that passive
RFID is a new and evolving technology. For example, the electronic
product code standards that identify specific information about items
are being revised to provide increased capabilities, development of
newer generation tags is creating uncertainty about upgrading and
replacing equipment, concerns exist about the industrial base's ability
to meet the demand for tags and equipment for both the private and
public sectors, and training must be provided. Other challenges derive
from operational issues associated with performance capabilities. For
example, because the performance capabilities of passive RFID
technology are still being determined, concerns exist about systems
integration, which enables interoperability of automatic information
systems among the military components to facilitate active and passive
system interaction, and about the need for improvement in the accuracy
of tag read rates. In addition, concerns exist about the availability
of and permissions process for military use of authorized spectrum
frequencies in foreign countries. Another challenge is obtaining
adequate funding. Without the data needed to create business case
analyses that demonstrate appropriate return rates on investment, the
military services have been reluctant to provide funding for
implementation. In addition to these challenges, certain regulatory and
administrative obstacles remain, including the final approval of a
proposed acquisition rule that will require vendors to contractually
apply tags to products the government purchases, along with the
approval of multivendor contracts for DOD-wide purchases of passive
RFID equipment. Until the multivendor contracts are awarded, the DOD
military components may be unable to leverage the purchasing power of
the department to realize economy and efficiency benefits. Based on our
discussions with DOD officials, the underlying cause of these various
challenges is the newness and evolving nature of the technology.
However, officials noted that the current challenges they face will be
resolved over time and are to be expected with the integration of any
new technology. Without identifying the challenges that adversely
impact passive RFID implementation and identifying the actions
necessary to mitigate them, progress in resolving such challenges may
be impeded.
We are recommending that the Secretary of Defense direct the Under
Secretary of Defense (Acquisition, Technology, and Logistics) to
develop a DOD-wide comprehensive strategic management approach that
will ensure that passive RFID technology is efficiently and effectively
implemented throughout the supply chain processes and will include an
integrated strategy for fully implementing passive RFID, performance
measures or metrics of progress, and a corrective action plan. We are
also recommending that the Secretary of Defense direct the secretaries
of each of the military services and other DOD military components to
develop comprehensive strategic management approaches that support this
DOD approach to fully implement passive RFID. As DOD and the military
components develop these comprehensive strategic management approaches,
we recommend that these approaches identify the specific challenges
impeding passive RFID implementation and the actions needed to mitigate
these challenges. In commenting on a draft of this report, DOD did not
concur with our recommendation to expand its RFID planning efforts to
include a comprehensive management approach that embodies key
management principles used by leading organizations. The department
asserted that it has already set forth the goals, objectives,
performance measures, and milestones in its July 2004 RFID policy
sufficient to guide the planning activities of the military services
and other components. We disagree with the department's position
because DOD's existing RFID policy lacks a number of key management
principles necessary for good program management, and the lack of a
comprehensive approach to guide the planning activities of the services
and other components may impair DOD's ability to efficiently and
effectively implement passive RFID technology. The department concurred
with our recommendation for each of the military services and
administrators of other DOD military components to develop individual
comprehensive management approaches for implementing RFID. We believe
that this approach will satisfy the intent of our recommendation if,
prior to the military components developing their plans, the Under
Secretary of Defense (Acquisition, Technology, and Logistics) takes
additional actions to develop a DOD-wide comprehensive strategic
management approach that would then be supported by the plans developed
by the military components. The department did not concur with our
recommendation to develop a plan to identify challenges impeding
passive RFID implementation and actions needed to mitigate those
challenges. In essence, the department stated that the passive RFID
challenges described in the draft report have basically been resolved.
We do not believe this to be the case. We recognize that passive RFID
is an evolving technology and that the department is continuing to
address the challenges associated with implementing passive RFID
technology. However, we believe that the challenges identified in the
report continue to exist and that it is necessary for the department to
identify specific challenges impeding passive RFID implementation and
to develop a mitigation plan to address these challenges as RFID
implementation proceeds. DOD's comments and our evaluation are
discussed in detail at the end of this report.
Background:
RFID technology is one type of automatic identification technology.
Automatic identification technology is a suite of commercial
technologies--including bar codes, smart cards, magnetic stripes, and
radio frequency identification--that provides a range of capabilities
that enable the automatic capture of source data and enhance the
ability to identify, track, document, and control deploying and
redeploying forces, equipment, personnel, and sustainment cargo.
Anticipated potential benefits of RFID include providing (1) near real-
time, in-transit visibility for all classes of supplies and materiel;
(2) "in the box" content-level detail for all classes of supplies and
materiel; (3) quality, nonintrusive (hands-off) identification and data
collection that enables enhanced inventory management; and (4) better
item-level visibility. RFID tagging of DOD materiel is applicable to
all items except bulk commodities such as bulk liquids, sand, and
gravel.
At the most basic level, RFID is a data input system that consists of
(1) a transponder, generally referred to as a tag; (2) a tag reader,
also known as an interrogator, that reads the tag using a radio signal;
(3) centralized data processing equipment; and (4) a method of
communication between the reader and the computer. The reader sends a
signal to the tag, which prompts the tag to respond with information
about the container or item to which it is attached. The information is
forwarded to central data processing equipment, which can then be used
to get detailed information about the container or item, such as the
shipping date or the date received. The information contained in the
central data processing equipment can provide visibility over inventory
items throughout the supply chain. DOD's final RFID policy, issued on
July 30, 2004, includes business rules for implementing two types of
RFID tags--active and passive.
Active RFID technology, which is more mature than passive technology,
is used on containers or pieces of equipment for tracking shipments and
their contents while in transit. Active RFID tags, which generally use
a battery, have transmitters that transmit information when
interrogated through radio signals that are read electronically. Active
tags are more expensive than passive tags and are used for tracking
major items and containers over long distances.
Passive RFID is the newer technology and its use in DOD is evolving.
Ultimately, this technology, which appears to be promising, will be
used to enable better inventory management and accountability. Passive
RFID tags are applied to cases, pallets, and item packaging. Passive
tags do not have batteries and store only a limited amount of
information. To be activated, these tags require strong radio frequency
signals from reader devices to enable the tags to send back the
information stored on them. Once the radio signal is received, a small
amount of the reader's signal power is temporarily stored and then used
to generate the tag response. However, because of the tags' limited
energy, the radio frequency signal strength emitted by them is at a low
level, thus limiting the distance--generally 3 to 10 feet--from which
the tags can be read. We reported in our May 2005 report that, under
perfect conditions, the tags can be read from a range up to about 20
feet. Passive tags are much lighter and less expensive than active
tags, ranging from about $0.20 to several dollars each, in comparison
with about $100 each for active tags. DOD is testing the passive
technology through pilot projects and initial implementation to assess
its application to existing business processes. DOD's RFID policy,
issued on July 30, 2004, requires (1) the department and its various
military components to begin to implement passive RFID and immediately
expand active RFID technology and capability within the DOD supply
chain, and (2) suppliers to affix passive RFID tags on certain
commodities for solicitations issued on or after October 1, 2004, for
materiel delivered on or after January 1, 2005.
Passive and active RFID tags physically differ from one another, as
figure 1 shows. Even though passive and active RFID technologies
require similar types of equipment and function in a similar manner,
the equipment is not interchangeable between the two technologies
because they serve different purposes and use different radio
frequencies. For more detail about the equipment necessary for passive
and active RFID technology, see appendix II.
Figure 1: Passive and Active RFID Tags:
[See PDF for image]
[End of figure]
Although passive RFID is an emerging technology for both commercial and
defense applications, DOD logistics leadership views it as a key factor
in transforming DOD logistics. DOD envisions using passive RFID
technology to facilitate accurate, hands-off data capture in support of
its logistics business processes in an integrated DOD supply chain
enterprise. DOD anticipates that the application of passive RFID
technology will provide efficient and accurate item/content visibility
for better inventory management. DOD's goal for passive RFID is to
provide nonintrusive identification of shipping contents to improve
item-level visibility, and its goal for active RFID is to provide
nearly real-time, in-transit visibility for most classes of supplies
and materiel. Figure 2 depicts how DOD could use both passive and
active RFID as items are physically moved from the manufacturers and
suppliers to the warfighter.
Figure 2: Projected Supply Chain Distribution Process:
[See PDF for image]
[End of figure]
As the defense logistics executive responsible for RFID implementation,
the Under Secretary of Defense (Acquisition, Technology, and Logistics)
issued DOD's final RFID policy on July 30, 2004. Certain other DOD
military components also have specific responsibilities in the RFID
implementation process. The DOD Logistics Automatic Identification
Technology Office, for example, is the DOD focal point for coordinating
overarching guidance for the use of automatic identification technology
within the department. The Army Program Executive Office, Enterprise
Information Systems, Product Manager Joint-Automatic Identification
Technology Office is the DOD procurement activity for automatic
identification technology equipment--including equipment and
infrastructure--and it maintains a standing contract for equipment
integration, installation, and maintenance. This office is also
responsible for maintaining contracts for the purchase of passive RFID
tags. DLA is the procurement activity and single manager for active
RFID tags. Finally, the U.S. Transportation Command, as the
distribution process owner, is responsible for directing and
supervising execution of the strategic distribution system for moving
and distributing supplies.
DOD and Its Military Components Have Taken Actions to Implement Passive
RFID Technology:
DOD and its military components have developed RFID policy, and DOD has
provided guidance to suppliers and military components for implementing
passive RFID technology. DOD also is using pilot projects and has begun
initial implementation at several receiving and conveyor locations to
better understand this technology and test its application to their
business processes. Although the military components have begun
acquiring and funding the infrastructure needed for passive RFID
implementation, existing infrastructure is minimal because
implementation did not begin until January 1, 2005. Consequently, DOD
is just beginning to purchase equipment for passive RFID technology
implementation, and it projects a sharp increase in expenditures as
full implementation proceeds.
DOD Has Developed Policy and Guidance and the Military Components Are
Developing Plans to Implement Passive RFID Technology:
Since 2003, the Office of the Under Secretary of Defense (Acquisition,
Technology, and Logistics) has developed policy and guidance to
implement a potentially promising technology, known as passive RFID
into their supply chain operations. The military services, DLA, and
U.S. Transportation Command also have developed or are developing plans
and guidance to support passive RFID implementation. DOD's RFID policy
and the military components' implementation plans are evolving, and the
department has taken several actions to provide additional guidance to
suppliers and military components for implementing passive RFID. Figure
3 identifies the dates of several major policy and guidance actions
that DOD has taken or plans to take to implement passive RFID into its
supply chain processes. Although DOD plans to begin implementing the
use of passive RFID to all classes of all commodities, excluding bulk
commodities, shipped to all locations by January 1, 2007, it will be
fiscal year 2016--and beyond for the Army--before passive RFID will be
fully implemented into supply chain operations, according to Navy and
Army funding projections.
Figure 3: Timeline of Major DOD Actions to Implement Passive RFID:
[See PDF for image]
[End of figure]
The initial RFID policy, issued by the Under Secretary of Defense
(Acquisition, Technology, and Logistics), required suppliers to put
passive RFID tags on pieces, parts, cases, or pallets by January 2005.
A DOD news release officially announced the RFID policy in late October
2003. In early 2004, the initial RFID policy was updated. The updated
policy provided an initial set of business rules for the implementation
of passive RFID and laid out the requirement to plan for a January 1,
2005, implementation of the passive RFID business rules.
In late July 2004, the Under Secretary issued the final RFID policy.
This policy finalized the business rules for the implementation of
passive RFID and prescribed the implementation approach for DOD
suppliers and vendors to use to apply passive RFID tags. The final
policy establishes a mandatory requirement on solicitations issued on
or after October 1, 2004, for suppliers to use passive RFID tags for
deliveries that take place on or after January 1, 2005. This
requirement applies to shipments of materiel in four supply classes
that are delivered to two of DOD's distribution depots--San Joaquin,
California, and Susquehanna, Pennsylvania--in accordance with the
supplier implementation plan of the policy. In late August 2004, the
Under Secretary of Defense (Acquisition, Technology, and Logistics)
issued a Logistics Decision Memorandum approving initial implementation
of passive RFID at strategic distribution depots, strategic aerial
ports, and maintenance depots. Starting January 1, 2006, the final RFID
policy expands the requirement for suppliers to tag six additional
supply classes and 32 additional shipping locations. Commencing January
1, 2007, all classes of all commodities, excluding bulk commodities,
shipped to all locations are to be affixed with passive RFID tags.
According to the final policy, the Defense Logistics Board is to review
the internal implementation plan, benefits, compliance requirements,
and requisite budget requirements annually, based on an assessment of
the implementation to date. As part of this review process, in late
August 2004 the Under Secretary of Defense (Acquisition, Technology,
and Logistics) met with the Defense Logistics Board to discuss DOD's
strategy for RFID implementation and to obtain the board's agreement on
future funding for both active and passive RFID. Additionally, a
defense logistics executive decision memorandum issued in March 2005
stated that Defense Logistics Board members agreed that implementation
of RFID across the department had the potential to greatly enhance
visibility of the supply chain. The memorandum further stated that the
business case analysis developed by DLA was compelling, and directed
the secretaries of the military departments to move forward with
passive and active RFID implementation. While we reviewed the contents
of DOD's business case analysis, we did not assess its methodology and
validity.
The final RFID policy also states that the Army's Program Executive
Office Enterprise Information Systems continue development of a
multivendor contract to support the purchase of passive RFID technology
and to leverage the purchasing power of the department. Additionally,
DOD's policy requires military components to prepare passive RFID
implementation plans to support the DOD vision.
To meet the requirements of the final DOD RFID policy, in September
2004 DOD developed a departmentwide RFID Concept of Operations as an
outline for the military services and other military components to
follow in implementing RFID technology into DOD logistics and to
articulate the specific uses of passive RFID throughout the DOD supply
chain. The document outlines the scope, objectives and goals,
assumptions and constraints, and project framework for DOD's
implementation of RFID.
DOD has taken other actions to provide guidance and policy to DOD
military components and external partners. For example, DOD has
established Web sites such as www.dodait.com and www.dodrfid.org for
suppliers, DOD military components, and others to use to access RFID
information, specifications, and updates to policy and guidance. DOD
has also established Integrated Process Team Working Groups to discuss
issues involving RFID and the implications of RFID for current business
processes, new technology concerns, and strategic planning and
implementation. DOD has hosted several conferences on RFID
implementation instructions and training for suppliers and DOD military
components.
In response to DOD's policy and concept of operations guidance, the
military components are developing implementation plans to support
DOD's policy and vision for passive RFID technology. As of January
2005, the Navy and DLA have completed passive RFID implementation
plans. While the U.S. Transportation Command does not have a formal
passive RFID implementation plan, its business process plan contains
elements of DOD passive RFID guidance and requirements. The Army and
Marine Corps have draft implementation plans, and the Air Force had
just begun development of its plan at the time of this review.
DOD Is Using Pilot Projects and Initial Implementations to Test the
Application of Passive RFID Technology:
DOD is using several pilot projects and has begun initial
implementation at several receiving and distribution facilities to
better understand passive RFID technology and test its application to
their business processes. Examples of these pilot projects and initial
implementations are listed in table 1 below. These pilot projects
involve DLA and each military service and are small in scope, and
generally have involved selected supply items, such as meals-ready-to-
eat or individual protective clothing. One of these pilot projects, the
Navy's ocean terminal project, which began in November 2003,
successfully transitioned into an initial passive RFID implementation
by May 2004. Since that time, the Navy's Fleet Industrial Supply
Center, Ocean Terminal Division, has abandoned its legacy hand-held
scanning processes in favor of the passive RFID documentation
procedures, which document shipments by scanning RFID tags as they pass
through reader devices. Furthermore, DOD's operational guidance
required DLA to initially implement passive RFID by January 1, 2005, by
enabling two of its distribution depots to receive selected passive
RFID tagged items. As of late December 2004, DLA had completed this
initial implementation at three receiving locations and one conveyor
location in the Susquehanna, Pennsylvania depot and at three receiving
and two conveyor locations in the San Joaquin, California depot. As of
June 2005, a DLA official told us that surveys are being conducted to
determine the number and location of future passive RFID infrastructure
requirements. Reports regarding the results of some of the completed
pilot projects cite lessons learned that focus largely on the technical
aspects of implementing the passive technology. For example, a meals-
ready-to-eat pilot project, conducted in May 2004, was designed to
simulate the process as products moved from vendor to depot to the
delivery of the product to the unit level. This demonstration
illustrated ways in which passive RFID could be implemented in the DLA
supply chain. According to the reported results for this pilot, the
most important benefit from the demonstration was the experience gained
from the physical implementation of an RFID system within a DOD
environment. Lessons learned centered on the technology's systems
integration, application software, frequency coordination, and the
immaturity of the passive RFID technology. Regarding the technology's
immaturity, the report stated that the passive RFID hardware and
software were currently too immature for many production operations.
Phase I of the protective equipment project tracked pallets and cases
of Joint Service Lightweight Integrated Suit Technology (JSLIST) suits
using passive RFID tags. The project evaluated the passive technology's
implementation at three locations representing different functional
areas of the JSLIST supply chain: vendor (shipping), DLA Distribution
Center (receiving and shipping), and Army customer (receiving). The
Phase I report stated that in March 2004 the first shipment of 29
pallets of RFID tagged suits was successfully distributed among the
functional areas using a RFID-enabled receiving process. Lessons
learned from the protective equipment project also indicated that
passive RFID tag and reader technology is immature and that the
receiving processes, data elements, and data entry procedures are not
well known or documented at DLA distribution centers. We did not
evaluate the results of these reports.
Table 1: Examples of DOD's Ongoing, Completed, and Terminated Passive
RFID Pilot Projects and Initial Implementations as of January 2005:
Pilot project/initial implementation: Pilot: DLA/Army MRE Shipments-
ongoing;
Component: DLA/Army;
Location: Army National Training Center (interim test at Fort Lee);
Description: Applying passive RFID tags to shipments of MREs from
suppliers.
Pilot project/initial implementation: Pilot: Individual Protective
Equipment (IPE) completed 11/2004;
Component: DLA/Army;
Location: San Joaquin, CA; Blue Grass Depot, KY; Fort Hood, TX;
Description: Receiving shipments of IPEs from San Joaquin to Blue Grass
Army Depot tagged with passive RFID technology.
Pilot project/initial implementation: Pilot: Military Shipping Label
completed 12/2004;
Component: Air Force;
Location: Spangdahlem AB, GE;
Description: Using passive RFID to replace active RFID tags for
shipments to Spangdahlem AB, GE.
Pilot project/initial implementation: Pilot: Seabee RFID Pilot-
terminated[A] 11/2004;
Component: Navy;
Location: Fort Hunter-Liggett, CA;
Description: The integration of passive RFID into the Common Logistics
Command and Control System - Joint Expeditionary Warfighter Logistics
System.
Pilot project/initial implementation: Initial implementation: Strategic
distribution centers-ongoing;
Component: DLA;
Location: San Joaquin, CA; Susquehanna, PA;
Description: Centers capable of reading passive RFID tags attached to
shipments received from suppliers and applying passive RFID tags on
shipments to DOD activities and units.
Pilot project/initial implementation: Initial Implementation:
Norfolk/Lejeune Shipments-ongoing;
Component: Navy/Marine Corps;
Location: Norfolk Ocean Terminal/Camp Lejeune;
Description: Receiving shipments from DLA (Susquehanna, PA) tagged with
passive RFID technology.
Source: GAO analysis of DOD data.
[A] This project was terminated because DLA was dissatisfied with the
status and direction of the project, and its lack of DLA relevance.
[End of table]
Existing Passive RFID Infrastructure Is Minimal, and Expenditures Are
Projected to Increase Sharply as Full Implementation Proceeds:
As of January 2005, the DOD military components owned and operated very
little passive RFID infrastructure. DOD is just beginning to test and
implement passive RFID technology for managing its inventory because
passive RFID implementation did not officially begin until January 1,
2005. Passive RFID expenditures to date have largely been in connection
with pilot projects, so DOD military components have spent a minimal
amount of money on passive RFID technology. The passive RFID
infrastructure owned by major DOD military components is shown in table
2. Future cost projections of implementing passive RFID in DOD's supply
chain operations are estimated to be significantly higher than current
expenditures as full passive RFID implementation proceeds.
Additionally, the projected cost for passive RFID implementation--about
$437 million from fiscal years 2006 through 2011--includes costs for
purchasing passive RFID equipment such as tags, readers, and writers,
and costs associated with installation and maintenance, but does not
include the cost of system interoperability, which officials estimate
to be the most expensive element of implementation.
Table 2: Quantities of Passive RFID Infrastructure Items Reported by
Major Department of Defense Component as of January 2005:
DOD component: DLA;
Tags: 5,000;
Readers: 11;
Handheld readers: 0;
Writers/printers: 5.
DOD component: U.S. Transportation Command;
Tags: 0;
Readers: 0;
Handheld readers: 0;
Writers/printers: 0.
DOD component: Army;
Tags: 0;
Readers: 0;
Handheld readers: 0;
Writers/printers: 0.
DOD component: Navy;
Tags: 8,867;
Readers: 16;
Handheld readers: 10;
Writers/printers: 1.
DOD component: Air Force;
Tags: Yes[A];
Readers: 40;
Handheld readers: 2;
Writers/printers: 8.
DOD component: Marine Corps;
Tags: 0;
Readers: 4;
Handheld readers: 0;
Writers/printers: 0.
DOD component: Total;
Tags: Unknown;
Readers: 71;
Handheld readers: 12;
Writers/printers: 14.
Source: GAO analysis of data from the DLA, U.S. Transportation Command,
Army, Navy, Air Force, and Marine Corps.
[A] The Air Force did not provide the quantity of passive tags owned.
[End of table]
DOD military components have spent a minimal amount of money on passive
RFID technology because passive RFID technology is new and DOD is just
beginning to implement this technology in its supply chain processes.
Current expenditures have largely been in connection with pilot
projects. As of January 2005, DOD and its military components had spent
about $7.4 million on passive RFID technology. As shown in table 3, the
Army and the Marine Corps had not spent any money on pilot testing
passive RFID as of January 2005. The Marine Corps does possess some
passive RFID infrastructure; however, according to Marine Corps
officials, that infrastructure was acquired and paid for by the Office
of the Secretary of Defense (OSD). As of January 2005, DLA had spent
the most on passive RFID infrastructure in its pilot testing and
initial implementation at two of its distribution depots, in San
Joaquin, California, and Susquehanna, Pennsylvania.
Table 3: Reported Passive RFID Expenditures by Major DOD Component as
of January 2005:
DOD component: OSD;
Expenditures: $1,650,000[A].
DOD component: DLA;
Expenditures: $3,545,000[B].
DOD component: U.S. Transportation Command;
Expenditures: $503,000[C].
DOD component: Army;
Expenditures: $0[D].
DOD component: Navy;
Expenditures: $1,458,523[E].
DOD component: Air Force;
Expenditures: $276,761[F].
DOD component: Marine Corps;
Expenditures: $0[G].
Total;
Expenditures: $7,433,284.
Source: GAO analysis of reported expenditure data from OSD, DLA, U.S.
Transportation Command, Army, Navy, Air Force, and Marine Corps.
[A] OSD estimate consists of funding for consulting services, tags,
readers, software, etc. to support initial implementations.
[B] The DLA estimate consists of funding for six passive RFID pilot
projects and initial implementation at two distribution depots--
Susquehanna, PA, and San Joaquin, CA.
[C] The U.S. Transportation Command estimate consists of funding for
one passive RFID pilot project.
[D] The Army has not spent any money on passive RFID.
[E] The Navy estimate consists of funding for five passive RFID pilot
projects.
[F] The Air Force estimate consists of funding for one passive RFID
pilot project.
[G] The Marine Corps does possess some passive RFID infrastructure;
however, it was purchased by OSD.
[End of table]
Future cost projections of implementing passive RFID in DOD's supply
chain operations are estimated to be significantly higher than current
expenditures. In response to OSD's final RFID implementation policy,
major DOD military components have projected significant increases in
passive RFID funding for fiscal years 2006 through 2011. Although
passive RFID testing and implementation in the DOD supply chain had
cost $7.4 million as of January 2005, from fiscal years 2006 through
2011 the DOD military components project costs of about $437 million on
passive RFID implementation, as shown in table 4. The figures provided
by DLA represent actual budgeted amounts, while other component
officials emphasized that the projections they provided were estimates
and did not represent actual figures in the budget. The Marine Corps
and Air Force did not provide any cost projections for passive RFID.
Table 4: Passive RFID Projected Costs by Major DOD Component and Year
for Fiscal Years 2006 through 2011:
Dollars in thousands.
DLA[A];
2006: $25,706;
2007: $23,191;
2008: $20,747;
2009: $18,516;
2010: $18,553;
2011: $18,098;
Total: $124,811.
U.S. Transportation Command[B];
2006: $580;
2007: $1,047;
2008: $743;
2009: $780;
2010: $495;
2011: $535;
Total: $4,180.
Army[B];
2006: $5,600;
2007: $8,030;
2008: $12,040;
2009: $17,713;
2010: $26,110;
2011: $39,660;
Total: $109,153.
Navy[B];
2006: $3,000;
2007: $16,400;
2008: $38,700;
2009: $43,000;
2010: $48,300;
2011: $49,900;
Total: $199,300.
Marine Corps[C];
2006: 0;
2007: 0;
2008: 0;
2009: 0;
2010: 0;
2011: 0;
Total: 0.
Air Force[C];
2006: 0;
2007: 0;
2008: 0;
2009: 0;
2010: 0;
2011: 0;
Total: 0.
Total;
2006: $34,886;
2007: $48,668;
2008: $72,230;
2009: $80,009;
2010: $93,458;
2011: $108,193;
Total: $437,444.
Source: GAO analysis of data from DLA, U.S. Transportation Command,
Army, Navy, Air Force, and Marine Corps.
[A] The DLA figures are actual budgeted amounts.
[B] The U.S. Transportation Command, Army, and Navy figures are based
on overall maintenance and procurement projections.
[C] The Marine Corps and Air Force did not provide us with any passive
RFID cost projections.
[End of table]
Although the total projected cost for passive RFID implementation is
estimated at about $437 million over fiscal years 2006 through 2011,
this total does not include the cost of system interoperability.
Officials estimate system interoperability to be the most expensive
element of implementation because of the various systems that will need
to be integrated to exchange automated shipping and receiving data from
the use of passive RFID technology. According to DOD, system
interoperability entails the ability of systems, units, or forces to
provide data, information, materiel, and services and to accept the
same from other systems, units, or forces and to use the data,
information, materiel, and services so exchanged to enable them to
operate effectively together. Interoperability includes both the
technical exchange of information and the end-to-end operational
effectiveness of that exchange of information as required for mission
accomplishment. DOD envisions a seamless integration between passive
and active RFID technology; however, such a seamless integration cannot
take place unless the information captured by the RFID technology can
flow though interoperable logistics information systems. According to
Navy and Army projections, it will be fiscal year 2016--and beyond for
the Army--before passive RFID will be fully implemented into supply
chain operations. The Marine Corps and Air Force did not know their
funding needs for implementing passive RFID. As of January 2005, there
was no estimate as to how much full interoperability will cost. System
interoperability is just one of many challenges DOD must overcome
before full implementation can occur throughout DOD's supply chain
process.
DOD's Implementation of Passive RFID Technology Lacks a Comprehensive
Strategic Management Approach:
While DOD has taken a number of actions to guide and direct the
implementation of passive RFID into the supply chain process, passive
RFID could be more efficiently and effectively implemented if DOD
developed a comprehensive strategic management approach to ensure that
implementation efforts are guided by sound management principles. Sound
management principles, such as those used by leading organizations and
embodied in GPRA, include identification of general and long-term goals
and objectives, a description of specific actions, performance measures
to evaluate actions, recognition of key external factors, comprehensive
schedules and milestones, identification of resources and annual cost
estimates, accountability for implementation, and evaluation of the
overall program with specific processes to allow for adjustments and
changes. Combined with effective leadership, these principles provide
decision makers with a framework to guide program efforts and the means
to determine if these efforts are achieving the desired results. We
compared the contents of DOD's and available military components'
implementation plans with these key management principles. Table 5
shows the results of the analysis for passive RFID.
Table 5: Comparison of Key Management Principles to DOD's and Its
Military Components' Passive RFID Policies and Implementation Plans:
Component: OSD;
Key management principles: General and long-term goals and objectives:
Partially;
Key management principles: Description of specific actions: Partially;
Key management principles: Performance measures: No;
Key management principles: Key external factors: No;
Key management principles: Schedules and milestones: Partially;
Key management principles: Resources and annual cost estimates:
Partially;
Key management principles: Accountability: Yes;
Key management principles: Evaluation: Partially.
Component: DLA;
Key management principles: General and long-term goals and objectives:
Partially;
Key management principles: Description of specific actions: Partially;
Key management principles: Performance measures: No;
Key management principles: Key external factors: Yes;
Key management principles: Schedules and milestones: Partially;
Key management principles: Resources and annual cost estimates:
Partially;
Key management principles: Accountability: Yes;
Key management principles: Evaluation: No.
Component: U.S. Transportation Command;
Key management principles: General and long-term goals and objectives:
No;
Key management principles: Description of specific actions: Partially;
Key management principles: Performance measures: No;
Key management principles: Key external factors: No;
Key management principles: Schedules and milestones: No;
Key management principles: Resources and annual cost estimates:
Partially;
Key management principles: Accountability: Partially;
Key management principles: Evaluation: No.
Component: Army[A];
Key management principles: General and long-term goals and objectives:
Partially;
Key management principles: Description of specific actions: Partially;
Key management principles: Performance measures: Partially;
Key management principles: Key external factors: Yes;
Key management principles: Schedules and milestones: Partially;
Key management principles: Resources and annual cost estimates: No;
Key management principles: Accountability: Yes;
Key management principles: Evaluation: No.
Component: Navy;
Key management principles: General and long-term goals and objectives:
Partially;
Key management principles: Description of specific actions: Partially;
Key management principles: Performance measures: Partially;
Key management principles: Key external factors: Yes;
Key management principles: Schedules and milestones: Yes;
Key management principles: Resources and annual cost estimates: Yes;
Key management principles: Accountability: Yes;
Key management principles: Evaluation: Partially.
Component: Air Force[B];
Key management principles: General and long- term goals and objectives:
No;
Key management principles: Description of specific actions: No;
Key management principles: Performance measures: No;
Key management principles: Key external factors: No;
Key management principles: Schedules and milestones: No;
Key management principles: Resources and annual cost estimates: No;
Key management principles: Accountability: No;
Key management principles: Evaluation: No.
Component: Marine Corps[C];
Key management principles: General and long-term goals and objectives:
Partially;
Key management principles: Description of specific actions: Partially;
Key management principles: Performance measures: No;
Key management principles: Key external factors: Yes;
Key management principles: Schedules and milestones: No;
Key management principles: Resources and annual cost estimates:
Partially;
Key management principles: Accountability: Yes;
Key management principles: Evaluation: No.
Source: GAO analysis of DOD data.
[A] The Army's RFID plan was a draft document at the time of this
analysis.
[B] The Air Force had not developed a plan at the time of this
analysis.
[C] The Marine Corps' plan for automatic identification technologies
(including RFID) was a draft document at the time of this analysis.
[End of table]
As table 5 shows, many of these key management principles are missing
or are only partially incorporated into existing passive RFID
implementation policy and operational guidance for both DOD and its
military components. While DOD has incorporated some of these key
management principles--for example, by establishing business rules for
passive RFID to explain how RFID will affect supply chain operations
and processes--DOD has not fully incorporated all of these principles
into a comprehensive strategic management approach to manage the
implementation of passive RFID into the DOD logistics supply chain. In
turn, the DOD military components are also unable to develop
comprehensive plans to support DOD-wide passive RFID implementation due
to the lack of an overarching DOD comprehensive strategic management
plan. Among the key management elements that are missing or only
partially present are (1) general and long-term goals and objectives,
(2) a description of specific actions to support goals and objectives,
(3) performance measures to evaluate specific actions, (4) schedules
and milestones for meeting deadlines, (5) identification of total
resources needed and annual cost estimates for passive RFID
implementation into the supply chain, and (6) evaluation of the overall
program with specific processes to allow for adjustments and changes.
The following discussion focuses on the key principles that are missing
or only partially present in DOD's and its military components'
planning and operational guidance for passive RFID.[Footnote 4]
* General and long-term goals and objectives. Key management principles
include having clearly defined general and long-term program goals and
objectives with specific expected results and annual goals that relate
back to the overall goals and objectives to guide implementation. OSD
has identified general passive RFID broad and descriptive goals and
objectives, such as to (1) implement knowledge-enabled logistics
through fully automated visibility and management of assets in support
of the warfighter; (2) ensure readiness for the forces and
sustainability of the operations; (3) increase warfighter/customer
confidence in the reliability of the DOD supply chain; (4) improve
process efficiency of sourcing and delivery by improving shipping and
receiving subprocesses; (5) improve product lifecycle management (i.e.,
warranties/configuration management); (6) employ mature and emerging
supply chain technologies to optimize effective in-transit and asset
visibility within the DOD supply chain; (7) enable an adaptive supply
chain with sense and respond capabilities; and (8) use RFID to
facilitate accurate, hands-off data capture in support of business
processes in an integrated DOD supply chain enterprise as an integral
part of a comprehensive suite of automatic identification technology.
The Army, Marine Corps, Navy, and DLA goals and objectives, included in
their respective RFID implementation plans, are also general and
descriptive in nature. The OSD and component general and descriptive
goals and objectives do not define specific expected results, such as
integration of automatic information systems, and no annual goals are
identified, as suggested by the principle. A hierarchical relationship
among and between OSD's and the military components' goals and
objectives is also lacking. The U.S. Transportation Command's
implementation plan for passive RFID did not contain any goals or
objectives.
* escription of specific actions to support goals and objectives. Good
management practices call for a description of specific actions to
support goals and objectives. OSD has described, in some detail,
specific actions related to operational processes where passive RFID
technology is expected or mandated to be used. OSD's planning also
includes an expectation for the automated information systems that
support logistics activities to be RFID compatible. However, the
following specific actions are not consistently present throughout
OSD's policy or the military components' implementation plans:
obtaining necessary workforce skills, considering human resource
issues, identifying major capital resources (for example, RFID-specific
equipment such as read stations and write stations), identifying major
technological resources, and obtaining needed information resources.
The presence of such specific actions is important for evaluating the
achievement of organizational visions, missions, goals, and objectives,
and could provide the basis for monitoring corrective actions that may
be needed. Inclusion of such actions could assist DOD and the military
components to better develop a strategic focus for passive RFID
implementation and to ensure goals and objectives are achieved.
* Performance measures to evaluate specific actions. Successful
organizations develop performance measures to evaluate specific actions
for programs. OSD policy does not include performance measures to
assess specific actions developed for passive RFID implementation. The
Army and Navy implementation plans contain a basic set of measures
designed to determine what progress the Army and Navy are making in
achieving OSD's and their overall goal of improved logistics. For
example, measures the Army identified include quantitative improvement
for in-transit visibility, the read rate (accuracy) of tags, and the
amount of inventory reduced by the RFID technology. While these
performance measures evaluate specific actions and support OSD goals
and objectives, the planning does not include interim steps or specific
details of how the measures will be taken or further identification of
what targets the Army and Navy must achieve in order to be successful.
Neither DLA, the U.S. Transportation Command, nor the Marine Corps
included any performance measures in their respective passive RFID
implementation plans.
* Comprehensive schedules and milestones for meeting deadlines. Leading
organizations incorporate comprehensive schedules and milestones for
meeting deadlines to monitor the progress of a program. For passive
RFID, the Army, Navy, OSD, and DLA had short-term schedules, but these
plans were only 2-year schedules based on supporting OSD guidance. Key
management principles recommend that these schedules and milestones
span a 5-year period. The Marine Corps and U.S. Transportation Command
had no schedules and milestones listed for passive RFID in their
implementation plans.
* Identification of total resources needed and annual cost estimates.
Good management practices call for the identification of total
resources needed and annual cost estimates. For passive RFID, OSD and
its military components have established a framework for resource and
annual cost estimation. For example, OSD states that the cost of
implementing RFID into the DOD supply chain would be funded with
Operations and Maintenance Fund or Working Capital Fund processes. The
Navy's plan identifies annual and total resources needed; however,
total resources needed--including annual cost estimates--are not
present in OSD's plan or in the plans of the other military components.
Without detailed resource planning, DOD and its military components
cannot be certain that the passive RFID investments they are making are
the right investments to meet their needs, and that implementing
passive RFID would result in a sound return on their investments.
* Evaluation of an overall program with specific processes to allow for
adjustments and changes. Successful organizations implement the
evaluation of an overall program with specific processes to allow for
adjustments and changes. For passive RFID, OSD identified evaluation
methods to monitor progress toward achieving the general goals and
objectives of DOD-wide RFID implementation. For example, OSD's final
RFID policy states that the Defense Logistics Board is to review
internal implementation plans, benefits, compliance requirements, and
requisite budget requirements annually based on an assessment of the
implementation to date. This review is to include an updated analysis
of implementation success as well as to provide guidance for the
expansion of RFID capabilities into additional applications and supply
chain functional processes. Although OSD identified evaluation methods
to monitor progress towards achieving general goals and objectives, no
specific process is in place to reexamine and revise the general goals
and objectives themselves. The Navy also acknowledged the need for
evaluation, but it did not explain how this evaluation would occur.
DLA, the U.S. Transportation Command, the Army, and the Marine Corps
did not include any evaluation methods in their passive RFID
implementation plans. The U.S. Transportation Command's participation
in passive RFID pilot programs is mentioned, but no process for
evaluating RFID implementation is stated.
While DOD and its military components have made strides in developing
policy and guidance to implement passive RFID, their early planning
does not go far enough to protect the government's interest as
investment in the technology continues. Because the military components
are developing implementation plans to support DOD's RFID policy, the
development of a comprehensive strategic management approach that fully
incorporates these key management principles could provide decision
makers in both DOD and the military components with a framework to
guide RFID implementation efforts and the means to determine whether
these efforts are achieving the desired results.
DOD Has Identified Several Challenges for Passive RFID:
DOD officials have identified a broad spectrum of challenges concerning
passive RFID that remain to be resolved before passive RFID technology
can be fully implemented into DOD operations, but their RFID
implementation planning does not include any actions to mitigate these
challenges. Among the challenges facing DOD as it implements passive
RFID are those in four distinct categories. First, passive RFID
technology is a new technology that is evolving. Consequently,
electronic product code (EPC) standards--which identify specific
information about items--are being revised, development of newer
generation tags is creating uncertainty about upgrades and replacement
of equipment, concerns have been raised about the industrial base's
ability to meet the demand for tags and equipment, and training must be
provided. Second, the performance capabilities of the technology are
still being determined, creating operational issues concerning systems
integration, the fragility of tags, the percentage of accurate read
rates, and spectrum frequency. Third, the return on investment from
passive RFID has been difficult to determine and without the data
needed to create a business case analysis, the military services have
been reluctant to provide funding for implementation. Fourth, certain
regulatory and administrative requirements remain, including the
implementation of a Defense Federal Acquisition Regulation Supplement
rule (acquisition rule) and the approval of a multivendor contract for
passive RFID purchases. In addition, although DOD and its military
components have identified these passive RFID implementation
challenges, they have not yet identified actions to mitigate these
challenges.
Technology Is Evolving:
The EPC standards for passive RFID tags were being revised at the time
of our review to provide increased capabilities,[Footnote 5] and as of
August 2005 these revised standards had been published and were
awaiting approval from the International Standards
Organization.[Footnote 6] These new standards, designated EPC UHF GEN 2
(Generation 2), call for a radio frequency range of Ultra-High
Frequency (UHF) 860-960 MHz, with a minimum read range of 3 meters--
about 10 feet. The Generation 2 specifications were published in
December 2004, but equipment and tags using these specifications were
not available as of May 2005. DOD's RFID policy for placing tags on
cases, pallets, and item packaging of shipped goods calls for the
phasing out, over an anticipated 2-year period, of the tags currently
in use once equipment operating under the new tag specifications is
available. The current policy requiring the use of existing passive
tags on items shipped after January 2005 has caused component officials
to question the rationale for making an investment in tags and
equipment, such as readers and printers, that will have to be replaced
or upgraded in a short period of time to comply with the Generation 2
standards and tag format.
In our May 2005 report concerning governmentwide use of RFID
technology, we identified a potential concern about whether the demand
for passive RFID tags and equipment may eventually exceed the
industrial base's ability to supply them.[Footnote 7] Specifically, we
stated that the increasing demand for passive RFID tags may eventually
outstrip the supply and that the 30 percent damage rate during
production will likely contribute to future shortages. Army
representatives expressed similar concerns about the industrial base's
ability to supply passive tags and equipment in sufficient quantities
to meet the implementation demand anticipated by both the military and
commercial sectors. Thus, the infrastructure, such as RFID readers and
write-stations, which are needed to support passive RFID technology,
could be unavailable as implementation progresses. For example, DOD's
and Wal-Mart's schedules for implementing passive RFID technology are
similar, which could drive the near-term demand for tags and other
equipment to exceed supply levels. Wal-Mart, the largest U.S. retailer,
is requiring all of its suppliers to adopt RFID technology standards as
of January 2006. As of January 18, 2005, according to Wal-Mart
officials, 57 of the 100 suppliers scheduled to implement RFID in
January 2005 were shipping tagged cases and pallets and that some of
the 200 suppliers scheduled to begin shipping tagged cases and pallets
in 2006 were already doing so. Army representatives also pointed out,
however, that once Generation 2 standards are finalized, additional
industrial base sources are expected to emerge to meet and surpass the
public-and private-sector market demand.
Additionally, training is an ongoing challenge to passive RFID
implementation. As in any new technology or operating system, the end
users must be trained both to recognize RFID and to use it. Such
training is especially important when dealing with inventory assets for
DOD personnel operating in a combat setting. While the services have
acknowledged this lack of training and are working to correct it,
concerns remain about passive RFID training, as the following examples
illustrate.
* The Air Force has provided passive RFID training to personnel in
selected areas, associated with their pilot projects, but it has not
institutionalized this training in its training curriculum.
* The Army has updated its training curriculum to include active RFID
training into its business processes. In addition, its reserve forces
get the same training as the active forces, and several reserve classes
have already received training in active RFID technology. However, the
Army is presently considering how to incorporate passive RFID training
into its curriculum. At the time of our review, no official passive
RFID training was in place.
* The Navy provides passive RFID technology training through contractor
support in conjunction with its active RFID training on Early Entry
Deployment System Kits; these kits provide the capabilities of
writing/reading/uploading tags, access to regional servers, and
printing labels.
* The Marine Corps anticipates using contractor support for passive
RFID training in conjunction with its active RFID training on Early
Entry Deployment System Kits, as well as including this training into
its training center curriculum.
* U.S. Transportation Command officials pointed out that they are
attempting to train all shippers, transportation consignees, and supply
receivers to correctly use the single RFID format and data standard
that DOD adopts. The requirements and standards for this are being
developed and mandated by OSD/Joint Chiefs of Staff offices. As the
distribution process owner, the U.S. Transportation Command is
responsible for improving the overall efficiency and interoperability
of distribution-related activities.
Overall, DOD and its military components acknowledged that passive RFID
implementation will require significant training to ensure proper use
throughout the military supply chain.
Performance Capabilities of Passive RFID Technology Are Still Being
Determined:
Three performance capability issues also lead to challenges for DOD in
implementing passive RFID technology. The first is that of systems
integration, which enables interoperability of automatic information
systems among the military components so these systems can work
together and facilitate active and passive system interaction.
Furthermore, common systems and standards for interoperability need to
be established. For example, an Air Force official explained that
because DLA and each of the services are developing their own plans to
incorporate passive RFID into existing business processes, there is a
possibility that implementation in each service could be different,
leading to limited interoperability among the services. If passive RFID
implementation is not interoperable among the services, this could lead
to inefficiencies that could be avoided if interoperability had been
built into the services' passive RFID implementation plans as these
plans developed.
A second performance capability issue concerns the accuracy of passive
RFID tag read rates. Army officials told us that within DOD and private
industry there is a concern about the level of accuracy for reading
tags. For example, results of some read-rate experiences within DOD and
commercial industry have been reported at approximately 90 percent
accuracy for passive RFID tags placed on individual cases and pallets.
This is "not yet good enough" for Army-wide implementation, according
to officials in the Army Program Executive Office, Enterprise
Information Systems, Product Manager Joint-Automatic Identification
Technology Office. The 10 percent tag misread rate could be attributed
to the placement of the tags on an item or to the quality of the tags.
For instance, Navy tests have shown that inaccurate tag readings can
occur when metals, packages containing liquids, or extremely dense
material are tagged. In addition to the problems in reading individual
tags, the technology is not yet sufficiently sophisticated to read all
tagged items on fully loaded pallets within acceptable accuracy rates.
For example, Navy officials found problems reading tags on items in the
middle of a pallet versus those on the periphery. According to a Navy
official, testing in October 2004 regarding the Navy ocean terminal
pilot project identified an 85 percent accuracy read rate for tagged
items on fully loaded pallets. The Air Force has experienced
considerably lower accuracy read rates, ranging from 32 to 65 percent,
according to a briefing presented by an Air Force official on February
10, 2005. Private industry has experienced this problem as well.
According to Wal-Mart officials, as of January 18, 2005, the accuracy
of its read rate for tagged items on fully loaded pallets was 66
percent and stated that reading all cases on a fully loaded pallet
remains the biggest challenge. Our May 2005 report corroborates
reliability problems with reading tags--and an inability to read tags
in some instances--associated with conditions such as close proximity
of multiple tagged items, environmental conditions, and reading tags at
high speeds.[Footnote 8] Furthermore, some tags have been found to be
fragile, which could be a result of manufacturing and production
techniques, according to an Army official. The fragility of passive
RFID tags is further corroborated by a research group's survey of RFID
tag vendors. We reported in May 2005 that this survey found that up to
30 percent of chips for passive RFID tags are damaged during production
when they are attached to their antenna, and an additional 10 to 15
percent are damaged during the printing process.
A third area of performance capability involves spectrum frequency.
Obtaining radio frequency spectrum permissions outside the continental
United States is an implementation issue. Foreign governments can
impose requirements on the type of RFID reader technology to be used,
and must grant permission for use of spectrum frequencies in their
countries. Army officials told us that the military does not use RFID
technology in countries that do not grant frequency permission.
Currently there is no worldwide frequency standard for passive RFID
tags. For example, the allowed UHF frequency spectrum in the United
States, Europe, and Japan ranges from 860 to 960. However, the
International Organization for Standardization is considering possible
worldwide frequency standards for passive RFID tags because of the
impact an absence of standards could have on the commercial application
of RFID tags. Furthermore, an Army official told us that Germany's
frequency spectrum for active RFID will change in 2006. Consequently,
radio-frequency-dependent equipment may have to be upgraded or
replaced. Army officials are considering the use of region-or country-
specific RFID readers operating with locally approved frequencies to
address this issue.
Concerns Exist about the Unknown Return on Investment for Passive RFID:
The military services have expressed concern about the unknown return
on investment for passive RFID, which has led to reluctance to provide
funding for passive RFID. Studies have been conducted to determine a
return on investment, although these studies have had mixed results.
Without data to determine a business case analysis that would
demonstrate a return on investment from using passive RFID technology,
the military services have been reluctant to provide funding to support
it. For example, in commenting on DOD's draft RFID policy, Air Force
officials stated that DOD directed investment in passive RFID
infrastructure without first building a business case to document the
savings. Without seeing documented savings, the Air Force considered
that it would face tremendous challenges in supporting the initial
investment.
Navy officials commented similarly that without a compelling business
case it is unable to proceed with investments and implementation as it
needs to do. DOD's operational guidance states that the military
components will plan for a January 1, 2005, implementation of passive
RFID, although DOD's RFID policy does not require implementation by the
military components to begin until January 1, 2006. Navy officials
expressed their concern that this 2005 goal was not supportable because
the Navy had not planned or budgeted for enabling passive RFID at its
key supply system locations. Navy officials stated that a compelling
business case was needed to help balance their total resource
requirements against passive RFID's projected benefits. They also
explained that ultimately they need a better understanding of the
savings that investment in passive RFID can provide.
Furthermore, in commenting on DOD's draft RFID policy, the Office of
the Army's Deputy Chief of Staff for Logistics pointed out several
concerns impacting the Army's implementation of passive RFID
technology. First, funding for passive RFID technology would be
challenging because DOD's RFID policy was issued in the middle of a
budget cycle and the schedule for implementing RFID was not
synchronized with the budget cycle process. Second, in order to justify
funding necessary to implement passive RFID, the Army needed to conduct
business process analyses, pilot projects, and site surveys, as well as
to procure equipment and develop and conduct training to support RFID.
Third, while DOD's RFID policy states that the cost of implementing and
operating RFID technology is to be considered a normal cost of
transportation and logistics, and it should be funded through routine
operation and maintenance, working capital funds, or capital investment
processes, such use of working capital funds would increase operating
costs and surcharges until the potential RFID benefits offset them.
Those costs would, in turn, be passed on to customers through higher
prices that would have to be paid from appropriated funds. Finally, the
Army is transitioning from its legacy Standard Automated Management
Information System to a replacement system, the Single Army Logistics
Enterprises System. Army officials have not determined if adopting
passive RFID in its legacy systems is a sound investment strategy. They
elaborated that because the Army is fielding its new Single Army
Logistics Enterprises System, expensive and time-consuming changes to
its legacy system may not be cost effective.
Regarding costs and benefits of implementing passive RFID, we reported
in May 2005 that organizations need to determine whether the increased
visibility provided by RFID technology will outweigh the costs
associated with its implementation.[Footnote 9] The military components
and OSD have conducted some studies to develop a business case for use
of RFID, although these studies have had mixed results. For example,
the Center of Naval Analysis published a cost and benefits study in
June 2004, but concluded that the option preferable to current full
investment would be to wait until passive RFID technology is more
mature because they had no hard data to use to estimate
benefits.[Footnote 10] However, according to a January 25, 2005, DLA
briefing, the bottom-line results of a DOD business case analysis found
that "there is a reasonable to good expectation that implementation of
Passive RFID across DOD will provide an economic return on investment
in the near term and an excellent expectation of economic returns in
the long term." This DOD business case analysis was issued in April
2005 and was conducted pursuant to an August 30, 2004, logistics
decision memorandum directing DLA to work with the Deputy Under
Secretary of Defense (Logistics and Materiel Readiness) to document the
investment and cost benefits of implementing passive RFID. DOD
recognized that this business case analysis is an initial and
abbreviated analysis due to time constraints. The DOD business case
analysis presented two results, which it characterized as optimistic
and pessimistic. The optimistic result estimated savings of $1.781
billion, while the pessimistic result estimated savings of $70 million.
In a March 10, 2005, Logistics Decision Memorandum, the Under Secretary
of Defense (Acquisition, Technology, and Logistics) stated that this
business case was compelling and directed the Secretaries of the
military departments to move forward with passive and active RFID
implementation as justified by the DOD business case. While we did not
assess DOD's business case for implementing passive RFID because it was
released after we completed our field work, we believe that it
represents a step in the right direction. Lastly, Army officials
informed us that the Army's Logistics Transformation Agency is
conducting a business case analysis involving passive RFID, but this
analysis was still being conducted as of May 2005.
Regulatory and Administrative Requirements Need to Be Approved:
DOD faces two additional challenges in implementing passive RFID as a
result of regulatory and administrative processes. The regulatory
challenge faced by DOD is one of ensuring consistency in the
contractual requirements its vendors must follow in affixing or
applying passive RFID tags on the products DOD purchases. DOD's July
30, 2004, RFID policy includes a requirement that passive RFID will be
mandatory in solicitations issued on or after October 1, 2004, for
delivery of materiel on or after January 1, 2005. To implement this
action, DOD has proposed a rule to amend the Defense Federal
Acquisition Regulation Supplement (DFARS)[Footnote 11] for passive
RFID. This proposed rule was published in the Federal Register on April
21, 2005, for a 60-day comment period.[Footnote 12] The proposed rule
is limited in scope, specifying that passive RFID tagging will be
required on only four supply classes,[Footnote 13] excluding bulk
commodities, and only applies to shipments of those classes of items
that are delivered to two specific defense distribution depots--
Susquehanna, Pennsylvania, and San Joaquin, California. As DOD
continues implementation, it will need similar DFARS amendments that
apply to its remaining supply classes and shipping locations. For
example, DOD's RFID policy expands the requirement for passive RFID
tagging as of January 1, 2006, to six additional supply classes and 32
additional shipping locations, and as of January 1, 2007, to all supply
classes (except bulk commodities) shipped to all locations.
Consequently, DFARS may need to be further amended to accommodate
implementation of DOD's expanded policy requirements. Until additional
DFARS amendments are in place, the contract language regarding vendors'
placement of passive RFID tags on all products purchased by and shipped
to DOD may not be standardized. Without additional DFARS rules, supply
contracts could be subjected to individual contract clauses regarding
passive RFID, which could result in inconsistencies among contracts
across DOD and its military components.
The administrative challenge concerns establishing agreements with
vendors to provide EPC-compliant technology through multivendor
contract mechanisms, which can include the use of blanket purchase
agreements, to leverage the purchasing power of the department for
passive RFID infrastructure purchases. DOD designated the Army Program
Executive Office, Enterprise Information Systems, Product Manager-
Automatic Identification Technology Office as the DOD procurement agent
for automatic identification technology equipment, including RFID
equipment and infrastructure. As such, the office is to establish and
maintain a multivendor contract for equipment, equipment integration,
installation, and maintenance. While DOD policy requires that passive
RFID implementation begin on January 1, 2005, the absence of a
multivendor contract obligated the services and DLA to individually
purchase passive RFID equipment in order to conduct the services' pilot
projects and meet DLA's commitment to enable two of its depots--
Susquehanna, Pennsylvania, and San Joaquin, California--to receive and
process passive RFID-tagged shipments from vendors. In addition,
according to an official in the Army Program Executive Office, a total
of five blanket purchase agreements are to be established for passive
RFID. As of April 12, 2005, the Automatic Identification Technology
Office had established one blanket purchase agreement for passive RFID
tags. It is still in the process of establishing the remaining four
blanket purchase agreements for acquiring passive RFID equipment.
According to Army officials, the delay in establishing the multivendor
contract can be attributed to the fact that Army and DOD officials were
working to define requirements and develop an Independent Government
Cost Estimate, a process that they consider to be part of the normal
contracting process. Until other multivendor contracts are established,
the DOD military components may be unable to leverage the purchasing
power of the department to realize economy and efficiency benefits. In
response to DOD's comments on a draft of this report, we were informed
that as of August 11, 2005, three blanket purchase agreements have now
been awarded, and only two agreements remain to be established and are
expected to be established in the near future.
DOD and Its Military Components Have Not Yet Identified Actions to
Mitigate Passive RFID Implementation Challenges:
Although the Marine Corps and Army draft passive RFID plans and the
Navy and DLA passive RFID plans identify challenges and external
factors affecting implementation, which is a key element of GPRA, most
of these plans do not identify any actions for mitigating passive RFID
implementation challenges. The OSD and U.S. Transportation Command
plans do not identify passive RFID implementation challenges. Based on
our discussions with DOD officials, the underlying cause of these
various challenges is the newness and evolving nature of the
technology. However, officials noted that the current challenges they
face will be resolved in time and are to be expected with the
integration of any new technology. We recognize that the identification
of such challenges is a positive and essential step, but identification
does not go far enough to ensure their resolution in an efficient and
effective manner. Until DOD and the military components identify
actions to mitigate these implementation challenges, their progress in
resolving these challenges will be impeded.
Conclusions:
Although much more needs to be done, incorporating passive RFID
technology into the DOD supply chain offers the promise of a technology
that may begin to help address the long-standing problems of inadequate
asset visibility throughout DOD and the military services. While DOD
and its military components have made strides in developing policy and
guidance to implement passive RFID, their early planning does not go
far enough to ensure that Congress is sufficiently informed of the
investments that will be required and that the department can achieve
its goals with this technology. In particular, neither the department
nor its military components have developed comprehensive strategic
management approaches to ensure that implementation efforts fully
incorporate key management principles, such as those used by leading
organizations and contained in the Government Performance and Results
Act. These principles can provide decision makers with a framework to
guide program efforts and the means to determine if these efforts are
achieving the desired results. Although DOD and its military components
have incorporated some of these key management principles in their RFID
policy and guidance, many of these principles are missing or are only
partially present. Without an improved management approach, DOD and its
military components may, in the long term, continue to invest heavily
in passive RFID without knowledge of which and how much infrastructure,
and at what cost, will be needed to meet overall goals, objectives, and
strategies. In addition, some key challenges slowing progress toward
full implementation of RFID include (1) the newness and unproven state
of passive RFID technology, (2) difficulty with demonstrating a sound
business case and return on investment for passive RFID technology, and
(3) lack of a DOD-wide needs assessment that identifies, by location,
the infrastructure, maintenance support, and funding resources needed
to fully implement passive RFID technology in the DOD supply chain
processes. As the department and the military components continue to
implement passive RFID without a comprehensive strategic management
approach that identifies the challenges impeding implementation and
ways to overcome those challenges, DOD and its military components will
not have a means of measuring the progress of implementation and
developing defensible budget requests, or of taking corrective actions
as necessary in competitive budget environments.
Recommendations for Executive Action:
We recommend that the Secretary of Defense take the following three
actions:
* Direct the Under Secretary of Defense (Acquisition, Technology, and
Logistics) to expand its current RFID planning efforts to include a DOD-
wide comprehensive strategic management approach that will ensure that
RFID technology is efficiently and effectively implemented throughout
the department. This strategic management approach should incorporate
the following key management principles:
* an integrated strategy with goals, objectives, and results for fully
implementing RFID in the DOD supply chain process, to include the
interoperability of automatic information systems;
* a description of specific actions needed to meet goals and objectives;
* performance measures or metrics to evaluate progress toward achieving
the goals;
* schedules and milestones for meeting deadlines;
* identification of total RFID resources needed to achieve full
implementation; and:
* an evaluation and corrective action plan.
* Direct the secretaries of each military service and administrators of
other DOD military components to develop individual comprehensive
strategic management approaches that support the DOD-wide approach for
fully implementing RFID into the supply chain processes.
* Direct the Under Secretary of Defense (Acquisition, Technology, and
Logistics), the secretaries of each military service, and
administrators of other military components to develop a plan that
identifies the specific challenges impeding passive RFID implementation
and the actions needed to mitigate these challenges. Such a plan could
be included in the strategic management approach that we recommend they
develop.
Agency Comments and Our Evaluation:
DOD provided written comments on a draft of this report. The department
concurred with our recommendation for each of the military services and
administrators of other DOD military components to develop individual
comprehensive management approaches for implementing RFID, but did not
concur with our other two recommendations.
DOD did not concur with our recommendation to expand its RFID planning
efforts to include a comprehensive management approach to ensure
efficient and effective implementation. The department commented that
RFID is a critical transformational technology that will be implemented
across the department over the next several years. The department
stated that its approach is to build the rollout for passive RFID from
the bottom up. The department asserted that it has already set forth
the goals, objectives, performance measures, and milestones sufficient
to guide the planning activities of the military services, DLA, and the
U.S. Transportation Command, and that these activities have plans in
development. The department stated that it will work with these
activities to ensure that RFID is efficiently and effectively
implemented throughout the department, to ensure implementation is
funded, and to evaluate the benefits being achieved and report progress
as part of the department's supply chain management improvement plan.
We disagree. DOD's July 2004 RFID policy does not represent a sound
strategic approach because it lacks a number of key management
principles necessary for good program management. Specifically, we
found that the policy (1) contains only general and descriptive goals
and objectives that do not define specific expected results, and no
annual goals are identified, as suggested by the principle; (2)
describes specific actions related to operational processes but does
not provide specific actions related to things such as obtaining
necessary workforce skills, considering human resource issues,
identifying major capital resources, identifying major technological
resources, and obtaining needed information resources, which could
provide the basis for monitoring corrective actions that may be needed;
(3) does not include performance measures to assess the progress of
implementation actions for passive RFID; and (4) contains only short-
term schedules rather than comprehensive schedules and milestones for
meeting deadlines. Despite DOD's assertion in its comments that it
already has sufficient guidance to ensure that RFID is efficiently and
effectively implemented throughout the department, implementation of
the technology is adequately funded, benefits are being achieved, and
progress is being reported as part of the department's supply chain
management improvement plan, we continue to believe that the incomplete
incorporation of these key management principles in DOD's RFID policy
may impede DOD's ability to achieve these things. The lack of clear,
comprehensive, and integrated performance goals and measures has
handicapped DOD efforts for several undertakings, including business
management transformation,[Footnote 14] critical spare parts
shortages,[Footnote 15] installation preparedness,[Footnote 16] and
depot maintenance.[Footnote 17] We continue to believe that DOD needs
to develop a more comprehensive strategic management approach to guide
the implementation of RFID technology throughout the department.
The department concurred with our recommendation for each of the
military services and other DOD military components to develop
individual comprehensive management approaches for implementing RFID.
In its comments, the department said that the services, DLA, and U.S.
Transportation Command have RFID implementation plans in varying stages
of development. The department stated that OSD will direct that these
plans be completed by September 30, 2005, and that these plans will
incorporate the key management principles cited in our report and will
correct deficiencies cited in our report. The department noted that it
would be premature to expect detailed implementation plans until RFID
funding is solidified. We believe that this approach will satisfy the
intent of our recommendation if, prior to the military components
developing their plans, the Under Secretary of Defense (Acquisition,
Technology, and Logistics) takes additional actions to develop a DOD-
wide comprehensive strategic management approach that would then be
supported by the plans developed by the military components.
The department did not concur with our recommendation to develop a plan
to identify challenges impeding passive RFID implementation and actions
needed to mitigate those challenges. The department stated that the
challenges outlined in our report have either already been mitigated or
represented a misunderstanding on our part. In essence, the
department's comments suggest that the passive RFID challenges
identified in our draft report have been basically resolved. We do not
believe this to be the case. We recognize that passive RFID is an
evolving technology and that the department is continuing to address
the challenges associated with implementing passive RFID technology.
However, we continue to believe that the challenges identified in the
report remain, and that the department needs to develop a mitigation
plan to address these challenges. Specifically, our responses to DOD's
comments about the individual challenges identified in the draft report
are as follows.
* DOD stated that the audit incorrectly states that new standards are
currently being developed to "meet DOD's RFID policy requirements." The
department commented that the specification for the Electronic Product
Code RFID tags being required by DOD is already published and products
compliant to this specification are available on the market today. DOD
also stated that the audit incorrectly states that the new standard
will "define the DOD approved format for EPCs." The department said
that the approved format for DOD was published in May 2005 and that the
new Generation 2 standard, although already developed, is still
awaiting International Standards Organization (ISO) approval. DOD
stated that any concerns expressed in the audit to the contrary appear
unfounded. We disagree with DOD's assertion that the concerns expressed
in the report are unfounded. Nonetheless, we have clarified the
language in the report to respond to DOD's technical concerns about our
description of the development status of the new Generation 2 EPC
standard. As discussed in the report, we found that the military
components are reluctant to purchase passive RFID infrastructure
knowing that the standard is going to change and that they might need
to modify existing equipment or purchase new equipment to be compliant
with the new EPC standard. Because the new Generation 2 EPC standard
has not yet been approved and equipment and tags using the new standard
were not available as of May 2005, we continue to believe that the
military components' concern is valid and that it may not be the best
use of scarce resources to fund purchases of equipment necessary for
implementing passive RFID until equipment operating under the new tag
specifications is available.
* The department stated that the audit conjectures that the industrial
base will not have the capacity to supply sufficient quantities of tags
and equipment to meet requirements. The department stated that it had
not found this to be the case. DOD further stated that the audit
appeared to base this concern on some anecdotal comments made during
some interviews. DOD also commented that it recognized that the
department needed to consider lead times as new products come to the
market. We concur that lead times are necessary for evolving
technologies such as passive RFID, and we acknowledge in our report
that these challenges will be resolved over time and are to be expected
with the integration of any new technology. Nonetheless, we continue to
believe that this is a valid concern that is not solely based on
anecdotal comments made during some interviews. While this concern was
expressed during some interviews conducted in the course of this audit,
it was further corroborated in our May 2005 report,[Footnote 18] in
which we reported that the increasing demand for passive RFID tags may
eventually outstrip the supply and that the 30 percent damage rate
during production will likely contribute to future shortages.
* The department stated that the report identifies training as a
challenge, and that DOD already has plans to address that challenge.
DOD stated that the RFID implementation plans developed by the
services, DLA, and U.S. Transportation Command will address training;
that the Defense Acquisition University is developing computer-based
training for internal stakeholders; and that training is being provided
to DOD's Procurement Technical Assistance Centers. DOD commented that
its training strategy will be refined and intensified as implementation
continues. In our report, we recognize the planned efforts to provide
training by the military components. We also believe that these actions
cited by DOD recognize the necessity for passive RFID training
throughout the department. However, until such training is formalized
into the various training curriculums and personnel become proficient
in the use of RFID technology and its capabilities, training remains a
concern for passive RFID implementation. As recognized by DOD in
identifying the need to refine and intensify its training strategy, we
believe training will be a continuing challenge as DOD addresses the
need to train new personnel and to refresh training of experienced
personnel.
* The department states that systems interoperability is already being
facilitated because the military components share a common approach,
the Advance Shipment Notice (ASN), for passing RFID information. We
continue to believe that interoperability is a challenge. An ASN is a
notification issued by a supplier prior to shipment that provides the
recipient with advance notice describing in detail what is being
shipped. While the ASN provides helpful information, we do not believe
that the ASN effectively addresses the interoperability concern. As we
stated in our draft report, DOD identifies system interoperability as
the ability of systems, units, or forces to provide data, information,
materiel, and services and to accept the same from other systems,
units, or forces and to use the data, information, materiel, and
services so exchanged to enable them to operate effectively together.
We also stated in our draft report that interoperability includes both
the technical exchange of information and the end-to-end operational
effectiveness of that exchange of information as required for mission
accomplishment. DOD envisions a seamless integration between passive
and active RFID technology; however, such a seamless integration cannot
take place unless the information captured by the RFID technology can
flow through interoperable logistics information systems. Effective
implementation of passive RFID requires interoperability of automatic
information systems among the military components so these systems can
work together and facilitate active and passive system interaction.
Common systems and standards for interoperability need to be
established. If passive RFID implementation is not interoperable among
the military components, this could lead to inefficiencies that could
be avoided if interoperability had been built into the military
components' passive RFID implementation plans as these plans developed.
* The department stated that the low read rates cited in our audit were
based on older pilot projects reading all cases on a pallet. The
comments noted that pallet and case tags on a conveyor are consistently
read at 100 percent and stated that the audit does not mention this
fact. The department stated that the draft report implied that the read
rates were too low for implementation and responded that this simply
was not true. The department stated that the use of the ASNs mitigated
low read rates because the ASN contains the nested relationship of all
cases on the pallet and that the reading of just one tag enables
determining all other tags on the shipment. We continue to believe that
for DOD to use passive RFID technology as intended, the accuracy of
passive RFID read rates is critical to expeditiously verify that
individual items were actually received. While read rates of tags on
individual pallets and cases may be 100 percent, as stated by the
department, our report focused on the technology not yet being
sufficiently sophisticated to read all tagged items on fully loaded
pallets with acceptable accuracy rates. As stated in our report, our
audit found problems reading tags on items in the middle of a pallet
versus those on the periphery as follows: the Navy experienced an 85
percent accuracy read rate for tagged items on fully loaded pallets in
its terminal pilot project, reported in October 2004; the Air Force has
experienced 32 to 65 percent accuracy read rates for fully loaded
pallets, reported on February 10, 2005; and even Wal-Mart reported that
as of January 18, 2005, it has experienced only 66 percent accuracy of
its read rate for tagged items on fully loaded pallets and stated that
reading all cases on a fully loaded pallet remains the biggest
challenge. These read rate figures were the most recent figures that
were available to us at the time of our audit, and we believe that the
dates of these data are sufficiently recent to demonstrate that this
concern will continue for some time. Furthermore, while the ASN
provides details pertaining to individual shipments--including a list
of the contents of a shipment of goods as well as additional
information relating to the shipment such as product description,
physical characteristics, type of packaging, and configuration of goods
within the transportation equipment--the ASN basically serves as a
verification control mechanism to validate the contents of shipments
received. The ASN is not a new type of control mechanism. In April
2005, the existing Material Inspection Receiving Report--which
basically served the function of a packing slip--was expanded to
contain RFID tag data. We believe that the ASN should continue to be
used as a control to ensure that shipments sent by suppliers are
actually received, but we believe that the ASN does not mitigate nor
should it serve as a replacement for the need to read the passive RFID
tags on all of the items received to ensure that what the ASN says was
sent is what was actually received.
* DOD stated that one worldwide frequency standard is not required as
recommended in the audit and will not occur. DOD stated that passive
RFID technology as adopted can operate anywhere along the UHF band and
a foreign country only needs to open up a portion of that band for RFID
technology to be able to operate. The department also stated that
readers are designed to operate at the country-approved spectrum.
However, as discussed in our draft report, we did not advocate a
worldwide standard. In our draft report, we noted that there was no
worldwide frequency standard, and stated that a worldwide standard was
being considered by the International Organization for Standardization,
but we did not recommend that such a worldwide standard be developed.
The concerns identified in the report were that the United States would
need to obtain frequency spectrum permissions from foreign governments
to be able to use RFID reader technology in their countries, and that
foreign governments can impose requirements on the type of readers that
can be used. We continue to believe that these are implementation
issues because DOD will need to ensure that its procedures in place for
requesting frequency spectrum permissions are followed, track any
special requirements imposed by foreign governments, and identify and
respond to changes in a country's spectrum. For example, in our draft
report, we pointed out that Germany's spectrum for active RFID will be
changing in 2006, so radio frequency-dependent equipment operating
under the old spectrum may need to be upgraded or replaced.
* The department stated that the concerns raised in the audit about
unknown return on investment were dated because the DOD business case
analysis has now been completed. DOD also stated that the Navy business
case has been superseded by a more recent business case analysis that
did find a return on investment. We believe that DOD's new business
case analysis, issued in April 2005, is a step in the right direction,
and we referred to the findings of this new business case analysis in
our report. We continue to believe, however, that return on investment
remains a strong concern among the military components and the DOD
business case still needs to be adapted into the development of
individual business case analyses by the military components that they
can use to integrate the technology into their respective business
processes. Our initial review of the department's business case
analysis leads to reservations regarding the potential benefits it
portrays because of the wide disparity between the optimistic and
pessimistic results. As stated in our report, the DOD business case
analysis presented two results, which it characterized as optimistic
and pessimistic. The optimistic result estimated savings of $1.781
billion, while the pessimistic result estimated savings of $70 million.
Although DOD recognized that this business case is an initial and
abbreviated analysis due to time constraints, DOD stated that this
business case was compelling and directed the secretaries of the
military departments to move forward with passive and active RFID
implementation as justified by the business case. In addition, DOD's
business case is a departmentwide analysis and was developed to
determine a gross benefit to the department. Until a return on
investment can be demonstrated by the military components, the military
components may continue to be reluctant to provide funds necessary for
successful implementation. As stated in our report, we did not assess
the methodology and validity of the DOD business case analysis,
primarily because it was released after we concluded our field work.
* The department stated that the DFARS clause is nearing completion and
will be followed by subsequent DFARS clauses as DOD phases in
implementation. DOD also stated that the concern raised in the audit
about "inconsistencies among contracts across DOD" is not an issue
because very few contracts have been let in the interim. DOD explained
that the purpose of the proposed DFARS clause was to standardize
contract clauses across the department. We continue to believe that the
development and approval of DFARS clauses remain a valid concern. As
described in our draft report, the existing proposed rule is limited in
scope, applying only to four supply classes delivered to two
distribution depots. We stated in our draft report our concern that as
DOD continues passive RFID implementation, it will need additional
DFARS amendments as RFID tagging requirements expand to DOD's remaining
six supply classes and 32 additional shipping locations as of January
1, 2006, and to all supply classes (except bulk commodities) shipped to
all locations as of January 1, 2007. DOD's comments acknowledge that
they will need subsequent DFARS clauses as DOD phases in
implementation. We concur with DOD that the purpose of the DFARS clause
is to standardize contract clauses across the department; however,
until additional DFARS amendments are in place, the contract language
regarding vendors' placement of passive RFID tags on all products
purchased by and shipped to DOD may not be standardized. Until DFARS
clauses are approved for all supply classes and shipping locations,
supply contracts could be subjected to individual contract clauses,
which could result in inconsistencies among contracts across DOD and
its military components. Just because few contracts have been awarded
to date, as DOD stated in its comments, does not, in our opinion, mean
that there will continue to be few contracts awarded until such time as
additional DFARS amendments to cover the remaining supply classes and
shipping locations are approved. The fact that the proposed DFARS
clause covering only a portion of supply classes and locations still
has not been completed but was anticipated to have been completed in
October 2004 is indicative that the DFARS concern is likely to continue
for some time.
* The department stated that the discussion of multivendor contracts
was dated because since the audit, awards have been made for tag,
reader, printer, and integration software/services. DOD also commented
that blanket purchase agreements are not mandatory and are just one
tool for procurement of RFID equipment, which can be and has been
purchased without the use of such agreements. As stated in our draft
report, the administrative challenge concerns establishing agreements
with vendors to provide EPC-compliant technology to leverage the
purchasing power of the department for passive RFID infrastructure
purchases. As of August 11, 2005, we were informed by officials in the
Army Program Executive Office, Enterprise Information Systems, Product
Manager-Automatic Identification Technology Office that three of five
blanket purchase agreements had been established. These agreements are
for tags, fixed and transportable readers, and technical engineering
services. The remaining two blanket purchase agreements, for printers
and multiprotocol handheld readers, are anticipated to be established
soon. However, until the remaining multivendor contracts are awarded,
we continue to believe that the establishment and award of contract
mechanisms such as blanket purchase agreements are administrative
challenges and the DOD military components may be unable to leverage
the purchasing power of the department to realize economy and
efficiency benefits.
DOD's comments are printed in appendix III. DOD also provided technical
comments, which we have incorporated as appropriate.
We are sending copies of this report to the appropriate congressional
committees; the Secretary of Defense; the Secretaries of the Army, Air
Force, and the Navy; the Commandant of the Marine Corps; the Commander,
U.S. Transportation Command; and the Director, Defense Logistics
Agency. 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 on (202) 512-8365 or solisw@gao.gov if you or your
staff have any questions concerning this report. Contact points for our
Offices of Congressional Relations and Public Affairs may be found on
the last page of this report. GAO staff who made major contributions to
this report are listed in appendix IV.
Signed by:
William M. Solis, Director:
Defense Capabilities and Management:
List of Congressional Committees:
The Honorable John Warner:
Chairman:
The Honorable Carl Levin:
Ranking Minority Member:
Committee on Armed Services:
United States Senate:
The Honorable Ted Stevens:
Chairman:
The Honorable Daniel K. Inouye:
Ranking Minority Member:
Subcommittee on Defense:
Committee on Appropriations:
United States Senate:
The Honorable Duncan L. Hunter:
Chairman:
The Honorable Ike Skelton:
Ranking Minority Member:
Committee on Armed Services:
House of Representatives:
The Honorable C.W. Bill Young:
Chairman:
The Honorable John P. Murtha:
Ranking Minority Member:
Subcommittee on Defense:
Committee on Appropriations:
House of Representatives:
[End of section]
Appendix I: Scope and Methodology:
To determine the status of the Department of Defense's (DOD)
implementation of passive Radio Frequency Identification (RFID)
technology, we relied on information gathered through our visits and
interviews with key personnel within the Office of the Secretary of
Defense; the Defense Logistics Agency; the U.S. Transportation Command;
the Joint Forces Command; the Logistics and Command, Control,
Communications and Computer Systems Directorates within the Office of
the Joint Chiefs of Staff; the Army Program Executive Office,
Enterprise Information Systems, Product Manager-Automatic
Identification Technology Office; and pertinent logistics offices
within the Departments of the Air Force, Navy, and Marine Corps. We
reviewed DOD's overall RFID implementation policy, its concept of
operations guidance for DOD military components and suppliers and
pertinent articles, and we obtained briefing documents to understand
DOD's strategy for implementing RFID technology into its supply chain
processes. We also obtained and reviewed historical RFID infrastructure
and cost data and obtained, to the extent available, DOD military
components' future infrastructure and funding requirements to fully
implement the technology into the DOD supply chain operations. Because
DOD is just beginning to implement passive RFID technology, we did not
verify the data provided and considered the data sufficiently reliable
for the purposes of this review. Additionally, we visited and observed
the use of RFID technology at the Defense Logistics Agency's Defense
Distribution Depot in Susquehanna, Pennsylvania, and the Norfolk Ocean
Terminal pilot initiative at the Navy's Fleet and Industrial Supply
Center in Norfolk, Virginia.
To identify the extent to which DOD has developed a strategic approach
for implementing passive RFID technology, we obtained and analyzed
DOD's and various DOD military components' passive RFID guidance. We
assessed this guidance by comparing its content to key management
principles, such as those used by leading organizations and contained
in the Government Performance and Results Act of 1993, to determine
whether DOD's planning contained key management attributes that are
necessary to guide and monitor implementation of the technology.
To determine the broad spectrum of challenges DOD faces with
implementation of RFID technology, we relied on analysis of data
gathered through visits and interviews with and briefings provided by
key personnel from the DOD organizations identified above. We also
conducted a literature search to understand the RFID technology and the
applications of it for commercial and defense purposes. We obtained and
reviewed RFID technology studies initiated by DOD or its military
components. We also obtained and analyzed DOD military components'
comments regarding DOD's overall RFID policy and concept of operations
guidance.
We conducted our work from July 2004 through August 2005 in accordance
with generally accepted government auditing standards.
[End of section]
Appendix II: Examples of Passive and Active RFID Equipment:
[See PDF for image]
[End of figure]
[End of section]
Appendix III: Comments from the Department of Defense:
DEPUTY UNDER SECRETARY OF DEFENSE FOR LOGISTICS AND MATERIEL READINESS:
3500 DEFENSE PENTAGON:
WASHINGTON, DC 20301-3500:
AUG 05 2005:
Mr. William Solis:
Director, Defense Capabilities and Management:
U.S. Government Accountability Office:
441 G Street, N.W.:
Washington, DC 20548:
Dear Mr. Solis:
This is the Department of Defense (DoD) response to the GAO draft
report, GAO-05-345, "DEFENSE LOGISTICS: Better Strategic Planning Can
Help Ensure DoD's Successful Implementation of Passive Radio Frequency
Identification" dated June 29, 2005 (GAO-05-345). The Department
nonconcurs with Recommendations 1 and 3 and concurs with Recommendation
2. Attachment 1 contains our detailed response. Technical comments have
been provided under separate cover.
Radio Frequency Identification (RFID) is a critical transformational
technology that will be deployed across the Department over the next
several years. It is a crucial part of our plan to improve Supply Chain
Management (SCM) and is included as a key component of our Focused
Logistics Roadmap. The Office of the Secretary of Defense (OSD) has
established a definitive RFID policy and is working with the Combatant
Commands, Military Services and Defense Agencies on implementation
plans and funding issues. OSD has already set forth the
goals/objectives, performance measures and the milestones sufficient to
guide the planning activities of the Military Services/Defense
Logistics Agency (DLA) and U.S. Transportation Command (USTRANSCOM). In
addition, OSD is not acting as a program office for RFID
implementation, which will occur within the Military
Services/DLA/USTRANSCOM. Therefore, the Department nonconcurs with
Recommendation 1.
Each of the Military Services/DLA/USTRANSCOM has plans in development.
The Department concurs with the recommendation that these plans be
completed and should incorporate the key management principles cited in
the audit. We will direct completion of those plans by September 30,
2005. OSD will continue to work with the Services/DLA/TRANSCOM to
evaluate the benefits being achieved and will report progress as part
of our Supply Chain High Risk improvement plan.
Lastly, the Department nonconcurs with the recommendation to develop a
plan to address specific challenges outlined in the audit. The
challenges outlined have either already been mitigated or represent a
misunderstanding of the technology and its implementation in the
Department.
The Department appreciates the opportunity to comment on this audit.
Should additional information be required, Mrs. Kathy Smith of my staff
is the point of contact. She may be reached at (703) 604-0098x135.
Sincerely,
Signed for:
Bradley Berkson:
PC Principal Assistant Deputy Under Secretary of Defense (Logistics and
Materiel Readiness):
Attachments: As Stated:
GAO DRAFT REPORT - DATED JUNE 29, 2005 GAO CODE 350561/GAO-05-345:
"DEFENSE LOGISTICS: Better Strategic Planning Can Help Ensure DoD's
Successful Implementation of Passive Radio Frequency Identification"
DEPARTMENT OF DEFENSE COMMENTS TO THE RECOMMENDATIONS:
RECOMMENDATION 1: The GAO recommended that the Secretary of the Defense
direct the Under Secretary of Defense (Acquisition, Technology, and
Logistics) to expand its current Radio Frequency Identification (RFID)
planning efforts to include a DoD-wide comprehensive strategic
management approach that will ensure that RFID technology is
efficiently and effectively implemented throughout the department. This
strategic management approach should incorporate the following key
management principles:
* An integrated strategy with goals, objectives, and results for fully
implementing RFID in the DoD supply chain process, to include the
interoperability of automatic information systems;
* A description of specific actions needed to meet goals and objectives;
* Performance measures or metrics to evaluate progress toward achieving
the goals;
* Schedules and milestones for meeting deadlines;
* Identification of total RFID resources needed to achieve full
implementation; and:
* An evaluation of corrective action plan. (page. 38/GAO Draft Report):
DOD RESPONSE: Nonconcur. RFID is a critical transformational technology
that will be deployed across the Department over the next several
years. It is a crucial part of our plan to improve Supply Chain
Management (SCM) and is included as a key component of our Focused
Logistics Roadmap.
The Office of the Secretary of Defense is not acting as a program
office in managing the implementation of RFID. Our approach is to build
the Department rollout for passive RFID from the bottom up. The Office
of the Secretary has already set forth the goals/objectives,
performance measures and the milestones sufficient to guide the
planning activities of the Military Services/DLA and USTRANSCOM. Each
of the Military Services, Defense Logistics Agency (DLA) and USTRANSCOM
has plans in various stages of development. They are also doing
analyses now to determine the best place to start in implementing
passive RFID. We will direct completion of those plans by September 30,
2005 and will work with the Components to ensure that RFID is
efficiently and effectively implemented throughout the Department.
In addition, we continue to work with the Military Services and
USTRANSCOM to ensure implementation is funded. Until funding is
solidified, it is premature to expected detailed implementation plans.
The Office of the Secretary will continue to work with the Military
Services/DLA/USTRANSCOM to evaluate the benefits being achieved and
will report progress as part of our SCM improvement plan.
RECOMMENDATION 2: The GAO recommended that the Secretary of the Defense
direct the secretaries of each military service and administrators of
other DoD components to develop individual comprehensive strategic
management approaches that support the DoD-wide approach for fully
implementing RFID into the supply chain processes. (page 38/GAO Draft
Report):
DOD RESPONSE: Concur. The Military Services, DLA and USTRANSCOM have
implementation plans in various stages of development. The Office of
the Secretary of Defense will direct completion of these plans by
September 30, 2005. The plans will incorporate the key management
principles cited in the audit and will correct deficiencies pointed out
in the audit. Until funding is solidified, it is premature to expected
detailed implementation plans.
RECOMMENDATION 3: The GAO recommended that the Secretary of the Defense
direct the Under Secretary of Defense (Acquisition, Technology, and
Logistics), the secretaries of each military service and administrators
of other components to develop a plan that identifies the specific
challenges impeding passive RFID implementation and the actions needed
to mitigate these challenges. Such a plan could be included in the
strategic management approach that we recommend they develop. (page
39/GAO Draft Report):
DOD RESPONSE: Nonconcur. The "challenges" outlined in the audit have
either already been mitigated or represent a misunderstanding of the
technology and its implementation in the Department.
The audit incorrectly states that new standards are currently being
developed to "..meet DoD's RFID policy requirements.." The
specification for the Electronic Product Code (EPC) RFID tags being
required by DoD is already published and products compliant to this
specification are available on the market today. In addition, the audit
incorrectly states that the new standard will "..define DoD approved
format for EPCs." The approved format for DoD is already published as
part of the Tag Data Specifications 1.27 published May 27, 2005. The
"new standard" referred to in the audit is apparently what is commonly
referred to as EPC Generation 2 (Gen 2). This standard has already been
developed and is now going through International Standards Organization
(ISO) approval. However, this standard is not necessary to "meet the
DoD RFID policy requirements." The Generation 1 products are sufficient
for this purpose. Moreover, the design of the Gen 2 standard is
intended to minimize changes necessary to upgrade to Gen 2 from the
Generation 1 products, and early products have born that out. Any
concerns expressed in the audit to the contrary appear unfounded.
The audit also conjectures that the industrial base will not have the
capacity to supply tags and equipment in sufficient quantities to meet
the requirement. The audit appears to base this concern on some
anecdotal comments made during some interviews. The Department has not
found this to be the case. The Department does recognize that lead
times need to be considered as new products come to market.
The audit cites training as a challenge, but the Department already has
plans to address this challenge. The format for the Military
Service/DLAIUSTRANSCOM implementation plans will address training as a
key part of the format. In addition, the Defense Acquisition University
is developing RFID computer-based training for our internal
stakeholders and "train-the-trainer" training is being provided to the
Procurement Technical Assistance Centers so that they can educate our
small business suppliers on RFID. As the technology is implemented, our
training strategy will be refined and intensified.
The audit cites systems "interoperability," as a challenge. Despite the
fact that each component is developing their own plan for
implementation, they all share a common approach to the data for
passing RFID information, e.g. Advanced Shipping Notice (ASN). These
standards have already been developed, thus facilitating systems
"interoperability."
The tag read rates are also cited as a challenge. The low read rates
cited are based on older pilots reading all cases on a pallet. Pallet
tags and case tags on a conveyor are consistently read at 100% although
the audit does not mention this fact. The implication is that the rates
are too low for implementation. This is simply not true. The
requirement for an Advanced Shipping Notice (ASN) mitigates any low
read rates of cases on pallets through a dock door. The ASN will have
the nested relationship of all cases on the pallet. Therefore, by
reading just one of the tags, you are able to determine all the other
tags on the shipment.. 100% read rate of all cases on the pallet are
not needed. Radio Frequency enabled conveyors also mitigate the read
rates in the receiving process.
Another challenge in the audit is frequency spectrum. One worldwide
frequency standard is not required as recommended in the audit and will
not occur. The passive RFID technology that DoD has adopted is designed
to operate anywhere along the entire Ultra-High Frequency (UHF) band
(860-960 mHz). Therefore, one single frequency is not required. A
country need only open a portion of the UHF band for this technology to
be able to operate. For example, the same EPC tag can be read in the US
at 915 mHz and also read in Australia at 920-925mHz. The vast majority
of countries in which we operate have already opened portions of the
UHF band for this technology and efforts continue to get the last few
(Italy, Spain, etc). Readers are designed to operate at the country-
approved spectrum.
Concerns about unknown return on investment were also mentioned in the
audit. These concerns are largely dated as the DoD business case has
now been completed in addition to a Navy business case. The audit cites
a Navy business case that was superceded by a more detailed one that is
now complete and does find a return on investment.
Finally, the audit posits concerns about the Defense Federal
Acquisition Regulation (DFAR) clause and the multivendor contracts. The
DFAR clause is nearing completion and will be followed by subsequent
DFAR clauses as we phase in our implementation. At this phase of the
implementation, the concern about "..inconsistencies among contracts
across the DoD" is not an issue. Very few individual contracts have
been let in the interim. The purpose of the proposed DFAR clause to
implement RFID with our suppliers was, in fact, to standardize contract
clauses across the Department.
The discussion on the multivendor contracts is also dated. Since the
audit began, the tag, reader, printer and integration software/services
awards have been made. In addition, the Blanket Purchase Agreements
(BPAs) are just one tool for procurement of RFID and are not mandatory.
Equipment can and has been purchased without the use of the BPAs.
[End of section]
Appendix IV: GAO Contact and Staff Acknowledgments:
GAO Contact:
William M. Solis (202) 512-8365:
Acknowledgments:
In addition to those named above, Renee S. Brown, James A. Driggins, K.
Nicole Harms, Jeffrey R. Hubbard, Shvetal Khanna, Louis V.
Modliszewski, Kenneth E. Patton, Charles W. Perdue, Keith A. Rhodes,
Dudley C. Roache, Jr., David A. Schmitt, Yong Song, and Cheryl A.
Weissman also made significant contributions to this report.
FOOTNOTES
[1] Additional information regarding governmentwide implementation of
RFID technology is discussed in GAO, Information Security: Radio
Frequency Identification Technology in the Federal Government, GAO-05-
551 (Washington, D.C.: May 27, 2005).
[2] Department of Defense, Conduct of the Persian Gulf War: Final
Report to the Congress (Washington, D.C.: April 1992); GAO, Operation
Desert Storm: Lack of Accountability Over Materiel During Redeployment,
GAO/NSIAD-92-258 (Washington, D.C.: Sept. 23, 1992); U.S. Army Materiel
Command (USAMC), Operation Iraqi Freedom (OIF), Lessons Learned
Conference (Redstone Arsenal, Ala.: Sept. 10-11, 2003); GAO, Defense
Logistics: Preliminary Observations on the Effectiveness of Logistics
Activities during Operation Iraqi Freedom, GAO-04-305R (Washington,
D.C.: Dec. 18, 2003); Department of Defense, Objective Assessment of
Logistics in Iraq: DUSD (L&MR) and Joint Staff (JSJ4) Sponsored
Assessment to Review the Effectiveness and Efficiency of Selected
Aspects of Logistics Operations During Operation Iraqi Freedom (OIF)
(Washington, D.C.: March 2004); GAO, Defense Inventory: Actions Needed
to Improve the Availability of Critical Items During Current and Future
Operations, GAO-05-275 (Washington, D.C.: Apr. 8, 2005).
[3] Pub. L. No. 103-62 (1993).
[4] We did not perform a GPRA comparison for the Air Force because the
Air Force had not developed its RFID implementation plan at the time of
this analysis.
[5] The EPC standards provide a uniform format for encoding passive
RFID tags to carry a sequence of digits that identifies the
manufacturer, product, and version, followed by another sequence that
is a serial number, which identifies each item uniquely.
[6] EPCglobal, Inc., is working with DOD to administer and develop the
EPC standards. EPCglobal was formed in November 2003 as a joint venture
between EAN Inc. and the Uniform Code Council. It is "a not-for-profit
organization — to establish and support the Electronic Product Code
(EPC) Network as the global standard for immediate, automatic, and
accurate identification of any item in the supply chain of any company,
in any industry, anywhere in the world."
[7] GAO-05-551.
[8] GAO-05-551.
[9] GAO-05-551.
[10] Center of Naval Analysis, An Examination of Costs and Benefits of
Navy RFID Adoption, CRM D0010265.A2/Final (June 2004).
[11] DFARS are published regulations DOD uses to establish and manage
procurement business rules, policy, and guidance. The Director of
Defense Procurement and Acquisition Policy is responsible for these
regulations.
[12] 70 Fed. Reg. 20726 (Apr. 21, 2005). After further consideration
following the 60-day comment period, DOD will determine if and when to
finalize a proposed rule.
[13] These four classes are Subclass of Class I, packaged operational
rations; Class II, clothing, individual equipment, tentage,
organizational tool kits, hand tools, and administrative and
housekeeping supplies and equipment; Class VI, personal demand items;
and Class IX, repair parts and military components.
[14] GAO, Defense Management: Key Elements Needed to Successfully
Transform DOD Business Operations, GAO-05-629T (Washington, D.C.: Apr.
28, 2005).
[15] GAO, Defense Inventory: The Department Needs a Focused Effort to
Overcome Critical Spare Part Shortages, GAO-03-707 (Washington, D.C.:
June 27, 2003).
[16] GAO, Combating Terrorism: DOD Efforts to Improve Installation
Preparedness Can Be Enhanced with Clarified Responsibilities and
Comprehensive Planning, GAO-04-855 (Washington, D.C.: Aug. 12, 2004);
and Combating Terrorism: Actions Needed to Guide Services'
Antiterrorism Efforts at Installations, GAO-03-14 (Washington, D.C.:
Nov. 1, 2002).
[17] GAO, Depot Maintenance: Key Unresolved Issues Affect the Army
Depot System's Viability, GAO-03-682 (Washington, D.C.: July 7, 2003).
[18] GAO-05-551.
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The first copy of each printed report is free. Additional copies are $2
each. A check or money order should be made out to the Superintendent
of Documents. GAO also accepts VISA and Mastercard. Orders for 100 or
more copies mailed to a single address are discounted 25 percent.
Orders should be sent to:
U.S. Government Accountability Office
441 G Street NW, Room LM
Washington, D.C. 20548:
To order by Phone:
Voice: (202) 512-6000:
TDD: (202) 512-2537:
Fax: (202) 512-6061:
To Report Fraud, Waste, and Abuse in Federal Programs:
Contact:
Web site: www.gao.gov/fraudnet/fraudnet.htm
E-mail: fraudnet@gao.gov
Automated answering system: (800) 424-5454 or (202) 512-7470:
Public Affairs:
Jeff Nelligan, managing director,
NelliganJ@gao.gov
(202) 512-4800
U.S. Government Accountability Office,
441 G Street NW, Room 7149
Washington, D.C. 20548:
