Audit Report

02-23-2016
Acquisition Processes and Contract Management
Defense Logistics Agency Aviation Can Improve its Processes to Obtain Restitution From Contractors That Provide Defective Spare Parts (Project No. D2015-D000AG-0107.000)
DODIG-2016-052

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Objective

We determined whether Defense Logistics Agency (DLA) personnel were obtaining appropriate restitution (reimbursement) from contractors that provided defective spare parts. This is the second in a series of audits on product quality deficiency reports processed by DLA.

Finding

DLA Aviation did not pursue and obtain appropriate restitution for a projected 269 stock numbers for which contractors supplied defective parts. This occurred because DLA Aviation lacked controls and oversight to ensure that its logistics operations and acquisition personnel:

  • coordinated and pursued restitution from responsible contractors;
  • adequately searched DoD’s inventory to identify and remove defective parts;
  • returned defective parts to the responsible contractors for replacement; and
  • tracked the status of parts returned to the responsible contractors for replacement.

As a result, we project that DLA Aviation did not recover at least $12.3 million in restitution. In addition, defective parts were left unaccounted for in the DoD supply system, which negatively impacts warfighter readiness and safety.

Recommendations

We recommend that the Director, DLA, develop a plan of action with milestones to improve the agency’s processes to identify defective spare parts and pursue and obtain restitution from contractors that provide defective spare parts. The plan should address the findings in this report and establish controls and oversight to ensure DLA Aviation logistics operations and acquisition personnel:

  • coordinate and pursue restitution from contractors that provide defective parts;
  • adequately search DoD’s inventory to identify and remove defective parts;
  • return defective parts to responsible contractors for replacement;
  • track the status of defective parts shipped back to contractors and ensure that appropriate restitution is provided in the form of replacement parts; and
  • review all stock numbers with associated product quality deficiency reports closed from January 2014 through November 2015 where DLA’s investigation concluded that the contractor provided defective parts, take prompt action to pursue and obtain appropriate restitution, and remove all defective parts from the DoD supply system.

Management Comments and Our Response

Comments from the Director, DLA Logistics Operations, responding for the Director, DLA, addressed all specifics of the recommendations, and no additional comments are required.


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