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Consolidation Needed for Procurements of DoD H-60 Helicopter Spare Parts(Redacted)

DODIG-2017-002

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Oct. 12, 2016 — Objective

We determined whether DoD was effectively managing the procurement of H-60 helicopter (H-60) spare parts. The Army, Navy, Air Force, and U.S. Special Operations Command all fly different versions of the H-60 for troop transport and personnel recovery.  We reviewed H-60 spare parts procured on 2,136 DoD contracts and purchase orders from February 2015 through January 2016. During this time, DoD procured 10,047 unique spare parts.  DoD spent at least $394.9 million on H-60 spare parts.

Finding

DoD did not effectively manage the procurement of H-60 spare parts. Specifically, DoD did not consolidate its purchase of 2.9 million H-60 spare parts to maximize its market leverage, such as receiving quantity discounts.  The lack of consolidation occurred because the Office of the Under Secretary of Defense for Acquisition, Technology, and Logistics did not ensure that the Army, Navy, U.S. Special Operations Command, and Special Operations Forces Support Activity fully executed Base Realignment and Closure Act 2005 Recommendation 176 by transferring H-60 spare parts procurements to the Defense Logistics Agency (DLA). Recommendation 176 directed the Military Services to use DLA as the single, integrated procurement manager for spare parts, but that did not occur.   In addition, DLA did not appropriately consolidate its H-60 spare parts procurements where practicable. Section 2384a, title 10, United States Code requires, where practicable, agencies to procure supplies in quantities that will result in the total and unit cost most advantageous to the United States.  However, DoD officials procured the same H-60 spare parts on different contracts, often at different prices, which occurred or potentially occurred in 1,319 instances.

Recommendations

We recommend that the Under Secretary of Defense for Acquisition, Technology, and Logistics perform a cost-benefit analysis to determine whether the procurement responsibility for all H-60 spare parts, including those procured under performance-based logistics and contractor logistics support contracts, should be transferred to DLA, as originally required by Base Realignment and Closure Act 2005 Recommendation 176.  If the Under Secretary determines that H-60 spare parts procurement responsibility should be transferred to DLA, DoD should review and update its policy regarding spare parts procurements.  If DoD determines it should not transfer the procurement responsibility to DLA, it should notify Congress of its decision and justification.

We also recommend that the Director, DLA, collect and analyze data related to the contracts and purchase orders used to procure H-60 spare parts and take steps to consolidate these procurements where practicable to take advantage of quantity discounts and reduce administrative costs.

Management Comments and Our Response

The Acting Assistant Secretary of Defense for Logistics and Material Readiness, responding for the Under Secretary of Defense for Acquisition, Technology, and Logistics, did not address the specifics of the recommendations to perform a cost-benefit analysis, review and update DoD policy, and notify Congress if needed.  The Acting Assistant Secretary stated that Base Realignment and Closure Act 2005 Recommendation 176 does not apply to performance-based logistics and contractor logistics support contracts.  In addition, cost-benefit analyses are required prior to the award of a performance-based logistics and contractor logistics support contract. The Under Secretary of Defense for Acquisition, Technology, and Logistics does not plan to conduct a DoD-wide cost-benefit analysis or notify Congress that it will not transfer the procurement responsibility to DLA.  We request that the Acting Assistant Secretary provide additional comments to describe what actions will be taken to perform a cost-benefit analysis and determine whether the procurement responsibility for all H-60 spare parts, including those procured under performance-based logistics and contractor logistics support contracts, should be transferred to DLA.  Based on those actions, the Under Secretary of Defense for Acquisition, Technology, and Logistics should review and update DoD policy and notify Congress if needed.

The Director, DLA Acquisition, responding for the Director, DLA addressed all specifics of the recommendation to collect and analyze data related to H-60 spare parts contracts and purchase orders and take steps to consolidate spare parts procurements. No further comments are required.