June 24, 2015 —
The objective of the audit was to determine whether DoD effectively managed Government-owned V-22 spare parts before procuring the same parts from private contractors and whether DoD properly accounted for Government-owned V-22 inventory managed by private contractors.
The Defense Logistics Agency (DLA) Aviation did not effectively manage Government-owned V-22 Osprey spare parts. For 22 of 53 spare parts that we nonstatistically selected for review, DLA Aviation retained spare-parts inventory that was excessive.
This occurred because DLA Aviation:
- did not evaluate the reasonableness of V-22 Osprey spare-parts inventory quantities, and
- forecasted and purchased excessive inventory of V-22 Osprey spare parts.
As a result, DLA Aviation retained excessive inventory valued at $8.7 million. In addition, it will cost DLA Aviation approximately $0.7 million in holding costs over the next 5 years to store and retain the excessive inventory.
We recommend that the Director, DLA:
- evaluate the reasonableness of V-22 Osprey spare-parts inventory quantities to ensure they do not retain or procure excessive inventory;
- review inventory identified as economic retention stock and contingency retention stock and determine whether it was properly categorized. In addition, document its retention and approval decisions, if applicable; re-categorize the inventory, as appropriate; and initiate the review and disposal process for V-22 Osprey spare parts categorized as potential reutilization stock; and
- establish a plan for conducting periodic reviews of forecasting results to ensure DLA Aviation officials do not purchase excessive V-22 Osprey spare-parts inventory.
Management Comments and Our Response
The Executive Director, Support, DLA Logistics Operations, responding for the Director, DLA, partially addressed the recommendations in the draft report. We request that the Director provide comments on the final report. Please see the Recommendations Table on the next page