Objective
Our objective was to evaluate whether the Navy cost effectively managed material requirements for the AN/SPY–1 Phased Array (SPY–1) radar systems.
Finding
The Navy did not cost effectively manage spare-part requirements for the SPY–1 radar variants installed on the Arleigh Burke–class destroyers. Specifically, from October 2012 through September 2014, the Navy did not use 250 of 374 parts that it determined were critical, acquired 32 of 124 parts in excess of their authorized stock levels, and for 26 of 124 parts, the quantities were below the authorized levels.
This occurred because the Navy used ineffective forecasting methods to determine the type and quantity of parts needed to sustain the systems. In addition, the Navy did not adequately monitor and revise the authorized stock levels to more accurately reflect actual parts used.
As a result, the Navy purchased and stocked parts valued at $71.8 million that were not needed. Of those stocked parts, the Navy could remove $36.5 million worth of excess parts from the destroyers and put storage space to better use. In addition, the Navy could save $59.6 million if it used excess parts that are not unique to SPY–1 radar to offset the procurement of other weapon system future part requirements, and the Navy may save additional cost by either reselling or disposing unneeded parts that
are unique to the SPY–1 radar. The Navy has potentially adversely impacted the destroyer’s mission readiness, unless those parts can be readily obtained when needed from other sources.
Recommendations
We recommended the Commander, Naval Supply Systems Command, in coordination with the Commander, Naval Sea Systems Command, compare the authorized stock levels of forecasting models to the actual parts used and take appropriate action to determine future needs. After the action is taken, conduct annual reviews for parts identified by the forecasting models to ensure the authorized stock levels remain consistent with actual parts needs and report the results separately for each subsystem.
Among other recommendations the Type Commanders should monitor the authorized stock levels and submit a request for approval to revise the levels to reflect actual usage and require personnel to identify excess when they conduct annual inventories of parts and turn in all parts identified as excess. If the parts are determined no longer needed and cannot be used, dispose of the parts.
Management Comments and Our Response
The Assistant Secretary of the Navy for Research, Development and Acquisition addressed all specifics of
Recommendations 1.a, 1.b, and 2.a and partially addressed those for Recommendation 2 .b. In addition, as a result of management comments, we renumbered Recommendation 2.c. as 1.c. and redirected the recommendation to the Commander, Naval Supply System Command and Commander, Naval Sea System Command. Therefore, we request that the Commanders provide comments to this report by December 7, 2015.