Report | Dec. 3, 2019

Audit of the Defense Logistics Agency’s Purchases of Aviation Critical Safety Items DODIG-2020-037

Audit

Publicly Released- December 5, 2019

 

Objective

The objective of this audit was to determine whether Defense Logistics Agency (DLA) personnel properly purchased aviation critical safety items at the DLA Aviation Supply Chain in accordance with DoD guidance.

 

Background

 Aviation critical safety items are parts, assemblies, installation equipment, launch equipment, recovery equipment, or support equipment for an aircraft or aviation weapon system that if they fail or malfunction could cause a catastrophic or critical failure resulting in the loss of or serious damage to the aircraft or aviation weapon system and personal injury or loss of life.

Each Military Department has a Service Engineering Support Activity that is responsible for ensuring the airworthiness of an aviation weapon system, identifying items and products that meet the aviation critical safety item classification criteria, and for qualifying and approving supply sources.

The DLA manages the global supply chain for the Military Services and DLA personnel purchase aviation critical safety items directly from approved sources or from dealers and distributors that agree to obtain the items from approved sources to support the Services’ mission requirements.

The Defense Contract Management Agency (DCMA) is responsible for ensuring the integrity of contractual processes and providing a broad range of contract‑procurement management services, including product inspection, test, or verification to ensure that critical safety items presented for acceptance meet the contract’s technical requirements.

After contract award, the DCMA monitors contractor performance to ensure that cost, product performance, and delivery schedules comply with the contract’s terms and conditions. As part of this effort, the DCMA completes a contract technical review to identify the contract’s quality and technical requirements associated with the item the DLA is purchasing.

In FY 2017, DLA Aviation personnel awarded 11,427 contracts, valued at $423.4 million. The contracts involved 3,978 unique aviation critical safety item stock numbers. From this universe of contracts, we reviewed a nonstatistical sample of 85 contracts, valued at $37.5 million. The contracts involved 81 unique aviation critical safety item stock numbers.

 

 

Finding

We determined that DLA personnel obtained aviation critical safety items in accordance with DoD guidance to meet Service mission requirements for 83 of 85 contracts reviewed, valued at $37.5 million. However, DLA personnel awarded two contracts to sources that the Service Engineering Support Activities did not approve. DLA personnel took corrective actions during the audit, such as notifying the responsible Service Engineering Support Activity and obtaining source approval, screening stock at a DLA Distribution Depot, and alerting customers.

While we determined that the aviation critical safety items obtained met DoD requirements, we also identified weaknesses in the DLA’s controls for 31 contracts awarded to dealers and distributors that could have resulted in the purchase of nonconforming parts. Specifically, DLA personnel did not prepare or issue quality assurance letters of instruction to the DCMA or obtain documentation to trace items to approved sources to validate source approval in accordance with DoD guidance.

The awards to unapproved sources and control weaknesses occurred because DLA officials did not:

• provide adequate procedures and oversight to ensure that personnel accurately completed

                 critical safety items award checklist requirements for all 33 contracts, or

 

• establish a process to ensure that personnel issued internally prepared quality assurance

   letters of instruction to the DCMA and verified the DCMA’s receipt of the instructions for 15 of

   the 33 contracts.

 

In addition, DLA officials did not provide oversight to ensure that DLA business process analyst personnel independently and consistently performed compliance reviews on all aviation critical safety item contracts after contract award. DLA officials cited resource limitations as the reason that the compliance reviews were not conducted on all aviation critical safety item contracts.

 

We also identified deficiencies in the DLA compliance review procedures involving the verification of traceability documentation and the issuance of quality assurance letters of instruction to the DCMA.

Because of the control weaknesses involving issuing quality assurance letters of instruction and obtaining documentation to trace parts to approved sources, the DLA could not validate that approved sources manufactured the critical safety items for 31 contracts awarded to dealers and distributors. Therefore, we obtained inspection and acceptance results from the DCMA for 27 contracts to verify product conformance. We also requested the DLA take additional steps for four contracts to verify product conformance.

Finally, as a result of the control weaknesses over its aviation critical safety item purchases, the DLA could purchase nonconforming parts. A critical safety item malfunction as a result of nonconforming parts could cause a catastrophic or critical failure resulting in the loss of or serious damage to the aircraft or weapon system, threatening the life and safety of the warfighter.

 

Recommendations

We recommend that the DLA Director improve and implement controls over the purchases of aviation critical safety items in the DLA Aviation supply chain. Specifically, we recommend that the Director:

•  establish procedures for the completion and review of DLA critical safety item award   

    checklists and provide oversight and recurring training,

•  improve, implement, and enforce controls over the independent compliance reviews of

    aviation critical safety item contract awards,

•  develop a formalized process to ensure issuance of quality assurance letters of instruction to

    the DCMA for aviation critical safety item contracts and obtain and retain evidence of the

    DCMA’s receipt of the instructions,

•  revise the memorandum of agreement between the DLA and the DCMA to clarify

    responsibilities,

•  review the problems in this report, identify responsible personnel, and initiate as appropriate

    any administrative actions warranted by the review, and

• implement the applicable corrective actions resulting from this report across all DLA

    organizations that purchase aviation critical safety items.

 

Management Comments and Our Response

The DLA Acquisition Director, responding for the DLA Director, agreed with the recommendations, stating that the DLA has taken action or has planned actions to:

• update the critical safety item award checklist and provide procedures and training,

• update technical quality procedures to address the issuance of quality assurance letters of

   instruction to the DCMA and the retention of DCMA receipt acknowledgement,

• improve the critical safety item contract award compliance review process,

• review the deficiencies cited and the involvement and actions of staff to determine if

   individual administrative actions are warranted, and

• direct enterprise‑wide adoption of corrective actions resulting from this audit to all DLA supply

   chains.

The comments from the Director addressed our recommendations; therefore, the recommendations are resolved and will remain open. We will close the recommendations once the Director provides the documentation showing that the actions have been completed. Please see the Recommendations Table on the next page for the status of recommendations.

 

 

This report is a result of Project No. D2018‑D000AG‑0153.000