Report | June 15, 2022

Audit of the Reuse of Defense Logistics Agency Disposition Services Excess Property (DODIG-2022-105)

Audit

Publicly Released: June 16, 2022

 

Objective

The objective of this audit was to determine whether DoD Components used excess Defense Logistics Agency (DLA)-managed property to fill existing needs (known as reutilization) before initiating new procurements for the same items.

 

Background

The DLA is the nation’s combat logistics support agency for the Military Services, combatant commands, other Federal agencies, and partner nations. When DoD Components have property they no longer need, they provide that excess property to the DLA. Within the DLA, DLA Disposition Services receives and processes the excess property for reuse or disposal. DLA Disposition Services provides visibility and promotes maximum reuse of excess property.

DoD Components may reuse excess property from DLA Disposition Services at little to no cost to the receiving activity. Reusing excess property reduces the need to purchase new items. DoD and Service‑specific policy promote the maximum reuse of excess property to satisfy requirements before purchasing new property.

DLA Disposition Services screens incoming excess property and maintains information about the excess property in its inventory management system—the Distribution Standard System. Once the excess property is in DLA Disposition Services inventory, the DLA redistributes the property through reuse, transfer, donation, sale, or destruction within a 42-day window.

We reviewed DLA Disposition Services reuse and redistribution data for DLA‑managed items in serviceable, like-new condition but not reused by DoD Components during 2020. Our analysis of the reuse and redistribution data identified the items DoD Components could have reused but did not. We focused our review on the Military Services and identified whether the Military Services purchased these same items new from the DLA when the items were available for reuse from DLA Disposition Services. Therefore, we reviewed DLA sales to the Military Services from November 1, 2019, through January 31, 2021. Our analysis of this sales data identified new purchases by the Military Services from the DLA for the same items that were available for reuse at DLA Disposition Services.

 

Finding

In 2020, the Military Services reused 166,421 items, valued at $18.1 million, from excess property inventory in serviceable, like-new condition at DLA Disposition Services. The Military Services could have avoided purchasing up to an additional 132,838 DLA‑managed items, valued at $5.2 million, by reusing serviceable, like-new property already available at DLA Disposition Services.

The Military Services did not reuse up to 132,838 serviceable, like-new excess property because DLA Disposition Services and the Military Services did not sufficiently:

  • promote awareness of excess property available at DLA Disposition Services although DoD policy required the DLA to promote awareness and DoD Components to maximize reuse of excess property, or
  • address ordering personnel concerns about condition code accuracy and serviceability of the excess property at DLA Disposition Services.

In addition, the Military Services did not reuse property available from DLA Disposition Services because the Military Services and DLA systems did not communicate with each other. The lack of interoperability between the systems required ordering personnel to check and place orders for DLA Disposition Services property manually, which discouraged the reuse of excess property.

As a result of not reusing available excess property from DLA Disposition Services, the Military Services wasted up to $5.2 million by purchasing items that they could have obtained at little to no cost. Reusing serviceable, like-new property from DLA Disposition Services rather than initiating new purchases allows the Military Services to allocate funds to other critical areas and demonstrates good stewardship of taxpayer money.

 

Recommendations

We recommend that the Director of the DLA, in coordination with DLA Disposition Services:

  • Promote excess property reuse by establishing and offering periodic educational sessions with Military Department headquarters and Military Service activities.
  • Develop a process to track condition code inaccuracies for technical and non-technical items. Periodically summarize inaccurate condition codes and report the inaccuracies to Military Department headquarters and Military Service activities.
  • Consider that the requirements for the replacement system include a capability to assist ordering personnel in identifying opportunities to reuse available excess property from DLA Disposition Services.

We recommend that Headquarters officials in the Army, Navy, and Air Force:

  • Reinforce and periodically communicate to ordering activities DoD and Service-specific policies to promote maximizing reuse and DLA Disposition Services reuse resources.
  • Establish a process to ensure that activity ordering personnel comply with DoD and Service‑specific policy for completing reuse training, including ensuring that all staff complete the training, and newly-hired ordering personnel are trained on the reuse of excess property within a few months of starting their duties.
  • Reinforce DoD and Service-specific policy and guidance on proper assignment of condition codes when turning property in to DLA Disposition Services.
  • Collaborate with DLA Disposition Services to identify and implement training, educational sessions, or another solution to improve condition code accuracy for items the Military Services turn in to DLA Disposition Services.
  • Establish an internal control mechanism such as monitoring or periodic assessments to ensure assignment of accurate condition codes on turn‑in documentation.
  • Review the DLA Disposition Services report on inaccurate condition codes and take action to identify why the inaccurate condition codes occurred and to mitigate future inaccurate condition code assignments.

 

Management Comments and Our Response

The Deputy Director, DLA Logistics Operations, responding on behalf of the DLA Director, agreed that the DoD should maximize the reuse of excess property. The Deputy Director disagreed with two recommendations and agreed with one recommendation. The comments from the Deputy Director did not fully address the intent of two recommendations and addressed the intent of one recommendation. Two recommendations are unresolved and open, and one recommendation is resolved and open.

The Acting Deputy Chief of Staff, Army G-4, agreed with the need to maximize the reuse of DLA excess property held at DLA Disposition Services but disagreed with the recommendations. The comments from the Acting Deputy Chief of Staff did not address the intent of the recommendations. All of the recommendations are unresolved and open.

The Acting Deputy Chief of Staff disagreed with the potential monetary benefits calculation and stated that the analysis did not take into account the location of the demand versus the location of supply, distribution costs, or readiness impacts.

We acknowledge that the analysis did not take into account the location of the demand versus the location of the supply, distribution costs, or readiness impacts; however, we identified throughout the report that the $5.2 million in missed reuse opportunities may be lower based on mission, schedule, or cost exceptions for reusing excess property. While exceptions to reusing property from DLA Disposition Services do exist, our analysis identified that the Army had an additional 250,398 opportunities across 4,640 activities to reuse excess property but did not.

The Deputy Chief of Naval Operations for Fleet Readiness and Logistics agreed with all six recommendations. The comments from the Deputy Chief addressed the intent of one recommendation and did not address the intent of five recommendations. One recommendation is resolved and open and five recommendations are unresolved and open.

The Assistant Deputy Chief of Staff for Logistics, Engineering, and Force Protection for the Air Force agreed with all six recommendations. The comments from the Assistant Deputy Chief of Staff addressed the intent of four recommendations and did not address the intent of two recommendations. Four recommendations are resolved and open and two recommendations are unresolved and open.

For the recommendations that are resolved and open, we will close them once management provides documentation demonstrating that it has implemented the presented actions. For the unresolved recommendations, we request that management provide comments on this final report.

 

This report is the result of Project No. D2021-D000RK-0069.000.