Publicly Release: September 21, 2023
Objective
The objective of this audit was to determine whether the Army submitted accurate spare parts forecasts to the Defense Logistics Agency (DLA) in support of planned depot maintenance programs.
Finding
The Army did not submit accurate spare parts forecasts to the DLA. Specifically, in FY 2021 the Army overstated its forecasts for some spare parts by $202 million and ordered $148 million in other spare parts that it did not forecast. In addition, the Army’s spare parts forecast accuracy rate averaged only 20 percent throughout FY 2021.
Army process and system limitations prevented Army personnel from providing an audit trail (documentation) to recreate forecasts, which impeded our ability to identify the root causes for the overstated and understated forecasts. In addition, Army Materiel Command officials did not develop metrics and goals or establish guidance, procedures, controls, and training to ensure that the Army submitted accurate spare parts forecasts to the DLA.
Unreliable spare parts forecasts negatively affect the DLA’s purchase decisions and the Army’s readiness. Specifically, the DLA either buys too many parts, incurring unnecessary inventory costs and tying up funds that could be better spent on higher priorities, or does not purchase enough parts, negatively affecting depot operations and Army readiness.
DLA personnel were unable to identify the total value of the DLA’s excess inventory attributed to inaccurate Army spare parts forecasts. However, our detailed review of the spare parts forecasts for four items determined that inaccurate forecasts resulted in a $517,831 over procurement and one canceled purchase request for $40,810 based on a corrected forecast. In addition, shortfalls in on-hand stock resulted in one depot buying parts to build an unavailable item, costing $2.8 million, to meet operational requirements.
Although we did not audit other Services (Navy, Air Force, or Marine Corps), we analyzed DLA data on other Services’ FY 2021 spare parts forecasts and associated demands. The data showed that other Services also did not submit accurate spare parts forecasts to the DLA. Specifically, in FY 2021 other Services overstated their forecasts for some spare parts by $767 million and ordered $355 million in other spare parts that they did not forecast. In addition, the DLA reported a 20 percent spare parts forecast accuracy rate for all Services.
Recommendations
We recommend that the Under Secretary of Defense for Acquisition and Sustainment require the Services, in coordination with the DLA, to conduct an in-depth review of their respective spare parts forecasting process for DLA-managed items. The review should determine how the Services can improve the process and establish a plan of action with milestones with specific areas for improvement to address the deficiencies identified in this report.
Management Comments and Our Response
The Deputy Assistant Secretary of Defense for Logistics agreed with the recommendations and described actions planned to close the recommendations. The comments addressed our recommendations; therefore, the recommendations are resolved and will remain open. We will close the recommendations once we verify that the information provided and actions taken by management fully address the recommendations.