Watchdog Finds DoD Missed Opportunities for Savings on Spare Parts
If the military starts comparing price tags, taxpayers could save millions
The Department of Defense Inspector General (DoD IG) has found that the Under Secretary of Defense for Acquisition, Technology, and Logistics (AT&L) may have cost the DoD millions of dollars by mismanaging spare parts procurement. AT&L failed to implement recommendations from the Defense Base Realignment and Closure Commission (BRAC) in 2005 to assign responsibility for procuring nearly all of the military’s spare parts to the Defense Logistics Agency (DLA). The BRAC Commission estimated that this consolidation could save $156.8 million per year. As a result of AT&L’s failure, each service or command was ordering independently, leaving the DLA without sufficient resources or knowledge to make cost-effective decisions.
The DoD IG’s examination of the failure to consolidate buying for H-60 helicopter parts raises concerns that money was wasted because the Army, Navy, Air Force, and Special Operations Command (SOCOM) were each ordering their own spare parts. The DoD ordered approximately 2.9 million spare parts for these aircrafts between February 2015 and January 2016. Because a significant portion of these orders were placed by each branch separately rather than through the DLA, the military missed opportunities for efficiency and savings through quantity discounts.
As a result, some offices paid much more than others for the same spare parts. The IG reported that “DoD officials procured the same H-60 spare parts on different contracts, often at different prices, which occurred or potentially occurred in 1,319 instances.” Some of the discrepancies in prices were as large as 414 percent.
By combining some of these orders, the DLA could have saved taxpayers a significant amount of money. The DLA may have had more leverage to compare prices and make deals. For example, DoD IG found the Army paid lower prices for parts when they ordered more.
Although this recent report only draws data from last year, it makes one wonder just how much money the military wasted over the last decade because of AT&L’s inaction. When AT&L fails to follow through with BRAC policies to consolidate its spare parts contracts and purchase orders with the DLA, the military can lose valuable cost-saving opportunities. Moreover, it provides more ammunition for Members of Congress resisting the Department’s request for another BRAC, which the Pentagon estimates could save taxpayers $2 billion per year. By neglecting to implement the common-sense financial policies outlined in BRAC’s recommendations, taxpayers are stuck with the bill for untold millions in unnecessary charges.