Navy, Air Force spare-parts crisis

September 30, 2000

An internal Pentagon report says that Clinton-era changes to the
Department of Defense accounting and inventory procedures have
“virtually eliminated war reserve levels of spare parts for both the
Navy and the Air Force,” reversing a decade-long effort of steady
investment in vital military components.

The report, dated May 11, says “despite … current initiatives” that
were only implemented last budget year to remedy the Pentagon’s spare
parts problems, “the [Defense Department] is likely to face parts
challenges for the foreseeable future.”

Released from the office of the director for Readiness Programming
and Assessment, the eight-page report said “spare parts shortages have
been a major factor in lower reported equipment levels, particularly in
… aviation communities, for the last five to seven years.”

A high-level Pentagon source, who spoke on condition of anonymity,
told WorldNetDaily that though other “peace dividend reductions” were
originally implemented in 1989, “from then until 1991, readiness was not
affected.”

The report said that while more money has been added to the Defense
budget to resolve the spare parts problem, the “funds have not added to
the overall stockage level, but rather prevented the inventory from
shrinking further. In effect, we are purchasing more parts in order to
maintain the current inventory level,” which has shrunk.

“New [military] missions added are now part of the baseline
requirement,” the Pentagon official said, “but there is no room to fund
real readiness improvements unless the top line is increased or the
missions decrease.”

The report “documents large reductions in [the Pentagon’s] overall
spare parts inventory since the early ’90s,” as well as “a number of
business practice changes that … reduced our ability to monitor spare
parts inventories and forecast problems.”

Spare parts problems will continue, the report said, because “many of
the root causes of the current situation have not been remedied.”

The report said the Defense Department’s current spare parts
inventory is valued at $64 billion, up from its 1980 level of $43.4
billion — the final budget year of the Carter administration’s “hollow
military” years, analysts said.

By 1989, however, the Pentagon’s spare parts inventory had climbed to
$109.4 billion “primarily due to an expanded force structure and a
concerted effort to increase spare parts.” After the department
initiated “a series of business and financial management reforms” to
comply with the Pentagon’s “Base Force” restructuring plan, “the
Department established a plan to reduce ‘excess’ inventories.”

“In the early ’90s, Congress quickly added to this movement by
imposing legislative constraints on what the Department could purchase
for its wholesale inventory,” the report said.

In 1990, Congress imposed a 90 percent material replacement
limitation, followed by an 80 percent limitation in 1991. But from 1992
to 1995, Congress imposed a 65 percent material replacement level.

At the same time, throughout the Clinton-Gore administration,
military deployments and missions have more than doubled from deployment
levels seen in the 15 years between the U.S. exit from South Vietnam and
the end of the Cold War 11 years ago.

“Because of these initiatives, the DOD spare parts inventory, when
adjusted for price changes, has been reduced in the last decade by
approximately 50 percent for both wholesale (depot level) and retail
(held at the local base) levels,” said the report.

“The reduction virtually eliminated war reserve levels of spare parts
for both the Navy and Air Force and lowered the amount (retention
levels) for slow moving or inactive inventory,” the report said.

“There were $7 billion in ‘peace dividend’ savings generated from
1992 to 1994,” the Pentagon official said, “and about $9 billion since
then from operation purposes, including drug-war missions, increases in
peacekeeping, counterintelligence” and other frontline and
combat-oriented missions.

“The administration has ordered all these new missions without
increasing the ‘top line’ of the DOD’s budget.”

The root causes of the Pentagon’s spare parts and readiness problems
“were generally good ideas,” the official said, “but they were used to
justify taking far more funding than they saved.”

The report said Clinton administration officials at the Pentagon
changed the re-supply and spare parts inventory systems from one of
actively keeping necessary stockpiles of highly used spare parts to a
“just-in-time” delivery system used by corporate America to keep its
inventories low.

But as parts suppliers go out of business or stop manufacturing spare
parts because they are no longer getting orders for them, as well as
other business reasons, “wholesale levels [of inventory] have not been
increased accordingly,” the report said.

Maintenance level changes also initiated during the Clinton-Gore
administration have caused “long delays in unit stock replacement,
weapon systems down awaiting parts, and costly supply and maintenance
actions such as cannibalization, parts expediting [paying more for
overnight deliveries, for example], and local procurement/repair,” the
report said.

Other accounting gimmicks made the spare parts and inventory supply
systems dependent on “financial management of the stock fund” while
“judgments on the adequacy of spare parts requirements” became less
dependent on “logistics measures and readiness requirements,” said the
Pentagon document.

The report also cited other factors “exacerbating” the spare parts
shortages:

Diminishing manufacturing sources: With the end of the Cold War,
worldwide the defense industry has downsized, meaning the Pentagon has a
problem finding replacement parts for older weapons systems. “Because
the services are often not aware of the discontinuance of an item until
the manufacturer has made the decision, the services are often in a
reactive mode with limited options for addressing the problem,” the
report said.
Aging weapons systems: Aging systems have added support costs to
the Pentagon’s budget. “The aging of the DOD weapons systems, especially
aircraft, will continue to present material readiness challenges for the
Department until the next generation systems are purchased and fielded,”
said the report.
Skill and knowledge drains: For the past 10 years, the Pentagon
has dramatically decreased its military and civilian workforce. “Many
of these downsizing efforts … were directed at the Department’s
support functions, such as logistics and supply, and have left skill
shortages or imbalances in these areas.”

“If you’re going to play fast and loose with the numbers — if that’s
what’s going on here — or if you’re going to try some sort of
harebrained reforms that aren’t going to work, don’t do it in an area of
defense spending that you’re about to severely tax,” said Eric Schlect,
director of congressional relations for the

National Taxpayer’s
Union.

Schlect, who analyzed the report, said that the added weight of additional military deployments ordered by the Clinton administration —

coupled with inappropriate Defense Department expenditures — have contributed greatly to an overall decrease in military readiness.

“Who knows how much the administration knew about the extra deployments they have ordered before they actually ordered them? They must have known about some of them and they probably knew they had no intention of pulling troops out of existing deployments. But if you know about them — and that’s going to severely tax your spare parts — don’t start messing with spare parts and taking monies away from them,” Schlect said.

“If you need the money … take it from somewhere you can afford it,” he added, “especially for frivolous social programs.”

The Defense Department failed to return repeated calls seeking comment on the report and about the current state of spare parts readiness within the service branches.

The hardest hit over the last several years of decreasing spare parts funding has been the Pentagon’s aviation branches. According to the report, the Air Force has especially suffered.

“The largest [parts budget increases] were in the Air Force spare parts accounts,” the report said, but “even with this increase, the Air Force is projecting only a modest increase (3-5 percent) [in] aircraft mission capable rates.”

The report said “some evidence” suggested the Air Force’s spare parts shortages were easing, “but not significantly so.” Also, “the current forecast is for the Air Force MC (mission capable) rates to remain below the levels experienced five years ago.

“The Air Force arguably has the largest spare parts problem, but the remedies proposed to date will, at best, only solve part of the problem,” the Pentagon document said.

The Army, meanwhile, said it expects easing in its spare parts problems but “this seems to be in direct contrast to the Army’s recent experience with its rotary wing fleet and the M1A2 tank, where there have been notable reliability problems,” the report said.

Further, the report said, the number of Army systems “not meeting supply availability goals” has increased “notably” in the past year, and the service has “identified a $250 million unfunded shortfall in its unit stocks.”

The status of spare parts in the Navy is “unclear,” the report said, though “with a replacement rate of only 75 percent in FY2000, Navy spares inventory can be expected to continue to shrink.”

“Many Navy aviation units continue to ‘bowwave’ (defer) spare parts requirements late in the fiscal year due to lack of funding,” said the report, which added that the Navy “identified $174 million in unfunded initial spares … requirements to Congress for the FY2001 budget.”

The Marine Corps “is not experiencing significant spare parts shortages as seen in the other services,” said the report, which did not address spare parts levels in the Coast Guard.

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