A recent survey conducted by the Inspector General of the Department of Defense, titled “Office of Inspector General Spare-Parts Inventory Audit,” yielded one clear result: There’s an abundance of inventory. It was found that the Department of Defense has an excess inventory of spare parts that are currently valued in excess of $1 billion. In addition, it undervalued its inventory on its recent annual financial statements by more than $1.65 billion.
Why Spare Parts Matter
These findings from the DoD audit may put government contractors and future projects in jeopardy. Many contractors are unaware of what a lack of proper asset tracking can mean to their bottom lines, but for the Department of Defense, it means a great deal of financial loss. As a result, a trickle-down effect could impact a contractor’s ability to do business with the Defense Department.
The survey provided some incredible insight into the lack of management and tracking within the DoD. A few key results of this report include:
- In 33 of the 36 reports issued on spare-parts inventory, the study found the Department of Defense ineffectively managed its inventories. These 36 reports were conducted since 1999.
- The survey found the Department of Defense did not review its existing sources, and, as a result, it did not enforce inventory reduction before it decided to buy more.
- It did not verify properly that specific requirements were put in place for weapons systems. There was no control over what was to be on hand, what was available, or what was necessary for these massive systems.
The recommendation from the survey was simple in terms of the ultimate goal. It recommends that the organization put in place a specific process for managing and accounting for all government-owned spare parts, including inventory that is controlled directly by government contractors.
What Is the Importance of Tracking and Accountability?
While no specific changes are in place as of yet resulting from this survey, it is clear that government agencies, including the Pentagon, will begin paying closer attention to whom they work with as well as what types of spare parts will be on hand. As a result, proper tracking and accountability on the part of government contractors will become even more important.
- Tracking ensures spare parts, which are not necessarily wasted, are on hand when a need arises for them.
- Tracking ensures the government agencies know exactly where to find such parts down to the specific shelf or building in which they are stored when a time comes to use them.
- Spare parts management simply saves money. There is little benefit in buying the same item several times because of a lack of inventory control.
When proper tracking is in place, a streamlined back-end process is the result. In short, tracking makes it possible to run clean audits of Pentagon programs. This minimizes the risk of complications later on, especially when contractors are working toward new projects and missions.
How Can Government and Contractors Improve Accountability?
Tracking is not an option; it is a requirement. The DoD has been requiring Item Unique Identification (IUID) since 2004. IUID compliance requires that all tangible assets owned by the DoD to be marked with a unique serialized identification number that is then sent to the IUID Registry.
This recent Audit by the Inspector General highlights the lack of tracking and asset management of current DoD inventory. The defense community is paying more and more attention to IUID compliance and the importance of reporting new end items and property to the iRAPT system. The consequences of non-conformance to these regulations may result in loss of contracts.
Let the experts at A2B Tracking help you meet these IUID requirements and properly manage and track your assets. Call today and find out how we can help your organization track your assets effectively and ensure regulatory compliance.