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Coast Guard Cutters: Actions Needed Now to Ensure Better Management of
Parts and Supplies (Letter Report, 01/24/95, GAO/RCED-95-62).

The Coast Guard does not have the organizational structure or computer
systems necessary to effectively manage its inventory for supporting its
fleet of 240 cutters. As a result, the Coast Guard does not know the
value, type, quantity, and condition of many of the spare and repair
parts in the inventory. Without such information, the Coast Guard cannot
determine whether cutters have a shortage or an excess of parts or
whether the parts are readily available when needed.

--------------------------- Indexing Terms -----------------------------

 REPORTNUM:  RCED-95-62
     TITLE:  Coast Guard Cutters: Actions Needed Now to Ensure Better 
             Management of Parts and Supplies
      DATE:  01/24/95
   SUBJECT:  Military inventories
             Spare parts
             Computer equipment contracts
             Inventory control systems
             Logistics
             Federal supply systems
             Computer software
             Computerized information systems
             Military vessels
IDENTIFIER:  Coast Guard CMplus System
             Coast Guard Logistics Master Plan
             
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Cover
================================================================ COVER


Report to the Chairman and Ranking Minority Member, Subcommittee on
Oversight of Government Management, Committee on Governmental
Affairs, U.S.  Senate

January 1995

COAST GUARD CUTTERS - ACTIONS
NEEDED NOW TO ENSURE BETTER
MANAGEMENT OF PARTS AND SUPPLIES

GAO/RCED-95-62

Coast Guard Cutters Inventory


Abbreviations
=============================================================== ABBREV

  DOT - Department of Transportation
  GAO - General Accounting Office

Letter
=============================================================== LETTER

<RCED>

B-259401

January 24, 1995

The Honorable William S.  Cohen
Chairman, Subcommittee on Oversight
 of Government Management
Committee on Governmental Affairs
United States Senate

The Honorable Carl Levin
Ranking Minority Member, Subcommittee
 on Oversight of Government Management
Committee on Governmental Affairs
United States Senate

Over the last 6 years, we have issued several reports that
highlighted the growth in the amount and costs of inventories at the
Department of Defense and its purchase of unneeded items.\1 The
former Chairman, Subcommittee on Oversight of Government Management,
Senate Committee on Governmental Affairs, asked us to examine the
Coast Guard's inventory management system to identify any wasteful or
inefficient practices that should be changed.  As agreed with the
former Chairman's office, we focused our review on the Coast Guard's
inventory management system for its fleet of 240 cutters (vessels 65
to 399 feet in length)\2 and developed the following specific
questions to guide our review.  First, does the Coast Guard have the
systems needed to effectively manage its inventory of spare and
repair parts and supplies?  Second, if not, what initiatives does the
Coast Guard have under way to improve its inventory management? 


--------------------
\1 Air Force Logistics:  Base Maintenance Inventories Can Be Reduced
(GAO/NSIAD-94-8, Dec.  15, 1993); Commercial Practices:  DOD Could
Save Millions by Reducing Maintenance and Repair Inventories
(GAO/NSIAD-93-155, June 7, 1993); Navy Supply:  Excess Inventory Held
at the Naval Aviation Depots (GAO/NSIAD-92-216, July 22, 1992);
Commercial Practices:  Opportunities Exist to Reduce Aircraft Engine
Support Costs (GAO/NSIAD-91-240, June 28, 1991); Defense Inventory: 
Growth in Ship and Submarine Parts (GAO/NSIAD-90-111, Mar.  6, 1990);
and Defense Inventory:  Growth in Secondary Items
(GAO/NSIAD-88-189BR, July 19, 1988). 

\2 The Coast Guard also maintains inventories to support its aircraft
and small boats.  However, we focused on cutters because the
inventory to support small boats is small compared to the inventory
for cutters and because the Coast Guard has better controls over its
aircraft inventory. 


   RESULTS IN BRIEF
------------------------------------------------------------ Letter :1

The Coast Guard does not have the organizational structure or
computer systems necessary to effectively manage its inventory for
supporting cutters.  As a result, the Coast Guard does not know the
value, type, quantity, and condition of many of the spare and repair
parts in the inventory.  Without such information, the Coast Guard
cannot determine whether cutters have a shortage or an excess of
parts or whether the parts are readily available when needed. 
According to Coast Guard officials, this lack of information has not
seriously affected the Coast Guard's ability to carry out its
missions, but it has resulted in costly emergency purchases and
excess inventory. 

The Coast Guard recognizes these problems and has taken or plans to
take actions to improve its inventory controls between now and fiscal
year 2002.  For example, the Coast Guard expects to have a
centralized system to track its cutter inventory; a single source of
accountability for all fleet logistics; and a consolidated
maintenance, technical, and supply organization.  However, milestone
dates have slipped for some initiatives.  We agree with the direction
of the Coast Guard's long-term initiatives but believe that interim
steps can achieve some immediate efficiencies and inventory savings
and enhance the potential for the successful completion of the Coast
Guard's long-term initiatives to improve its inventory controls. 


   BACKGROUND
------------------------------------------------------------ Letter :2

To establish and manage its inventories, the Coast Guard must comply
with the criteria contained in federal property management
regulations and with the Department of Transportation's (DOT) policy. 
Federal property management regulations state that each agency shall
establish and maintain control of inventories to ensure that total
costs will be kept to a minimum consistent with the needs of the
agency's programs.  DOT's policy states that inventories will be
established and maintained only when it is more costly to purchase
items on a case-by-case basis or when the items are so critical that
a delay in delivery would negatively affect an agency's mission.  The
policy also states that inventories must be managed in an effective
manner to ensure that timely and adequate support is rendered and
that optimum inventory levels are maintained. 

Within the Coast Guard, supply centers located at Curtis Bay and
Baltimore, Maryland, stock about 18,000 different parts, including
mechanical, electrical, radar, communication, computer, and hull
items; these parts are valued at about $140 million.\3 In addition,
the Coast Guard authorizes each cutter to maintain a parts and
supplies inventory that ranges in value from a few thousand dollars
to over a million dollars, depending on the cutter's size, missions,
and operating area.\4 However, individual purchases are restricted to
established price thresholds that vary, depending on the cutter's
class; the thresholds range up to $5,000 for large cutters.  (Table
II.1 lists the 41 different classes of Coast Guard cutters.) For
example, the cutters usually purchase such items as nuts and bolts,
valves, seals, gaskets and other minor repair parts with their
operating budgets.\5

According to Coast Guard officials, about 55 percent of the cutters'
parts and supplies are purchased directly from commercial contractors
and about 45 percent are purchased from the federal supply system. 
The cutters' purchases from the federal supply system are divided
between orders from the two Coast Guard supply centers and orders
from other government agencies.  Such other agencies as the Defense
Logistics Agency; the Departments of the Army, Navy, and Air Force;
and the General Services Administration fill about 90 percent of
orders for parts from the federal supply system, while the Coast
Guard's two supply centers in Maryland fill the remaining 10 percent. 
Since storage space is limited on most vessels, cutters also store
some of their parts at individual onshore storage facilities,
including movable storage in tractor trailers, as well as at typical
warehouse-type buildings. 


--------------------
\3 Curtis Bay stocks about 25,000 additional items to support the
overhaul of vessels at its shipyard.  These 25,000 items are worth
about $30 million. 

\4 The Coast Guard estimates that the individual cutters' inventory
is worth approximately $200 million. 

\5 The cutters' inventories also contain expensive parts that exceed
the price thresholds, but Coast Guard headquarters or the Maintenance
and Logistics Commands generally purchase these parts for the
cutters. 


   THE COAST GUARD DOES NOT HAVE
   EFFECTIVE INVENTORY CONTROLS
------------------------------------------------------------ Letter :3

The Coast Guard does not have the organizational structure or
computer systems necessary to effectively manage its parts and
supplies inventory for its cutters.  As a result, the Coast Guard
does not know the value, type, quantity, and condition of many of the
spare and repair parts in the overall inventory.  In addition, the
Coast Guard does not know whether cutters have a shortage or an
excess of parts or whether the parts are available when needed. 


      FRAGMENTED ORGANIZATIONAL
      STRUCTURE IMPEDES EFFECTIVE
      INVENTORY MANAGEMENT
---------------------------------------------------------- Letter :3.1

Management responsibilities for buying, storing, issuing, and
tracking parts and supplies in the Coast Guard's inventories are
spread across various internal and external organizations.  For
example, the Maintenance and Logistics Commands at Alameda,
California, and Governors Island, New York, manage the parts used
during overhauls of cutters; the Coast Guard's two supply centers in
Maryland manage the unique parts needed by the cutters they support;
and individual cutters manage parts they need to keep them
operationally ready.  However, no one organization or individual is
responsible for consolidating inventory data and tracking the type,
quantity, condition, or value of the Coast Guard's total cutter
inventory. 


         MANAGEMENT STRUCTURE
         RESULTS IN POOR INVENTORY
         DISTRIBUTION
-------------------------------------------------------- Letter :3.1.1

The Coast Guard's fragmented management structure also limits the
agency's ability to determine whether cutters have a shortage or an
excess of parts and whether the parts are readily available when
needed.  We found, for example, that one cutter had 34 excess fuel
injector nozzles (above its allowance of 16 nozzles), which cost
about $580 each, and two excess starters (above its allowance of one
starter), which cost approximately $6,600 each.  During our visits to
other cutters, we noted many other such excess items as drill
presses, main engine cylinder heads, insulation, computer monitors,
and galley equipment.  Supply officials on the cutters told us that
the excesses in their inventories were the result of several factors. 
For example, sometimes cutters procured larger quantities than needed
to take advantage of volume discounts.  However, if the Coast Guard
centrally managed--at headquarters, a Maintenance and Logistics
Command, or a supply center--the total cutter inventory, wherever
located, it might be able to transfer excess items to cutters that
have shortages of those items.  For example, the Atlantic Coast
Maintenance and Logistics Command purchased more than 15 new starters
in 1 year, while one cutter had 2 excess starters in its inventory. 

Despite these excesses, officials responsible for the individual
cutters' inventories told us that they also had shortages of parts. 
For example, one cutter had parts shortages totaling $250,000 for
such electronic items as circuit boards for radar and communication
systems.  According to these officials, these kinds of shortages
occurred primarily because funding was not available to replenish the
cutters' parts or because the required parts were never issued when
the cutters were first commissioned.  If the Coast Guard centrally
managed its total cutter inventory, some of these shortages might
have been filled with excess items from other vessels' inventories. 
The cutter officers noted, however, that although the shortages had
not significantly affected their missions, they had resulted in
costly emergency purchases that would not have been necessary if the
parts had been in the cutters' inventories, as required. 


         INVENTORY ITEMS NOT
         AVAILABLE WHEN NEEDED
-------------------------------------------------------- Letter :3.1.2

During our visits, we found that many items in the cutter inventories
were not available to the vessels when they were at sea.  Each of the
cutters we visited stored a portion of its inventory in its own
individual onshore storage facility.  Since no one was available to
issue parts from these individual storage facilities when the cutters
were at sea, these inventories were not fully utilized.  We noted
such useful items as valves, filters, engine and hydraulic oil,
mooring lines, and damage control equipment--fire hoses and nozzles,
submersible pumps, shoring, plugs, and oxygen canisters--in the
individual onshore facilities. 

Unlike the Coast Guard, the Navy stores parts for its ships in
centralized base supply centers and does not maintain individual
onshore storage facilities for its ships.  According to Navy
officials, the centralized base supply centers provide more effective
support than individual storage facilities because personnel are
available at the centers to issue parts to the ships whenever the
parts are needed.  The centers can, for example, send the needed
parts to ships at sea via another ship or an aircraft.  When a Coast
Guard cutter is at sea, no one is available to issue parts from the
cutter's individual onshore storage facility.  According to Coast
Guard officials, the agency is studying the use of regional support
centers, but it does not expect to consolidate the individual onshore
storage facilities before fiscal year 2002, when it expects to have
total "visibility"\6 of its cutters' individual inventories. 


--------------------
\6 Total visibility is defined as tracking parts and supplies, which
are stored at several different locations, in one central computer
system. 


      LACK OF CENTRALIZED COMPUTER
      SYSTEM HAMPERS INVENTORY
      MANAGEMENT
---------------------------------------------------------- Letter :3.2

The Coast Guard uses several different systems to manage the cutters'
individual inventories.  For example, during our visits to nine
cutters, we observed a manual and three different computerized
inventory control systems.  However, the three automated systems that
we observed could not exchange data with each other or with the
systems at headquarters, the Maintenance and Logistics Commands, or
the supply centers. 

To help ensure effective inventory management and to distribute parts
more efficiently, the Coast Guard plans to implement a single
automated system, CMplus, on its 101 largest cutters.  The Coast
Guard expects this system to integrate inventory and maintenance
information into a larger fleet logistics system that will enable
cutter crews to share data with each other, headquarters, the
Maintenance and Logistics Commands, and the supply centers by the
year 2002.  According to Coast Guard officials, they expect to spend
over $27 million to install the CMplus system on the cutters. 

Although we agree with the goals of the CMplus system, the Coast
Guard can take interim actions to enhance the distribution of its
inventory between now and the year 2002, when CMplus will be fully
implemented.  For example, the Coast Guard can utilize the most
widely used, existing inventory system to enhance the distribution of
parts by sending the inventory information to headquarters and to the
Maintenance and Logistics Commands for analysis.  In 1993, Coast
Guard headquarters and one Maintenance and Logistics Command analyzed
the inventories held by all of the 270-foot cutters.  Because all 13
of these cutters used the same computer system, the Coast Guard was
able to consolidate their inventory data.  The data showed that the
13 cutters had more than $11 million worth of excess parts in their
inventories and that $3 million of the excess could be redistributed
among the cutters to offset their parts allowance shortfalls and
reduce future acquisitions. 

The Coast Guard incurred minimal time and costs (less than 1 staff
year) to perform the analysis because all of the 270-foot cutters had
conducted full physical inventories of their parts and supplies and
implemented a computerized inventory control program.  Moreover, the
payoff was significant and could be increased if the Coast Guard
conducted similar analyses for most other classes of cutters because
they have also already conducted full physical inventories when they
implemented their computerized inventory control systems. 

Although such analyses could greatly improve the distribution of
parts and supplies, they could not themselves ensure the optimal
distribution of inventories for two reasons.  First, because the
cutters cannot directly transmit inventory data to the Maintenance
and Logistics Commands conducting the analysis, the consolidated
inventory information would not be current when the cutters began to
redistribute their parts.  Second, the Maintenance and Logistics
Command conducted the redistribution study on a single class of
cutters because conducting a fleetwide study would have taken much
longer using current computer resources.  If future analyses are
conducted for only one class of cutter at a time, parts and supplies
will not be redistributed between classes.  When the Coast Guard's
fleet logistics system is implemented, it will deal with these two
limitations of the current system. 


   COAST GUARD'S INITIATIVES OFFER
   FEW SHORT-TERM SOLUTIONS
------------------------------------------------------------ Letter :4

In 1993, the Coast Guard issued its Logistics Master Plan.  The plan
addresses numerous issues--for example, the Coast Guard's lack of
central management for the cutter inventories.  The plan includes
short-term actions that the Coast Guard expected to complete by
fiscal year 1994, mid-term actions to be completed by fiscal year
1997, and 26 long-term actions that the Coast Guard expected to
complete by the end of fiscal year 2002. 

Although we agree with the plan's direction, we found that some
initiatives are already behind schedule, increasing the potential for
delays in the Coast Guard's long-term efforts to centrally manage its
inventories by fiscal year 2002.  (App.  I lists some of the
initiatives that are in progress or planned.)

Coast Guard officials told us that before the agency can centrally
manage its inventory, they must complete the following long-term
initiatives in the Logistics Master Plan: 

Develop a fully integrated, real-time computer system to track and
consolidate inventory and maintenance information for the cutters. 

Create a single organization to integrate the maintenance guidance,
technical, and supply functions now performed by headquarters and the
two inventory supply centers. 

Designate an official to be responsible for all fleet logistics. 

We found that the completion of these and many other long-term
initiatives in the plan are contingent upon the Coast Guard's
successfully completing numerous near- and mid-term initiatives. 
However, the Coast Guard has already experienced schedule slippages
with some of the near- and mid-term initiatives begun in 1993 and
1994.  For example, the Coast Guard had expected to implement the
following new initiatives: 

A computerized inventory control system, CMplus, on the first cutter
of the 378-foot class by the end of 1993.  However, the system will
not be operational until December 1994 (a 1-year delay) because of
such operational commitments as transporting Haitian and Cuban
refugees.  According to officials, CMplus is a critical part of the
Coast Guard's long-term initiative to develop a fully integrated,
real-time system to track and consolidate inventory and maintenance
data for its cutters. 

A computer system at Curtis Bay by the fourth quarter of fiscal year
1994.  However, the Coast Guard does not expect to have the system
fully implemented until the third quarter of fiscal year 1996 (almost
a 2-year delay) because of a 1-year delay in the award of the
hardware contract and because of software development problems. 
According to officials, this system is needed to enable the Coast
Guard to track and consolidate inventory and maintenance data for the
cutters. 

Centralized shoreside support for its 110-foot cutters (49 vessels)
by fiscal year 1996.  The Coast Guard now expects to have this new
management structure by fiscal year 1998 (a 2-year delay).  Until
that time, according to officials, the Coast Guard cannot centrally
manage its cutter inventories because it does not have visibility of
the inventories. 


   CONCLUSIONS
------------------------------------------------------------ Letter :5

The $140 million inventory held at the Coast Guard's two supply
centers does not reflect the agency's total investment in spare and
repair parts for its cutters.  The Coast Guard does not know the
type, quantity, condition, or total value of its total inventory of
parts and supplies for its cutters.  However, the Coast Guard
estimates that it has additional inventory worth approximately $200
million stored onboard its cutters and in the cutters' individual
onshore storage facilities.  Although Coast Guard officials contend
that the agency's lack of information on parts and supplies has not
significantly affected the Coast Guard's mission, it has resulted in
inefficient management of resources.  Consequently, the agency cannot
minimize the cost of its total inventory as required by federal
property management regulations and DOT's policy. 

In addition, the Coast Guard does not expect to complete its
integrated system to enhance the use and distribution of its
inventory until the year 2002.  Yet delays of as much as 2 years for
some early initiatives raise concerns that the Coast Guard will not
meet its targeted completion date.  Since the Coast Guard may take
many years to improve its inventory management system, some actions
now could help alleviate shortages and excesses and help the Coast
Guard better utilize its inventories. 


   RECOMMENDATIONS
------------------------------------------------------------ Letter :6

To enable the Coast Guard to manage its cutter inventories more
effectively between now and when the Logistics Master Plan is fully
implemented, we recommend that the Secretary of Transportation direct
the Coast Guard Commandant to take the following interim actions: 

Make the use of the current automated inventory control program
mandatory on all cutters that have sufficient computer hardware and
have not implemented CMplus, consolidate and analyze inventory data
for each class, and redistribute excess parts from additional cutter
classes as warranted. 

Where economically feasible, consolidate at regional support centers
those cutter inventories that are located at individual onshore
storage facilities, particularly where several cutters from the same
class are clustered or where the cutters' individual onshore storage
facilities are housed within a single building. 

Move up the implementation date for the Coast Guard's initiative to
establish a single source of accountability for all fleet logistics. 
This action will allow the Coast Guard to better coordinate interim
actions to improve management of its cutter inventories while the
fleetwide logistics system is being developed. 


   AGENCY COMMENTS AND OUR
   EVALUATION
------------------------------------------------------------ Letter :7

We discussed this report with the Coast Guard's Chief, Logistics
Management Division, Office of Engineering, Logistics, and
Development, and with other program officials, and we have
incorporated their comments as appropriate.  These officials
generally agreed with our findings and recommendations. 


---------------------------------------------------------- Letter :7.1

We conducted our work between November 1993 and December 1994 in
accordance with generally accepted government auditing standards. 
Our objectives, scope, and methodology are discussed in appendix II. 

We are sending copies of this report today to the Secretary of
Transportation; the Commandant, Coast Guard; and the Director, Office
of Management and Budget.  We will make copies available to others
upon request. 

This work was performed under my direction.  If you have any
questions, I can be reached at (202) 512-2834.  Major contributors to
this report are listed in appendix III. 

Kenneth M.  Mead
Director, Transportation Issues


THE COAST GUARD'S INITIATIVES
=========================================================== Appendix I

The Coast Guard's Logistics Master Plan sets out short-, mid-, and
long-term objectives to improve the agency's inventory controls by
fiscal year 2002.  This appendix provides (1) a brief description of
the major initiatives related to central management of the Coast
Guard's inventories and (2) the status of the initiatives that were
scheduled for completion in fiscal years 1993 and 1994. 


   NEAR-TERM, FISCAL YEARS 1993
   AND 1994
--------------------------------------------------------- Appendix I:1

The Coast Guard relocated the Brooklyn, New York, supply center to
Baltimore in 1993, as planned.  This action was the first step toward
the Coast Guard's creating a single organization to integrate the
maintenance, technical, and supply functions now performed by
headquarters and the two inventory supply centers. 

The Coast Guard designated one Maintenance and Logistics Command to
be responsible for an entire class of cutters, regardless of their
home ports, including the development of a maintenance plan that
lists the minimum information needed for a major overhaul or minor
repairs at shipyards and bases.  This initiative helped Curtis Bay to
increase the availability of parts for 270-foot cutters from 65
percent in March 1992 to 94 percent in March 1994.  In addition, the
Coast Guard developed improved maintenance plans and long-range
forecasts for its 210-, 180-, 157-, and 140-foot cutters in 1993 and
1994, as scheduled. 

The Coast Guard implemented a central supply department on its
378-foot cutters in 1992 and on its 399- and 270-foot cutters in
1993, as scheduled.  Previously the Coast Guard maintained
department-level inventories on these cutters that resulted in
duplicate procurements, excess spare parts, reduced storage
capacities, and longer casualty response times, according to Coast
Guard officials.  The new centralized supply departments have helped
to alleviate many of these problems because all of the cutters' parts
information is located in one data base.  Centralization of parts
information also helps to save space on the cutters because duplicate
parts that were previously stocked by more than one department are
readily visible and can either be used, transferred, or scrapped. 
Finally, a central supply department increases operational readiness
because procurements are coordinated across departments, making more
effective use of available spare parts funding. 

The Coast Guard implemented an automated system, CMplus, to integrate
shipboard supply and maintenance information on three of its cutters. 
According to Coast Guard officials, this system will be the
cornerstone of its centralized fleet logistics system.  The Coast
Guard implemented the system on 1 of its 210-foot cutters (a class of
16 vessels), 1 of its 270-foot cutters (a class of 13 vessels), and 1
of its 378-foot cutters (a class of 12 vessels) in 1994.  The Coast
Guard had placed a prototype CMplus system on a 140-foot cutter in
1992 and had expected to implement the system on its eight remaining
140-foot cutters by the fourth quarter of 1994, but this date has
slipped to fiscal year 1997. 

The Coast Guard had expected to purchase the hardware to replace its
supply center computers in the fourth quarter of fiscal year 1993. 
Although the agency has purchased developmental hardware for the new
system, procurement of the new production hardware is now scheduled
for the third quarter of fiscal year 1995.  This purchase is a key
step in instituting the standardized fleet logistics system that the
Coast Guard expects to have fully operational by the year 2002. 

The Coast Guard had expected to develop the software for its new
supply center computer system by the end of 1994.  Although the Coast
Guard wants to get the new system on line as quickly as possible, the
projected date for the initial software has slipped to the third
quarter of 1996 because of technical difficulties and a delay in
purchasing the needed hardware. 


   MID-TERM, FISCAL YEARS 1995
   THROUGH 1997
--------------------------------------------------------- Appendix I:2

Develop improved maintenance plans and long-range spare parts
forecasts for the 110-foot cutters. 

Implement a central supply department on the 210-, 140-, and 110-foot
cutters and study the feasibility of implementing it on smaller
cutters and bases. 

Analyze the feasibility of transferring management of such consumable
items as nuts, bolts, and bearings to the Defense Logistics Agency. 

Install the new automated inventory control system on the remaining
270-foot cutters and on the 399-foot cutters. 

Implement building block, software application groups for a
standardized fleetwide logistic system.  The application groups will
include maintenance planning, scheduling, funds management, parts
tracking, contract management, supply performance measures, and cost
analysis. 


   LONG-TERM, FISCAL YEARS 1998
   THROUGH 2002
--------------------------------------------------------- Appendix I:3

Install the new automated inventory control system on the remainder
of the 378-foot and 210-foot cutters and on the 110-foot cutters. 

Integrate maintenance, technical, and supply functions, which are now
performed by headquarters and the two supply centers, into a central
engineering logistics center at Curtis Bay. 

Designate a single official responsible for all logistics. 

Complete procurement of both the hardware and software for the
standardized fleet logistics system and implement the remaining
software application groups, including customer service, technical
information, and equipment management.  The Coast Guard expects that
this system will integrate shipboard logistics systems with shoreside
systems so that the supply centers will have information about the
cutters' inventories, equipment usage, and costs. 


OBJECTIVES, SCOPE, AND METHODOLOGY
========================================================== Appendix II

The former Chairman, Subcommittee on Oversight of Government
Management, Senate Committee on Governmental Affairs, asked us to
examine the Coast Guard's inventory management system to identify any
wasteful or inefficient practices that should be changed.  As agreed
with the former Chairman's office, we focused our review on the Coast
Guard's inventory management system for its 240 cutters (vessels 65
to 399 feet in length) and developed the following specific questions
to guide our work.  First, does the Coast Guard have the systems
needed to effectively manage its inventory of spare and repair parts
and supplies?  Second, if not, what initiatives does the Coast Guard
have under way to improve its inventory management?  In preparing
this report, we reviewed federal property management regulations (41
C.F.R.  101); the Department of Transportation's Order 4420.5,
Management of Material Inventories; and the Coast Guard's Supply
Policy and Procedures Manual. 

To determine the cost effectiveness of the Coast Guard's inventory
management systems, we met with officials from the Coast Guard's
supply centers at Baltimore and Curtis Bay, Maryland, and reviewed
their instructions, notices, and video tapes related to inventory
management and supply support.  We also reviewed Curtis Bay's Supply
Activity Reports for 1989 through 1993 and its list of inventory
items for the 378-, 270-, and 210-foot cutters.  We also met with
officials from headquarters; the Maintenance and Logistic Command for
the Atlantic Fleet; the Coast Guard District Five Office and the
Naval Engineering Support Unit in Portsmouth, Virginia; the Coast
Guard Group/Air Station in Cape May, New Jersey; and individual
cutters. 

Using the Coast Guard's register of cutters, we selected a judgmental
sample of cutters to visit.  Because of the large number of Coast
Guard cutters (240), we defined our sample in three ways.  First, we
selected only cutters that were at least 82 feet long because larger
cutters typically hold more inventory than smaller cutters.  Second,
we visited only cutters that had at least five ships in the class
because we wanted the cutters to be typical of the largest number of
cutters possible.  Finally, when two or more classes existed for
vessels of the same length and type (i.e., 210-foot, medium endurance
cutters, 210A and 210B), we visited only one cutter from the combined
classes because the cutters in the combined classes were still very
similar to each other.  Table II.1 lists the type, class, and number
of Coast Guard cutters.  Table II.2 lists the name, type, location,
and size of each of the nine cutters we visited.  The classes of the
nine cutters account for 178 of the Coast Guard's 240 cutters. 



                          Table II.1
           
             Type, Class, and Number of the Coast
                     Guard's 240 Cutters

Type                               Class              Number
--------------------  ------------------  ------------------
High endurance                       378                  12
Icebreaker
                                     399                   2
                                     290                   1
Icebreaking tug                      140                   9
Medium endurance
                                    270A                   4
                                    270B                   9
                                     230                   1
                                     213                   3
                                    210A                   5
                                    210B                  11
                                     180                   1
Patrol boat
                                    110A                  16
                                    110B                  21
                                    110C                  12
                                     82A                   1
                                     82C                  33
                                     82D                   7
Harbor tug
                                     65A                   6
                                     65B                   3
                                     65C                   3
                                     65D                   2
Seagoing buoy tender
                                    180A                   9
                                    180B                   2
                                    180C                  15
Coastal buoy tender
                                     157                   5
                                     133                   6
Inland buoy tender
                                    100A                   1
                                    100C                   1
                                   65303                   2
                                   65400                   2
River buoy tender
                                     115                   1
                                     75C                   5
                                     75E                   4
                                     75F                   2
                                      65                   6
Construction tender
                                     160                   4
                                     100                   3
                                     75A                   2
                                     75B                   3
                                     75D                   4
Training cutter                      295                   1
Total                                                    240
------------------------------------------------------------


                          Table II.2
           
            Name, Location, Type, and Size of Nine
                       Cutters Visited

Name           Type           Location
-------------  -------------  -------------  ---------------
USCGC Red Oak  Buoy tender    Philadelphia,     157 feet
                              Pa.

USCGC          High           Governors         378 feet
Gallatin       endurance      Island, N.Y.

USCGC          Medium         Cape May,         210 feet
Vigorous       endurance      N.J.

USCGC          Buoy tender    Cape May,         180 feet
Hornbeam                      N.J.

USCGC Point    Patrol boat    Cape May,          82 feet
Franklin                      N.J.

USCGC          Patrol boat    Cape May,         110 feet
Matinicus                     N.J.

USCGC White    Buoy tender    Boston, Mass.     133 feet
Heath

USCGC Thunder  Icebreaking    Newport, R.I.     140 feet
Bay            tug

USCGC LeGare   Medium         Portsmouth,       270 feet
               endurance      Va.
------------------------------------------------------------
To determine the Coast Guard's initiatives related to its inventory
controls, we reviewed the Coast Guard's 1993 Logistics Master Plan. 
We also obtained information on the actions that the Coast Guard had
undertaken that were not part of the Logistics Master Plan, such as
the Supply Center Information Systems Plan and user manuals for the
computerized inventory systems used on the Coast Guard's larger
cutters.  We met with headquarters, supply center, and Maintenance
and Logistics Command officials who were responsible for these
initiatives to determine their status and obtain clarification on the
benefits expected.  (App.  I describes some of the initiatives and
their status.)


MAJOR CONTRIBUTORS TO THIS REPORT
========================================================= Appendix III

RESOURCES, COMMUNITY, AND ECONOMIC
DEVELOPMENT DIVISION, WASHINGTON,
D.C. 

Gerald Dillingham, Associate Director
Mary Ann Kruslicky, Assistant Director
Steven R.  Gazda, Assignment Manager

NATIONAL SECURITY AND
INTERNATIONAL AFFAIRS DIVISION,
WASHINGTON, D.C. 

M.  Glenn Knoepfle, Adviser
Michael J.  Ferren, Evaluator-in-Charge