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the Reconstitution of its Afloat Prepositioned Stocks' which was 
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February 8, 2008: 

The Honorable Ike N. Skelton: 
Chairman: 
Committee on Armed Services: 
House of Representatives: 

The Honorable Solomon P. Ortiz: 
Chairman: 
Readiness Subcommittee: 
Committee on Armed Services: 
House of Representatives: 

Subject: Defense Logistics: Army Has Not Fully Planned or Budgeted for 
the Reconstitution of Its Afloat Prepositioned Stocks: 

At various stages throughout the current operations in Iraq and 
Afghanistan, the Army has withdrawn equipment from its stored, or 
prepositioned, stock sets around the world, as well as from its afloat 
stocks, thus depleting a large portion of its prepositioned 
stocks.[Footnote 1] The Army prepositions equipment at diverse 
strategic locations in order to field combat-ready forces in days 
rather than the weeks it would take if equipment had to be moved from 
the United States to the location of the conflict. The Army 
Prepositioned Stocks (APS) program supports the National Military 
Strategy and is an important part of the Department of Defense's (DOD) 
overall strategic mobility framework. The APS program depends on 
prepositioned unit sets of equipment and sustainment stocks to enable 
troops to deploy rapidly and train with prepositioned equipment before 
beginning combat operations. As we testified in January 2007 and March 
2006, however, sustained continuing operations have taken a toll on the 
condition and readiness of military equipment, and the Army faces a 
number of ongoing and long-term challenges that will affect both the 
timing and cost of equipment repair and replacement, particularly to 
its prepositioned stocks.[Footnote 2] 

Over the past several years, GAO and other audit agencies have reported 
on numerous long-standing problems facing DOD's and the Army's 
prepositioning programs, including a lack of centralized operational 
direction; unreliable reporting on the maintenance condition of 
equipment; equipment excesses at some prepositioned locations; and 
systemic problems with requirements determination and inventory 
management. In September 2005, we recommended that DOD develop a 
coordinated departmentwide plan and joint doctrine for the department's 
prepositioning programs.[Footnote 3] In February 2007, we reported that 
while the Army expected to finalize its implementation plan for 
prepositioning stocks[Footnote 4] by December 31, 2006, DOD would not 
complete its departmentwide strategy before mid-April 2007.[Footnote 5] 
We recommended that the Secretary of Defense direct the Secretary of 
the Army to take steps to synchronize the Army's prepositioning 
strategy with the DOD-wide strategy, to ensure that future investments 
made for the Army's prepositioning program would align with the 
anticipated DOD-wide prepositioning strategy. In addition, the John 
Warner National Defense Authorization Act for Fiscal Year 2007[Footnote 
6] required the department to establish a departmentwide prepositioning 
strategic policy by April 2007. 

The 2007 Authorization Act[Footnote 7] also directs the Secretary of 
Defense to take necessary steps to ensure that financial resources are 
provided to reconstitute equipment and materiel in prepositioned stocks 
in accordance with the requirements under the APS Strategy 2012 or 
subsequent strategy. Additionally, the act directs the Secretary to 
include in the budget justification materials a clear and detailed 
description of the amounts requested for reconstitution of equipment 
and materiel in prepositioned stocks. The National Defense 
Authorization Act for Fiscal Year 2008[Footnote 8] directs DOD to 
submit an annual report on the status of materiel in the prepositioned 
stocks, including the department's timeline and funding requirements 
for reconstituting shortfalls in prepositioned stocks. The act also 
directs DOD to report on any operations plans affected by any shortfall 
in the prepositioned stocks and any action taken to mitigate any risk 
that a shortfall may create. 

The APS program encompasses three categories of stocks stored at land 
sites and aboard prepositioning ships: combat brigade sets,[Footnote 9] 
war reserve sustainment stocks,[Footnote 10] and operational project 
stocks.[Footnote 11] APS equipment sets are referred to according to 
numerical designations of 1 through 5, corresponding to their 
locations. The Army has primarily depended on two APS sets for 
operations in Iraq and Afghanistan--APS-3, which is equipment 
prepositioned on ships, or "afloat"; and APS-5, which is the equipment 
prepositioned in Southwest Asia. APS-5 has been depleted and 
reconstituted several times over during the course of these operations. 
In December 2006, the Army decided to remove equipment and supplies 
from its APS-3 prepositioned sets stored on ships in order to 
accelerate the creation of two additional brigade combat teams[Footnote 
12] by April 2008.[Footnote 13] Army officials determined that using 
equipment from other APS sets, such as APS-4 and APS-5, to satisfy 
these equipment requirements was not a viable option because of the 
risks involved in Northeast Asia and ongoing operations in Southwest 
Asia. Some members of Congress have expressed concerns, however, about 
the potential effect of the Army's decision to deplete the equipment 
stocks from these ships and the risk that DOD may be unprepared for a 
conflict elsewhere in the world. Prepositioned stocks are critical 
enablers to DOD's military strategy, and they help ensure that the 
military has materiel and equipment available for rapid deployment 
should future conflicts erupt. 

At the request of the Chairman, House Committee on Armed Services, and 
the Chairman, Subcommittee on Readiness, House Committee on Armed 
Services, we have reviewed the above issues. For this report, our 
objectives were to identify (1) the Army's strategy for reconstituting 
the prepositioned equipment sets worldwide, and how this strategy fits 
into broader DOD-wide strategies; and (2) the extent to which the 
Army's APS reconstitution strategy is reflected in current defense 
budget requests and cost estimates for restoring the prepositioned 
equipment sets to a posture that fully supports DOD's strategy for 
future employment. On August 14, 2007, we briefed your offices on our 
preliminary observations. Subsequent to this briefing we obtained 
additional information from the Army and DOD regarding the Army's 
prepositioning strategy and the status of the DOD-wide strategy. This 
report updates and summarizes the information discussed in that 
briefing. You also asked us to identify (1) what factors the Army and 
DOD considered in deciding to remove the Army's prepositioned equipment 
sets afloat to accelerate the creation of two additional brigade combat 
teams; and (2) DOD's and the Army's process for analyzing and 
mitigating risks in the event that another conflict occurs elsewhere. 
These two additional objectives will be addressed in a separate 
classified report. 

Our audit work focused on the Army's strategy for reconstituting the 
prepositioned equipment sets worldwide and how this strategy fits into 
broader DOD-wide strategies; and the extent to which this strategy is 
reflected in current defense budget estimates and cost estimates for 
restoring prepositioned equipment. To identify the Army's strategy and 
determine how this strategy fits into broader DOD-wide strategies, we 
interviewed officials from key DOD and Army organizations, including 
the Office of the Under Secretary of Defense, Logistics and Materiel 
Readiness Program Support; Office of the Under Secretary of Defense, 
Acquisition, Technology, and Logistics; the Army Materiel Command; the 
Army Office of Program, Analysis, and Evaluation; Office of Army Deputy 
Chief of Staff, Logistics; and the Office of Army Deputy Chief of 
Staff, Force Development. To determine how the Army's strategy is 
reflected in current defense budget estimates and cost estimates for 
restoring prepositioned equipment, we reviewed cost estimates and 
fiscal year 2007 and fiscal year 2008 budget requests provided by the 
Army Budget Office, and we discussed how reconstitution strategies are 
reflected in future budget requests with officials from the Army Office 
of Program, Analysis, and Evaluation; Office of Army Deputy Chief of 
Staff, Logistics; and Office of Army Deputy Chief of Staff, Force 
Development. We conducted this performance audit from March 2007 
through February 2008 in accordance with generally accepted government 
auditing standards. Those standards require that we plan and perform 
the audit to obtain sufficient, appropriate evidence to provide a 
reasonable basis for our findings and conclusions based on our audit 
objectives. We believe that the evidence obtained provides a reasonable 
basis for our findings and conclusions based on our audit objectives. 

Findings: 

Army officials stated that its worldwide APS equipment sets, including 
APS-3, would be reconstituted in synchronization with the Army's 
overall equipping priorities when properly funded and in accordance 
with the official Army worldwide APS reconstitution strategy known as 
Army Prepositioned Strategy 2015 (APS Strategy 2015).[Footnote 14] 
According to DOD officials, the Army's equipping priorities will be 
based on evolving conditions and operations such as the availability of 
equipment and duration of operations in Iraq and Afghanistan, for 
example. As of December 2007, the Army had not established its overall 
equipping priorities. Additionally, the Army's APS reconstitution 
strategy is not correlated with a DOD-wide APS strategy, because, 
according to DOD officials, a DOD-wide prepositioning strategy does not 
exist. DOD officials explained that the services are responsible for 
equipping strategies and that the Joint Staff, consistent with current 
policy, conducts assessments of the services' prepositioned programs to 
determine their relationship within the DOD-wide strategic context. DOD 
officials do not believe additional synchronization of strategies is 
required. According to DOD, the War Reserve Materiel Policy[Footnote 
15] provides ample policy guidance on war reserve materiel requirements 
and war reserve materiel positioning while the allocation process is 
outlined in the Joint Strategic Capability Plan.[Footnote 16] DOD 
officials believe publication of the War Reserve Materiel Policy and 
Joint Strategic Capability Plan satisfies the congressionally mandated 
requirement contained in the John Warner National Defense Authorization 
Act for Fiscal Year 2007.[Footnote 17] Nonetheless, as we recommended 
in our September 2005[Footnote 18] and February 2007 reports,[Footnote 
19] a DOD-wide strategy would set direction and a shared foundation for 
the services' prepositioning programs. Synchronizing a DOD-wide 
strategy with the Army's prepositioning strategy would ensure that 
future investments made for the Army's prepositioning program would 
align with the anticipated DOD-wide strategy. Without a DOD-wide 
prepositioning strategy, DOD risks inconsistencies between the Army's 
and the other services' prepositioning strategies, which may result in 
duplication of efforts and resources. We continue to believe a DOD-wide 
strategy is needed in addition to broad strategic guidance. 

We could not determine the extent to which the Army's APS 
reconstitution strategy is reflected in current defense budget requests 
and cost estimates for restoring the prepositioned equipment sets to a 
posture that fully supports DOD's strategy for future employment 
because Army officials could not provide a breakdown of the $3.3 
billion cost estimate to reconstitute APS-3 requested in the fiscal 
year 2007 supplemental budget. Army officials also stated that full 
implementation of APS Strategy 2013[Footnote 20] would total somewhere 
between $10.6 billion and $12.8 billion throughout the 2008 Program 
Objective Memorandum (POM), which includes requests for 5 years beyond 
the current fiscal year 2008 budget request. The fiscal year 2008 POM 
estimates include about $3.6 billion for procurement; $4.2 billion for 
operations and support; and $2.8 billion for war reserve secondary 
items. Army officials stated that the fiscal year 2008 POM does not 
include requests for APS reconstitution costs, but that the fiscal year 
2010 POM will likely include a request for APS reconstitution. 
According to Army officials, the fiscal year 2007 supplemental APS 
budget funded the removal of equipment from APS-3. However, the Army's 
fiscal year 2008 budget requests for the care and maintenance of this 
equipment were not adjusted to reflect the fact that the equipment was 
no longer included in the prepositioned set. Furthermore, future budget 
requests for reconstitution of the APS equipment sets are difficult to 
distinguish because they may also include funding for other equipment- 
related budget requests, including Army modularity,[Footnote 21] 
modernization,[Footnote 22] and equipment reset,[Footnote 23] or 
requests to fill equipment shortages. According to Army officials, the 
Army programming and budget process does not treat APS funding as a 
discrete entity. Funds are often moved into and out of APS operation 
and maintenance accounts depending on Army funding priorities. Because 
operation and maintenance funds are fungible, the Army can move funds 
to respond to changes in readiness and operational environments. Army 
officials stated that separating APS requirements from other 
requirements in budget requests is complicated, and they do not plan to 
track APS execution separately. In addition, under the Army Force 
Generation (ARFORGEN) model,[Footnote 24] once the equipment from APS- 
3 has been removed from the ships, the equipment becomes part of the 
Army's reset and training pool.[Footnote 25] Equipment within this pool 
will be reset and, accordingly, funded with reset funding. Without 
clearly identifying APS reconstitution requirements, however, the Army 
cannot ensure that it can provide sufficient funding, and Congress 
cannot be assured it has the visibility it needs for its decision- 
making process. 

We are not making any recommendations at this time as DOD has not yet 
implemented the recommendation from our September 2005 report[Footnote 
26] to develop a coordinated departmentwide plan and joint doctrine for 
the department's prepositioning programs. While DOD partially concurred 
with our prior recommendation to develop a coordinated DOD-wide plan, 
it had not done so as of December 21, 2007. We continue to believe our 
recommendation has merit and that DOD should develop a departmentwide 
prepositioning plan. 

Agency Comments: 

While DOD did not provide any overall reactions to a draft of this 
report, they did provide written technical comments. We have 
incorporated those comments throughout the report as appropriate. 

We are sending copies of this report to the appropriate congressional 
committees, the Secretary of Defense, and the Secretary of the Army. We 
will also make copies available to others upon request. In addition, 
this report will be available at no charge on the GAO Web site at 
[hyperlink, http://www.gao.gov]. 

If you or your staff has questions, please contact me at (202) 512-8365 
or solisw@gao.gov. Contact points for our Offices of Congressional 
Relations and Public Affairs may be found on the last page of this 
report. GAO staff who made major contributions to this report are 
listed in enclosure I. 

Signed by: 

William M. Solis: 

Director: 

Defense Capabilities and Management: 

[End of section] 

Enclosure I: GAO Contact and Staff Acknowledgments: 

GAO Contact: William M. Solis, (202)512-8365 or solisw@gao.gov: 

Acknowledgments: In addition to the contact named above, David A. 
Schmitt, Assistant Director; Donna M. Rogers; Christopher Turner; and 
Cheryl Weissman made key contributions to this report. 

[End of section] 

Footnotes:  

[1] The Army prepositions stocks primarily at land sites in Europe, 
Northeast Asia, Southwest Asia, and aboard ships afloat near Guam and 
Diego Garcia. During the initial stages of Operation Iraqi Freedom, the 
Army primarily used prepositioned stocks afloat (APS-3) and from 
Southwest Asia (APS-5). 

[2] GAO, Defense Logistics: Preliminary Observations on the Army's 
Implementation of Its Equipment Reset Strategies, GAO-07-439T 
(Washington, D.C.: Jan. 31, 2007), and Defense Logistics: Preliminary 
Observations on Equipment Reset Challenges and Issues for the Army and 
Marine Corps, GAO-06-604T (Washington, D.C.: Mar. 30, 2006). 

[3] GAO, Defense Logistics: Better Management and Oversight of 
Prepositioning Programs Needed to Reduce Risk and Improve Future 
Programs, GAO-05-427 (Washington, D.C.: Sept. 6, 2005). 

[4] The revised Army Prepositioned Stock (APS) Strategy 2013 superseded 
Army Prepositioned Stock (APS) Strategy 2012. 

[5] GAO, Defense Logistics: Improved Oversight and Increased 
Coordination Needed to Ensure Viability of the Army's Prepositioning 
Strategy, GAO-07-144 (Washington, D.C.: Feb. 15, 2007). 

[6] Pub. L. No. 109-364, 351 (2006). See also 10 U.S.C. 2229 and the 
accompanying note. 

[7] Pub. L. No. 109-364, 323 (2006). 

[8] The National Defense Authorization Act for Fiscal Year 2008, Pub. 
Law No. 110-181,  352 (2008), was passed as we prepared to issue this 
report. 

[9] Combat brigade sets are designed to support 3,000 to 5,000 soldiers 
and include heavy weaponry such as tanks, support equipment such as 
trucks, and spare parts to support the early stages of a conflict. 

[10] War reserve sustainment stocks include items to sustain the battle 
until stocks can be resupplied and war reserve secondary items such as 
rations, clothing, medical supplies, and repair parts. 

[11] Operational project stocks include authorized materiel above unit 
authorizations designed to support Army operations and contingencies 
and equipment and supplies for Special Forces operations and mortuary 
operations, among others. 

[12] Brigade combat teams are combat maneuver brigades that will have a 
common organizational design and are intended to increase the 
rotational pool of ready units. Modular combat brigades have one of 
three designs--heavy brigade, infantry brigade, or Stryker brigade. 

[13] The April 2008 deployment date is based on the Army's overall 
rotation schedule for moving units in and out of Iraq. 

[14] In November 2007, the Army leadership approved APS Strategy 2015 
which superseded APS Strategy 2013. APS Strategy 2015 is similar to APS 
Strategy 2013 but also includes a Light Infantry Battalion and some 
Motorized Augmentation Sets. 

[15] DoDD 3110.6, War Reserve Materiel Policy (Nov. 9, 2000). 

[16] The Joint Strategic Capability Plan apportions resources to the 
combatant commanders. It covers a 2-year period and provides strategic 
guidance to the combatant commanders, Joint Chiefs of Staff members, 
and heads of defense agencies and departments. This is a classified 
document, which we were unable to review. 

[17] Pub. L. No. 109-364, 351 (2006). See also 10 U.S.C. 2229 and the 
accompanying note. 

[18] GAO-05-427. 

[19] GAO-07-144. 

[20] Updated budget requests for APS Strategy 2015 were not available 
because the budget requests were still under review when the new 
strategy was approved. 

[21] Modularity costs are defined as the increased costs of equipment 
due to changing authorizations associated with standardization of units 
to the modular configuration. 

[22] Modernization encompasses replacing older systems with more 
capable systems. 

[23] Reset is the cost to replace, recapitalize, and repair equipment 
in order to restore units to a level of combat capability required for 
future missions. 

[24] The ARFORGEN model is designed to generate trained and ready 
forces to meet global demands. 

[25] Under ARFORGEN, units proceed through three pools of unit 
readiness: (1) reset and train; (2) ready; and (3) available. 

[26] GAO-05-427.

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