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Photo: US Army

 

Jul 6, 2011By Michael Fabey Aviationweek.com

 

On paper, getting business professionals to manage logistics and related support services seems like a good idea. But as a recent Pentagon Inspector General (IG) investigation shows, the plan can turn into a disaster if government contracting officials are unable to properly supervise those deals.

 

At issue is the Army Aviation and Missile Life Cycle Management Command’s (Amcom) parts and related logistics contracts with Boeing for Apache and Chinook helicopters (Aerospace DAILY, July 29).

 

In its report, the IG identified “pricing problems ... that consistently favored Boeing” and pointed out “AMCOM does not have an experienced cost/price analysis group.”

 

As the IG noted, though, the Army unit started with the best of intentions — its Boeing deals are part of an effort to better control logistics. The unredacted May 3 report was released June 28 by the Project on Government Oversight.

 

“In February 1998, AMC [Army Materiel Command] began an effort to replace its existing materiel management systems with LMP (Logistics Modernization Program System),” the IG says. “Before LMP, AMC relied on a 30-year-old system to manage its logistics operations and supply critical equipment and repair parts to the soldier. The lack of a single, unified supply system across the Army fostered an environment in which numerous organizations developed independent material management systems. As a result, the Army faced serious challenges in managing its supply chain and distribution infrastructure.”

 

As of February 2007, the IG says, LMP managed $4.5 billion worth of inventory, processed transactions with 50,000 vendors, and integrated with more than 80 Defense Department systems. When fully implemented, LMP is expected to include about 21,000 users at 104 locations across the globe, and it will be used to manage more than $40 billion worth of goods and services.

 

The Army’s logistics efforts are mirroring those across the Pentagon. Logistic support services, as a department expense, have been steadily climbing in importance over recent years, ranking second among all defense categories for 2010 with about $7.9 billion in contracts and contract modifications, according to an Aerospace DAILY analysis of contracting data provided by the National Institute for Computer-Assisted Reporting. (See chart p. 6.)

 

Logistics deals surpassed fixed-wing transactions for the first time during the review period over the past decade, the analysis shows. As might be expected, Kellogg Brown and Root Services was the leading contractor with about $2.8 billion in transactions, while Boeing ranked fifth with about $183.7 million in deals.

 

The Defense Department also is focusing on building up logistics in Afghanistan to eliminate transportation costs and ensure contracting money is spent responsibly there, with a focus on its effect on local Afghan communities and culture, according to Pentagon acquisition chief Ashton Carter, speaking during the recent 2011 Defense Logistics Agency Industry Conference and Exhibition.

 

But, the IG warns, “DOD has inadequate policies and procedures addressing the use of DOD inventory before entering into contractor logistics support and performance-based logistics arrangements or contracts.”

 

The Pentagon now says it is “hiring a significant number of contract cost and price analysts,” the IG notes.

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