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PSAD-80-31 1 (1980-02-26)

handle is hein.gao/gaobabags0001 and id is 1 raw text is:                                                          411

                  UNITED STATES GENERAL ACCOUNTING OFFICE
                         WASHINGTON, D.C. 20548

NUMAN NKSOUMIS
   DIVISION
                                               FEBRUARY 26, 1980
     B-197773


     The Honorable Max Cleland0
     Administrator of Veterans Affairs    /6                111647

     Dear Mr. Cleland:

          Subject: r~lanned Expansion of Hines Supply
                   (-Depot Has Not Been Justifiedj(PSAD-80-1). 66
          The Veterans Administration (VA) Supply Service,
     Department of Medicine and Surgery (DM&S), is planning to expand
     the Hines Supply Depot to meet projected inventory increases.
     Provisions for this $8.8 million project are included in VA's
     1981 budget proposal and construction is slated for 1981.

          Having reviewed supporting documents and interviewed VA
     officials, we believe the Department has failed to demonstrate
     that the depot's needs will soon exceed its chpacity or that
     expansion would be the best solution to such a problem.
     Therefore, we recommend deleting the depot expansion project
     from VA's 1981 budget proposal.

          In projecting a need for more space, DM&S neglected to

             --consider the impact of the increased emphasis on the
               Federal Government's buy commercial policy,

             --obtain pertinent information from the VA Marketing
               Center, and

             --use reliable indicators of inventory growth.

     In planning an expansion as the solution to the alleged space
     problem, DM&S neglected to

             --adequately assess alternatives, such as reducing
               inventory levels, leasing space, or reallocating
               inventory, and

             --fully consider important cost factors, such as
               inflation and capital costs.



                                                     (950546)

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