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GAO-06-739R 1 (2006-06-19)

handle is hein.gao/gaocrptatnq0001 and id is 1 raw text is: SGAO , , Accountability - Integrity* Reliability United States Government Accountability Office Washington, DC 20548 June 19, 2006 The Honorable John Warner Chairman The Honorable Carl Levin Ranking Minority Member Committee on Armed Services United State Senate The Honorable Duncan L. Hunter Chairman The Honorable Ike Skelton Ranking Minority Member Committee on Armed Services House of Representatives Subject: Defense Management: Attention Is Needed to Improve Oversight of DLA Prime Vendor Program In fiscal year 2005, prime vendor sales accounted for approximately $9 billion of the Defense Logistics Agency's (DLA)' total sales and service of $32 billion. Under the prime vendor concept, the Department of Defense (DOD) relies on a distributor of a commercial product line, who provides that product line and incidental services to customers in an assigned region or area of responsibility. Products or services are to be delivered within a specified period of time after order placement. Since 1991, we have identified the use of prime vendors as a best commercial practice for inventory management.2 Nonetheless, media reports in October 2005, and a hearing before the House Armed Services Committee on November 9, 2005, raised concerns about the use of the prime vendor concept and the prices that DLA was paying for items acquired through a prime vendor. The use of prime vendor contracts is governed by the Federal Acquisition Regulation (FAR) and the Defense Federal Acquisition Regulation Supplement. DLA manages 'DLA is DOD's largest combat support agency, providing worldwide logistics support in both peacetime and wartime to the military services as well as several civilian agencies and foreign countries. 2GAO, Defense Inventory: Opportunities Exist to Expand the Use of Defense Logistics Agency Best Practices, GAO/NSIAD-00-30 (Washington, D.C.: Jan. 26, 2000). A best commercial inventory practice is defined in The National Defense Authorization for Fiscal Year 1998 as a practice that enables the agency to reduce inventory levels and holding costs while improving the responsiveness of the supply system to user needs. GAO-06-739R Defense Management

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