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DOD Inspector General finds $900M stockpile of Stryker parts

A U.S. Stryker vehicle rolls down a farm road near Khan Bani Sa'ad Iraq on March 1, 2008.

TACOMA, Wash. — The Army program charged with keeping thousands of eight-wheeled Strykers running over the past decade had its eye so much on wars in Iraq and Afghanistan that it neglected to keep its books.

It accumulated nearly $900 million worth of Stryker replacement parts — most of them in an Auburn, Wash., warehouse — with much of the gear becoming outdated even as the military continued to order more equipment, according to a Defense Department Inspector General report released late last year.

Take, for instance, the $57 million worth of obsolete infrared equipment the Army has not installed in Strykers since 2007. It lingered at the Stryker warehouse until the Inspector General called attention to it last year.

Or, the 9,179 small replacement gears called pinions the Army bought as a temporary fix for a Stryker suspension problem that surfaced between 2007 and 2009. The Army took care of the root malfunction in 2010, but kept buying pinions.

It needed only 15 of the gears. The 9,164 extra pinions are worth $572,000, the Inspector General reported.

The off-the-books equipment piled up in a sort of Army accounting netherworld.

Neither the Army Stryker Project Management Office in Michigan nor Stryker manufacturer General Dynamics took ownership of the equipment once it was delivered to the Auburn site, with each party believing that accounting was the other’s responsibility.

The Stryker Project Management Office was in the wrong, the investigators wrote, leading to poor oversight of a growing equipment inventory. “This is very concerning,” said U.S. Rep. Adam Smith of Washington, the ranking Democrat on the House Armed Services Committee.

“The military must ensure that it is spending every taxpayer dollar as wisely and effectively as possible,” Smith said. “The Army claims to have taken steps to start addressing the mismanagement highlighted in the IG report, but Congress will need to do aggressive oversight to make sure this same problem doesn’t happen again.”

The Inspector General reported that the Stryker program and Virginia-based General Dynamics are working account for the equipment and they expect to have it properly filed by March 2014. Some of it is to be resold to help the Army recover costs.

General Dynamics had no comment. The Stryker Project Management Office did not respond by deadline Friday to written questions The News Tribune submitted on Wednesday.

The high costs identified by the Inspector General reflect the fast-paced demands of the wars, said Daniel Goure, a defense analyst at the Virginia-based Lexington Institute think tank.

“This is truly much ado about nothing” he said. “It’s essentially miscommunication.”

The Inspector General released the report in late November but it got little attention aside from a blog run by a government consulting firm.

It was the second critical look from the Inspector General at how the Army pays to maintain its fleet of 20-ton Stryker infantry vehicles. The machines, developed at Joint Base Lewis-McChord, saw heavy use in Iraq and Afghanistan.

The first report suggested the Army overspent on its latest five-year, $1.5 billion Stryker maintenance contract with General Dynamics by some $335.9 million, mainly by accumulating excess inventory.

The military had awarded General Dynamics a no-bid contract that promised to reimburse its expenses for maintaining the Strykers while adding a fee, giving the company little incentive to control costs. A third Inspector General report is in the works.

The Auburn warehouse is a 730,000-square-foot, government-owned facility run by General Dynamics. The company sends equipment there after the Stryker Project Management Office orders it. From there, the materials are shipped to Stryker brigades all over the world.

The Inspector General wrote that the material belonged to the Army as soon as it reached the warehouse. The Army, however, contended the material belonged to General Dynamics until the contractor installed it in new vehicles.

The Inspector General took aim at the Army’s reasoning, arguing in part that it didn’t make sense to wait for General Dynamics to install the equipment in new vehicles because it by definition was intended to replace parts in existing Strykers.

Under the Army’s interpretation, the military “will never take delivery of the Stryker inventory, assign the inventory a value, record it in an appropriate Army property accountability system and recognize the inventory on the Army’s financial statements,” the investigators wrote.

Strykers joined the Army’s fleet of infantry vehicles on the eve of the wars in Iraq and Afghanistan, giving the service little time to acclimate them in the Army’s normal maintenance programs.

Over time, the Army usually shifts maintenance from contractors to soldiers, saving money on routine work. That transition for Strykers is happening only now that the wars are coming to an end.

Since 2003, the Army deployed Stryker brigades to Iraq and Afghanistan 17 times. The first ones departed for Iraq out of then-Fort Lewis.

The program faced one of its most severe tests in 2009, when the Army first started sending Strykers to Afghanistan. Exceptionally rugged terrain coupled with deadly insurgent mines made the vehicle less effective than it was in urban Iraq.

The Army redesigned the vehicle to provide better protection in Afghanistan, a change that saved lives but also complicated the maintenance program the Inspector General has been investigating.

“The operational environment, tempo, objectives, deployment, and utilization plans were all fluid as the threat would change in theater, creating a higher level of complexity for” improving maintenance contract oversight, the investigators wrote.

Today, about 12,000 soldiers serve in Lewis-McChord’s three Stryker brigades. The base south of Tacoma has more Strykers than any other Army post.

Goure, the defense analyst, pointed to General Dynamics’ success at exceeding the Army contract’s target for keeping 90 percent of the Stryker vehicles in each brigade ready for combat. General Dynamics consistently hit 96 percent, a threshold that Goure called “awesome.”

“You should get that in peacetime domestically, much less so in a war zone,” he said.

But lawmakers and the Pentagon are growing far less tolerant of red ink than they were during the peak of the wars. The Army alone faces an $18 billion shortfall this year because of unexpected costs in Afghanistan and efforts in Congress to cut military spending.

“I am concerned about the findings in this report that point to waste and mismanagement in the Stryker program,” said U.S. Sen. Patty Murray, D-Wash., the chairwoman of the Senate Budget Committee.

“At a time when important programs for military and civilian families are facing serious cuts, it’s incumbent on General Dynamics and the Army to come together to address the problems raised in this report and to provide the accountability that the American people deserve,” she said.

The report is full of eye-popping examples of the Stryker Project Management Office building up excessive quantities of replacement parts.

Neither the Army nor General Dynamics had an estimate for their worth on hand when investigators requested one. General Dynamics offered the total estimate — $892 million — with a disclaimer: “The data herein has not been verified or validated for accuracy, particularly with respect to dollar valuations.”

Investigators found the Army contract included a strong disincentive that prevented General Dynamics from using the extra gear for work on other Stryker projects.

For example, the Auburn warehouse accumulated 7,568 units of replacement netting worth $892,896. The Army kept buying the material, which soldiers use to store the gear, even though there was no demand for it as a replacement part.

General Dynamics could have used the netting in manufacturing new Strykers, bringing down the cost of that program. But to use the material for new vehicles the company would have had to pay a 23.4 percent fee on the value of the unneeded replacement netting.

The investigators found $10.8 million worth of equipment that could be to use for other Stryker projects, but “the buyback charge provides a disincentive for General Dynamics to use the excess Stryker spare part inventory for other applications.”

The Inspector General’s scrutiny led the Army and General Dynamics to identify some gear that can be reused. The rest would be “disposed” of or resold if possible.

One example of a product finding new life came in the form of 170 empty engine containers that are no longer used. They’re worth $1.1 million. General Dynamics told the Inspector General it would reuse them for a different program.
 

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