Summary

Each year the Department of Defense (DOD) sells millions of dollars worth of excess property to the public through a Web site run by its contractor, Government Liquidation. Before excess property can be sold on this site, it is DOD policy to screen the property to ensure it cannot be reutilized by the department in another location or that its sale would not result in sensitive military property becoming publicly available. DOD assigns demilitarization codes to sensitive military property so that, when the property is no longer in use, it is recognized and disposed of properly. However, on several prior occasions--most recently at a July 2006 hearing--we reported that management control breakdowns in DOD's excess property reutilization program resulted in the sale of sensitive military property to the public through the liquidation Web site, including property subject to demilitarization controls (demil-required property) such as F-14 aircraft parts. One country with operational F-14s, Iran, is known to be seeking these parts. If such parts were publicly available, it could jeopardize national security. At the July 2006 hearing, DOD officials testified that they would take action to prevent the improper sale of sensitive military property, including demil-required property. Given the seriousness of the security risk posed by the sale of sensitive military property to the public, Congress requested that we investigate whether (1) demil-required property was still being sold on DOD's contractor-run liquidation Web site and (2) whether DOD has taken steps to prevent further improper sales of sensitive items, including controlled and demil-required property.

After monitoring excess property sales for about 7 months, we concluded that DOD has made significant improvements in preventing the sale, through the contractor-run liquidation Web site, of property coded as being demil-required. During the first month of our investigation, in September 2006, we determined that DOD had sold 295 items coded as being demil-required to the public. Although a number of demil-required items were offered for sale on the liquidation Web site after September 2006, these items were detected by DOD or the contractor and the property was withdrawn prior to sale. Furthermore, DRMS reported that, between August 2006 and March 2007, 59,762 line items of demil-required and sensitive property were removed from the excess property disposal system prior to sale, representing a total of 1.3 million individual pieces of demil-required or other sensitive property items. This included items that would have been sold on the liquidation Web site. DOD told us that it has taken steps to prevent further improper sales by implementing various controls, including (1) restructuring the batch lot processes (the way property is grouped into lots for sale), (2) increasing scrutiny of property before sale, (3) tightening controls on the release of property, (4) creating a postsale review and retrieval process to account for improper sales, and (5) newly designating some property items as controlled and taking steps to prevent their sale to the public. Although DRMS has clearly taken a proactive approach to identifying and removing sensitive items from its system, we determined that approximately 1,400 items newly designated as controlled property were sold to the public in February 2007. DRMS told us the parts were sold to the public because it did not successfully update its automated control list and remove these items prior to their being listed on the Web site. DRMS had identified these items as parts that could be used on the F-14 fighter aircraft.