The DOD is Wasting Billions by not Selling its Surplus Humvee


“I say wasting billions because in the jungles of the Philippines, these kind of vehicles can be used to earn billions of pesos as transport vehicles.”–R Duterte

Waste

Scrapped Instead of Sold: Surplus Humvees Could Save Taxpayers Hundreds of Millions

BY DANIEL VAN SCHOOTEN | FILED UNDER INVESTIGATION | APRIL 23, 2019

(Photo of Humvee: Army National Guard / Sgt. Luther Talks; illustration by POGO)

The military is paying to crush tens of thousands of Humvees when it could legally donate or sell them, forfeiting by its own estimate at least $156 million in the first six years. The total financial impact, including savings to the military and other state and federal agencies, is far greater, reaching into the hundreds of millions of dollars, according to an analysis by the Project On Government Oversight. But the agency responsible for processing surplus military equipment states that federal regulations force it to destroy most surplus Humvees.

While the agency may not be breaking any rules in scrapping the vehicles, it doesn’t have to break the rules in order to sell them.

How the U.S. government has handled its surplus Humvees provides a window into the complex, sometimes contentious, and sometimes seemingly arbitrary bureaucratic world of demilitarization for Pentagon gear.

A substantial policy shift occurred five years ago. Prior to 2014, all surplus military vehicles—even unarmored support vehicles—were under the jurisdiction of the State Department’s United States Munitions List. Generally, as long as a vehicle remains on that list, it cannot be released from military control unless it is first crushed or scrapped.

In 2014, the Departments of State and Commerce—both of which have a say in managing exports of sensitive material—overhauled the system, with the intent of reserving the State Department’s list for “only those items that provide at least a significant military or intelligence applicability.” The military’s unarmed and unarmored vehicles were transferred to Commerce’s Commerce Control List, which governs items that might have dual military and commercial uses. It is less restrictive than the United States Munitions List, and is primarily for controlling the export of items under its jurisdiction.

If restricted surplus vehicles are not selected for the 1033 program, they must either be demilitarized or destroyed.(Photo obtained by POGO)

Neither the State nor Commerce Departments’ lists specify vehicle models, instead placing restrictions on vehicles with certain characteristics, such as armor or weapons. For example, Category VII of the United States Munitions List, the section that applies to ground vehicles, defines armored vehicles as those with armor installed that can stop rounds fired from a high-powered rifle or submachine gun. Removing the armor, however, would move the vehicle from that list to Commerce’s list (provided the Humvee didn’t have any other restricted parts). Once governed by Commerce’s list, it is possible for the Humvee to be donated to other government agencies or sold to the public, provided any parts controlled by other policies or rules are first removed.

The earliest Humvee models had a payload capacity of 2,500 pounds, which, when fully loaded with cargo or 10 people, left little room for the heavy armor needed to provide effective protection. Although later models with increased capacity could be equipped with add-on armor packages, many went without. Only the latest models have armor that is built-in and cannot be removed.

In response to the 2014 regulatory change, the Defense Logistics Agency (DLA), which manages the military’s surplus equipment, sought and received an official determination from the Departments of State and Commerce that the two most basic Humvee models, the M998 and the M1038, were governed by Commerce’s list and not State’s. With that official determination, the DLA began selling and donating those Humvee models in 2015. In the years since, however, the agency has not sought the same interagency determination for any other Humvee models.

If a surplus Humvee is governed by Commerce’s list and meets the requirements for domestic sale, the DLA puts the Humvee through a surplus disposal process. That process begins by offering it as a donation to federal agencies and then to state agencies, and, if the Humvee is still in DLA’s inventory, finally offering it for sale through a contractor to the general public. This regular surplus process is distinct from the more controversial 1033 program, which loans armored Humvees and other restricted United States Munitions List equipment such as grenade launchers or Mine-Resistant Ambush Protected vehicles (MRAPs) to local police forces. While unarmored vehicles can also go through the 1033 program, they continue on through the rest of the surplus process when not selected. If restricted surplus vehicles are not selected for the 1033 program, they must either be demilitarized or destroyed.

(Source: GAO-16-44, page 2)

The demilitarization process for Humvees generally includes removing any restricted weapons, armor, and communications equipment. All vehicles are assigned demilitarization codes indicating whether they must be destroyed, have “key points” that must be destroyed, have export restrictions, or have no restrictions. The military has a flowchart showing the various considerations for assigning codes, and it is possible for two vehicles with the same code to be governed by different lists. The military services are responsible for assigning the codes when vehicles are first procured, but the DLA manages the overall system and verifies that the codes are accurate during the disposal process. The services are not required to fully demilitarize vehicles before they are turned in to the DLA for processing, but they can if they choose to. Likewise, the DLA is not required to perform additional demilitarization work on the vehicles (since crushing also counts as demilitarizing), but it could also hire a contractor to demilitarize the vehicles, according to a 2015 study commissioned by the agency.

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When POGO asked the DLA why more Humvee models weren’t being donated or sold, the agency initially stated, “The bottom line is until the [demilitarization] code is changed by the Army, DOS [State] and DOC [Commerce], DLA cannot sell additional [Humvee] variants. To date, the [demilitarization] code has not been changed.” That statement generally matches what the agency has said before. For example, in a 2017 letter to Senator John Cornyn (R-TX), the agency asserted that Humvee models other than M998s and M1038s are still governed by the United States Munitions List.

The agency failed to mention to Senator Cornyn, however, that the only thing standing in the way of moving the vehicles to the less restrictive Commerce Control List is a formality that the agency told POGO it has made no attempt to navigate. Namely, the agency has not asked State and Commerce to provide an official determination on which list has jurisdiction over additional Humvee models like it did for the two earliest models.

In a 2018 letter to Representative John Carter (R-TX), the agency was less specific, saying that the assignment of vehicle demilitarization codes is “in accordance with [State] and [Commerce] regulations.”

After several follow-up emails from POGO, the agency acknowledged that at the time of the 2014 reform, they “determined that non-armed/non-armored [Humvees] were not [Munitions List Items].”

The DLA told POGO that some other Humvee models do lack armor, and, echoing their prior communications, that they believe approval from the Departments of State and Commerce is required. However, a significant reason given by the Obama Administration at the time of the 2014 reform for not listing specific vehicle models is because it would be too burdensome for State and Commerce to go through and label every single piece of inventory affected. The Department of Commerce’s website explicitly allows other entities, including foreign ones, to self-determine which list, if any, applies to an item. When in doubt, those entities can seek an official determination, but doing so is optional—a formality officially recognizing what was already the case.

The impact of the DLA’s position has real consequences. A 2015 study commissioned by the DLA, and obtained by the Project On Government Oversight through the Freedom of Information Act, states that “there is no downside to authorizing the sale of any non-armored [Humvee]” provided it has been properly demilitarized. The study figured that the agency is leaving almost $156 million on the table over the six years from 2015 to 2021 by not demilitarizing and selling five Humvee variants that are “very similar” to the ones already being sold, “just with a higher payload capacity.”

The military likely owns over 100,000 Humvees, the vast majority of which taxpayers will pay to scrap unless something changes. (Photo obtained by POGO)

POGO estimates that substantially more money could be recovered through the program, given the study’s undervaluation of the Humvees—they are currently selling for many times the estimated price—and that it only considered selling five variants when numerous additional models could be demilitarized and sold. Since the agency must pay for vehicles to be destroyed (a cost that is diminished but not eliminated by the resulting scrap value), donating or selling the vehicles instead could also save the agency tens of millions of additional dollars.

Furthermore, the DLA estimate fails to account for the savings to other federal and state agencies that would be able to receive these vehicles at a very low cost. By donating or selling the vehicles instead of scrapping them, the military could easily save taxpayers hundreds of millions of dollars, POGO estimates. Although the available estimates for surplus vehicle numbers stop in 2021, additional savings would likely continue to accrue in following years as more vehicles become surplus. These numbers are also limited to Humvees, and do not include other military vehicles, such as heavy duty cargo trucks, that are being scrapped instead of demilitarized and sold.

While private collectors and off-roading enthusiasts may be willing to pay a premium for the utility trucks, government sales of Humvees can save more than just money. When they are donated to state agencies, the vehicles can also help save lives during natural disasters. An association representing state agencies eligible for surplus vehicle donations wrote to the DLA in 2018, saying, “It is beyond our understanding as to why there would be a public contract to scrap vehicles that our state officials need for disaster assistance, wildfires, flooding, tornado and hurricane relief.”

POGO’s analysis defers to the military’s determinations of which vehicle components should be restricted; however, the government is sometimes internally inconsistent. For example, the Department of Defense policy guidance manual gives a general code to deep-water fording kits for Humvees. The DLA uses a type of sub-code to further designate fording kits as sensitive, requiring destruction. Meanwhile, the Marine Corps regularly assigns a different sub-code to Humvees with the fording kits installed. That code carries only export restrictions. Neither designation appears to violate the official guidance. However, POGO has found and verified recent examples where the DLA has sold stand-alone fording kits with no restrictions and a completely different code.

Fording kits are a fitting example of the inconsistencies found in the whole surplus demilitarization process. And inconsistencies play out in far bigger ways, as well. Some parts of the military, including the Marine Corps and Special Operations Command (SOCOM) are demilitarizing and selling Humvees the DLA won’t (including the M1025 and the M1123), at least some of which used to have add-on armor installed. These different parts of the Defense Department have interpreted the same rules in dramatically different ways, with the resulting practices making little sense, and taxpayers paying the price for it.

“It is beyond our understanding as to why there would be a public contract to scrap vehicles that our state officials need for disaster assistance, wildfires, flooding, tornado and hurricane relief.”

AN ASSOCIATION REPRESENTING STATE AGENCIES ELIGIBLE FOR SURPLUS VEHICLE DONATIONS, IN A LETTER TO THE DLA IN 2018

To sell these vehicles, the Marine Corps and SOCOM are using a special program known as the Exchange/Sale Authority. The exchange process, which is established in law, allows agencies to sell old equipment and put the money towards the cost of new “similar items.” It is not supposed to be used to dispose of surplus material, but given the vague wording of “similar items” in the law, using it to sell Humvees without purchasing replacement Humvees is likely legal, according to a 2018 report by the Government Accountability Office.

Reforming the exchange sale process has been the “number one priority” for the national association representing state surplus agencies, which lose the opportunity to receive the equipment for free (plus shipping and handling) when the services use the exchange program instead of the regular surplus process. Agencies are encouraged to make the equipment available for donation prior to use of the exchange sale authority, but are not required to do so.

The usual restrictions on armor and weapons still apply when services use the exchange sale process, meaning that the Marine Corps and SOCOM had to find a way to move the previously armored vehicles from State’s list to Commerce’s list. When POGO asked SOCOM if any interagency approval was needed to do so, a spokesman for the service only said that the agency had coordinated with the Transportation Security Administration and the DLA for approval of the sale. According to what the DLA told POGO, however, nothing can be sold unless State and Commerce officially change which list a given Humvee model is governed by.

These same vehicles, if designated as surplus and sent to the DLA, would have been crushed. POGO’s investigation found a handful of examples within the past year of demilitarized Humvees beyond the two approved models that the DLA did sell, but when POGO asked about them, the agency stated the vehicles were “misidentified” as one of the two approved models. The agency is now attempting to reclaim the vehicles from their new owners and destroy them.

Because the DLA believes the vehicles are governed by State’s list, it doesn’t let contractors remove unrestricted parts like seats or batteries from the restricted vehicles before they are crushed. Rather, the agency contracts with scrappers to crush the vehicles, and then transfers the title to the scrap, an agency spokesperson told POGO. Since Humvees share many parts with civilian Hummers, and a fair number of Humvees sold are no longer functioning, there is a market for parts. If the vehicles fall under Commerce’s jurisdiction, certain parts are explicitly designated in the 2014 reform as unrestricted in order to encourage their separate sale.

The DLA has scrapped over 19,000 Humvees since the 2014 regulatory change, according to the agency, but there is no need for the waste to continue. (Photo obtained by POGO)

Both the DLA and the services are bound by the same regulations regarding the United States Munitions List and the Commerce Control List. When asked why the services were able to remove the vehicles from the munitions list but the DLA couldn’t, the agency stated that while the military services are capable of demilitarizing and selling individual vehicles from an otherwise restricted fleet, the DLA is not. The agency said that this was due to its different responsibilities and that it lacks the facilities or labor force for removing restricted vehicle parts—a different reason from the jurisdictional issue the agency previously provided. The agency’s 2015 study even suggested contracting out work to overcome capacity issues.

One model, the M1097, makes up half of all Humvees currently being scrapped, despite the fact that it would take roughly the same amount of time to process as the approved models: less than 45 minutes, according to the agency’s 2015 study. Other vehicles, such as those with bolted-on armor or bulletproof windshields, would require more work. The 2015 study cited one military engineer who stated it could take 60-70 hours to demilitarize vehicles with added-on armor, but the contractor currently demilitarizing Marine Corps Humvees has publicly stated that it removes and destroys similar armor packages in just 6-7 labor hours per vehicle.

In 2018, the DLA’s Office of the Inspector General looked into whether the DLA was following the established rules regarding demilitarization codes. The office, which is not structurally independent like the main Department of Defense Inspector General is, concluded in September 2018 that the agency is “properly coordinating, establishing, and verifying [Demilitarization] Codes for rolling stock.” However, while the report cites the applicable policies and the 2015 cost analysis, it does not indicate that any actual review of vehicles or agency actions were undertaken. In fact, it appears to badly misrepresent the conclusion of the 2015 study. Despite the fact that the 2015 study explicitly recommends the sale of five additional models, and estimates nearly $156 million in profit, the Inspector General’s report ends, after significant redactions that appear to simply summarize the cost-benefit analysis,“the conclusion of the [study] was that it would not be cost effective to [demilitarize] additional rolling stock.” 

When POGO asked the Inspector General’s office to clarify its conclusion, the office referred our questions to the main DLA public affairs office, which stated that the report “wasn’t focused on the specifics of the [study], but rather if DLA was following the rules and regulations of the [demilitarization] process.”

While the agency may not be breaking any rules in scrapping the vehicles, it doesn’t have to break the rules in order to sell them. If it needs State and Commerce to formally determine that a given Humvee model, when unarmored, can be sold, it could start by asking them, like it did for the first two models. Given the actions of the Marine Corps and SOCOM, though, it isn’t clear that the interagency confirmation is even needed.

The DLA has scrapped over 19,000 Humvees since the 2014 regulatory change, according to the agency, but there is no need for the waste to continue. The military likely owns over 100,000 Humvees, the vast majority of which taxpayers will pay to scrap unless something changes. If something does change, it could conceivably save taxpayers over a billion dollars.

About eslkevin

I am a peace educator who has taken time to teach and work in countries such as the USA, Germany, Japan, Nicaragua, Mexico, the UAE, Kuwait, Oman over the past 4 decades.
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