Audit of Navy Defective Parts and Contractor Restitution

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Date Issued

Tuesday, March 17, 2026

Submitting OIG

Department of War OIG

Agencies Reviewed/Investigated

Department of War

Report Number

DODIG-2026-070

Report Type

Audit

Agency Wide

Yes

Number of Recommendations

Questioned Costs

$2,600,000

Funds for Better Use

Report updated under NDAA 5274

Open Recommendations

This report has 3 open recommendations.

Recommendation Number	Significant Recommendation	Recommended Questioned Costs	Recommended Funds for Better Use
D-2026-0070-D000AX-0001-0001	No	$2,600,000	$0
Rec. 1: The DoD OIG recommended that the Commander, Naval Supply Systems Command, review the four national stock numbers identified in this audit for which Navy personnel could not provide evidence of full restitution. If the review determines that the contractor did not provide restitution and the Navy can pursue restitution under the contract terms, then the Commander should require the applicable Navy contracting officer to pursue restitution from the contractor that provided defective parts. Also, the Commander should comment on the $2.6 million in questioned costs related to defective parts for which the Navy was unable to provide evidence of contractor restitution. If the Commander disagrees with the questioned costs, identify the amount and the reason.
D-2026-0070-D000AX-0001-0002.a	No	$0	$0
Rec. 2.a: The DoD OIG recommended that the Deputy Assistant Secretary of Defense for Logistics update Defense Logistics Management Standards DLM 4000.25, Volume 2, Chapter 24 Product Quality Deficiency Reporting, to require Military Departments to develop a process for obtaining restitution from contractors that provide defective parts. The guidance should clearly define key roles and responsibilities of responsible contracting officers and require their involvement in the process and require the Military Departments to:preserve an audit trail to support the receipt of restitution and specify the type of documentation needed, andestablish a program to provide recurring training to deficiency reporting personnel and monitor compliance with the requirement.
D-2026-0070-D000AX-0001-0002.b	No	$0	$0
Rec. 2.b: The DoD OIG recommended that the Deputy Assistant Secretary of Defense for Logistics require Military Departments to develop and implement controls and oversight to ensure tracking of contractor restitution from the completion of the investigation of the report on deficiencies in product quality through the receipt of restitution.