Defense Transportation:

Monitoring Costs and Benefits Needed While Implementing a New Program for Moving Household Goods

GAO-03-367: Published: Apr 18, 2003. Publicly Released: Apr 18, 2003.

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The Department of Defense (DOD) spends more than $1.7 billion each year to move and store over 600,000 household goods shipments when relocating military personnel. It conducted and evaluated several pilot program studies aimed at fixing its problem-plagued program and, in 2002, issued a report to Congress with three recommendations. The 1997 Defense Appropriations Act Conference Report directed GAO to validate the results achieved by the pilot programs. In response, GAO examined the extent to which DOD's recommendations to Congress (1) offer solutions to long-standing problems in the current program and (2) are supported by the evaluation's findings and should be implemented. GAO also assessed the soundness of methodologies used by DOD to develop cost estimates to implement the recommendations.

The recommendations in DOD's report to Congress have the potential to resolve several long-standing problems found in the current personal property program, which manages the transportation and storage of household goods. The recommendations, if implemented, would (1) reengineer the claims process to reduce the length of time it currently takes to resolve claims for lost, destroyed, or damaged household goods and increase the reimbursement rates that military personnel currently receive for their losses; (2) use performance-based service contracts to improve the generally low quality of service that DOD currently gets from the moving industry; and (3) put in place new information technology with interface capabilities to enable program managers and users to monitor in-transit shipments and track the number and cost of shipments processed each year. The recommendations in DOD's report to Congress are supported by the Transportation Command's evaluation of the pilot programs' findings and should be implemented within budget constraints. DOD's approach in conducting the evaluation was methodologically sound: It developed an evaluation plan to guide its work and adjusted the plan when necessary to address differences in the pilot programs' approaches. While the shipments included in the evaluation do not represent all shipment types managed annually by DOD, GAO believes that the evaluation results provide sufficient information to allow DOD to initiate actions to improve its current personal property program. GAO found that the soundness of methodologies used to develop DOD's cost estimates varied. Therefore, DOD's ability to implement changes to the existing program within the cost estimates DOD reported to Congress is uncertain. GAO found that the estimate to implement the information technology recommendation was $7 million rather than the $4 million to $6 million estimate DOD reported to Congress. In developing cost estimates for the remaining recommendations, DOD did not provide the same level of evidentiary support for one of the three adjustments it used to align the pilot programs' costs to current program costs. As a result, GAO questions the extent to which these recommendations can be implemented within DOD's estimated 13 percent increase over current program costs. While DOD believes it used a conservative approach in developing this 13 percent estimate, it has not quantified the risk associated with the projection, which could provide the military services and Congress information needed to develop and review future budget requests for this program. Without providing the range of possible cost increases and the risk regarding the likelihood of achieving this 13 percent projection within that range, DOD may find a repeat of what occurred during the pilots, where the military services terminated participation in one of the pilot programs due to costs exceeding projections. GAO also found that without carefully monitoring costs during the implementation phase and assessing costs and benefits from a period succeeding full implementation of the recommendations, DOD would not have the information needed to determine if anticipated improvements in the program are being achieved at a reasonable cost.

Recommendations for Executive Action

  1. Status: Closed - Not Implemented

    Comments: Based on input from industry, DOD has developed an approach for conducting a rate reasonableness analysis of the carriers rates. DOD stated that its Families First program includes safeguards to keep costs in check, and that its best value and rate reasonableness methodology will help ensure that costs remain within an acceptable level. For the first time , DOD will have one database with all cost data elements required by DOD's functional and financial communities for cost evaluation at the shipment level. DOD will monitor costs as industry submits bids during the solicitation process. In December 2003, DOD reported that it will test its best value and rate reasonableness approach in the upcoming Domestic Rate Cycle, and lessons learned will be leveraged in the future program. Rate reasonableness analysis and best value distribution are features of the Families First Program that are scheduled to be implemented under Phase II of the program, which has an estimated completion of October 2005. As of May 2007, DOD was starting the rate solicitation process for Families First. DPS is still in development and expected to be used by all of DOD by fall 2008.

    Recommendation: To improve the personal property program for military personnel, their families, and program administrators, the Secretary of Defense should direct the Commander, U.S. Transportation Command, to monitor costs for all recommendations during the implementation phase to ensure that the proposed changes are being achieved within an acceptable and a predefined range.

    Agency Affected: Department of Defense

  2. Status: Closed - Implemented

    Comments: In commenting on GAO's report, DOD partially concurred with this recommendation, stating that the services were in agreement with the estimated 13 percent cost increase provided by the Surface Deployment and Distribution Command, formerly the Military Traffic Management Command. DOD also stated that it does not see value added in providing the military services or Congress a formal risk assessment, but that it will continue to work with the military services as execution progresses to make sure they have all information required for budget purposes. However in May 2004, the House Armed Services Committee directed DOD to reevaluate its cost estimates, to quantify the risk or likelihood of achieving its goals within the 13 percent cost projection, and to develop the range of possible cost increases associated with the risk. This directive is stipulated in the House Armed Services Committee Report (H.R.108-491, page 298) on the National Defense Authorization Act For Fiscal Year 2005. This directive was based on concerns GAO raised in its report (GAO-03-367) about whether the recommendations can be achieved within the 13 percent increase in costs. GAO was also directed to assess whether DOD adequately performed the committee's directed task and issue a report to both House and Senate Armed Service Committees. DOD issued its report entitled "Reevaluation of Cost Estimate for DOD Families First Program" in March 2005. In June 2005, GAO issued its report entitled "Defense Inventory: DOD Has Adequately Addressed Congressional Concerns Regarding the Cost of Implementing the New Personal Property Initiatives" (GAO-05-715R).

    Recommendation: To improve the personal property program for military personnel, their families, and program administrators, the Secretary of Defense should direct the Commander, U.S. Transportation Command, to provide the military services and Congress additional information to quantify the risk associated with achieving the projected 13 percent cost estimate before the claims process and performance-based service contracts recommendations are implemented to provide the military services with information needed for budgeting purposes.

    Agency Affected: Department of Defense

  3. Status: Closed - Implemented

    Comments: DOD has initiated actions to implement the three recommendations contained in its report to Congress to improve its household goods program within budgetary constraints. The three DOD report recommendations and the key Phase II features that relate to them are as follows: 1) Reengineered Liability/Claims Process--full replacement value; direct claims settlement between customer and transportation service provider; 2) Performance-Based Service Contracts--minimum performance score criteria; and 3) Information Technology Improvements--automated online Defense Personal Property System (DPS). In December 2003, DOD reported that its new Families First Personal Property Program has been approved and that the major program changes addressed in GAO's report would be done in phases. The first phase of the Families First program encompasses the implementation of the electronic billing and payment processes in the current personal property program. The systems supporting the electronic payment process were developed and implemented on March 29, 2004. Phase I electronic billing and electronic payment process to all military installations has been mostly completed as of May 2007. Although DOD's Full Replacement Authorization bill was signed in November 2003, another bill making it mandatory by March 1, 2008, was signed and DOD said it is on course to implement full replacement value on time. DOD also implemented a web-based interim customer satisfaction survey in June 2004, and 12 months of customer surveys will impact performance scores when the new Families First program begins. As of May 2007, DOD was testing the Defense Personal Property System (DPS). Implementation of performance-based service contracts and a reengineered claims program are dependent upon implementation of DPS.

    Recommendation: To improve the personal property program for military personnel, their families, and program administrators, the Secretary of Defense should direct the Commander, U.S. Transportation Command, to initiate actions to implement the three recommendations contained in DOD's report to Congress within budget constraints.

    Agency Affected: Department of Defense

  4. Status: Closed - Not Implemented

    Comments: DOD reported that it would have the information needed to determine if anticipated improvements have been achieved on a continuing basis. In June 2004, DOD implemented web-based customer satisfaction surveys to assess improvements in the program and identify how well the carriers are performing. The data collected from these surveys will be used in establishing best value scores for each carrier before the start of the Families First program. The surveys will be completed upon shipment delivery, thus providing timely carrier performance data. Carrier performance ratings will be established quarterly with the exception of the peak season, when performance ratings will be established monthly. To ensure that quality carriers are in the program, DOD will implement a minimum performance score criteria prior to the rate filing process. DOD's goal in setting minimum performance standards is to limit distribution of shipments to only those carriers providing "high quality" service. The Surface Deployment and Distribution Command, formerly the Military Traffic Management Command, will monitor and provide metric reports to the Services. It was expected that this task will be completed by the end of 2006. As of May 2007, DOD was still working to implement Families First. Families First is expected to be underway by fall 2008.

    Recommendation: To improve the personal property program for military personnel, their families, and program administrators, the Secretary of Defense should direct the Commander, U.S. Transportation Command, to assess the effects of the three recommendations on the personal property program (to be carried out after the summertime peak-moving season once the recommendations have been implemented) to determine whether the anticipated improvements in the program are being achieved at a reasonable cost.

    Agency Affected: Department of Defense

 

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