[Federal Register Volume 66, Number 215 (Tuesday, November 6, 2001)]
[Notices]
[Pages 56084-56087]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 01-27863]


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DEPARTMENT OF DEFENSE

Department of the Army


MTMC Pam 55-4 ``How to do Business in the DOD Personal Property 
Program''. Defense Transportation Regulation Part IV; Tender of Service

AGENCY: Military Traffic Management Command (MTMC), DoD.

ACTION: Notice; Request for comments

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SUMMARY: New Procedures to participate in the Department of Defense 
Personal Property Program. MTMC, as Program Manager of the Department 
of Defense (DOD) Personal Property Shipment and Storage Program (the 
Program), proposes to streamline and strengthen the carrier

[[Page 56085]]

qualification process. The proposal requires all present and future 
participants (commercial carriers) in the Domestic and International 
Personal Property Programs to use our streamlined qualification process 
via the web, email, fax, and met more stringent financial requirements. 
These changes in procedures will:
    a. Simplify and streamline the carriers qualification process by 
reducing paperwork and expediting approval processing time.
    b. Meet MTMC's legal obligation to only do business with 
responsible commercial carriers.
    c. Improve Program performance and quality assurance.
    d. Incorporate suggestions made by our industry partners.
    For streamlining MTMC is proposing the following procedures.
    a. Present participants will be required to re-quality using the 
new procedures.
    b. Future applicants will be required to use the new procedures.
    c. Reducing from 13 previously required manual forms to 4 
electronic forms.
    These 4 forms include the electronic submission of the Tender of 
Service Signature Sheet, the list of countries and codes of service 
form, the performance bond (electronic or fax), and the certificate of 
cargo liability (electronic or fax).
    For strengthening MTMC is proposing the following changes.
    a. Current participants must comply with the new re-qualification 
procedures/standards.
    b. Financial requirements will be increased.
    c. Carriers must provide, upon request, financial statements, audit 
report or review memorandum, and income tax returns.
    d. Cargo liability insurance minimums will be increased.
    e. Performance bonds will be required in both the international and 
domestic programs.
    f. Five years government and/or commercial experience will be 
required, using the date on the operating authority or if the state is 
deregulated, the articles of incorporation date.
    g. MTMC will use carriers's safety rating obtained from SAFER 
system, Department of Transportation (DOT) for verification of 
authority and any reported safety infractions, which may be used in 
Carrier Review Boards.
    h. Change in company ownership applications will go through a 
novation process.

DATES: Comments on these proposed procedural changes and standards must 
be submitted to the address given below on or before January 7, 2002.

FOR FURTHER INFORMATION CONTACT: Ms. Sylvia Walker Headquarters, 
Military Traffic Management Command, ATTN: MTPP-HQ, Room 10N67-51, 
Hoffman Building II, 200 Stovall Street, Alexandria, Virginia 22332-
5000; Telephone (703) 428-2982; Telefax (703) 428-3388/3389.

SUPPLEMENTARY INFORMATION:
    MTMC's proposal to incorporate common commercial business practices 
and take advantage of efficiencies gained from the use of technology 
will streamline and strengthen the carrier qualification process for 
the first time in 10 years. Once changes have been adopted, the new 
requirements will supersede the current How To Do Business Book. The 
updated ``book'' will be available for your use on the internet on the 
MTMC home page at www.mtmc.army.mil.

Streamlining Initiatives

    1. Qualification procedures.
    Current: Manual and time consuming submission of documentation to 
MTMC.
    Proposed: All current Program participants and those who have 
applied for qualification prior to the publication of this notice in 
the Federal Register must apply or re-apply for qualification approval 
(also known as re-qualification) under the new streamlined requirements 
and submit their application electronically for two forms and 
electronic/fax for two specific forms.
    2. New procedures for future applicants.
    Current: Utilizes ``How to do Business Book''
    Proposed: Once published, carriers must comply with the new 
procedures in the revised ``How to do Business Book''.
    3. Submission of Forms.
    Current: Submission of a qualification package is a manual process 
with a minimum of 13 forms.
    Proposed: MTMC will require only 2 electronic forms and 2 forms 
that either contain electronic signatures or are faxed facsimile 
signatures. All forms will be available on the MTMC web site. These 
forms include the Electronic Tender of Service Signature Sheet, the 
List of Countries and Codes of Service form, performance bond, and 
certificate of cargo liability insurance as part of the approval 
process. The performance bond and certificate of cargo liability 
require signatures and must be sent electronically or faxed.

    Note: Requirements for accessing the Personal Property 
Qualification website are: Carrier must have access to the Internet 
via a Web Browser, Microsoft Internet Explorer version 5.5 or 
greater, or Netscape version 4.75 or greater. The minimum Personal 
Computer requirements recommended: Intel Pentium processor (or other 
IBM compatible), 400 MHz or greater speed, at least 128 MB of RAM 
and Windows 98/Windows NT 4.0/windows 2000.

Strengthening Initiative

    1. Application for re-qualification.
    Current: Manual applications are reviewed on a first come first 
served basis.
    Proposed: Required electronic re-qualification applications must be 
submitted during the period 1 Feb.-1 Mar. 02. The submission date is 
determined by the electronic date on the electronic tender of service 
signature sheet received in MTMC's database. After completing the 
electronic tender of service signature sheet and the List of countries 
and codes of service the computer will send back a response that we 
have received the documentation. It will be the carrier's 
responsibility to ensure any faxed documentation has been submitted to 
MTMC by the required deadline. Late submissions will not be accepted. 
Electronic applications will be reviewed on a first come first served 
basis. During the transition period while applications for re-
qualification are being processed, previously approved carrier 
applicants may continue to do business with DOD pending completion of 
the re-qualification process. Before filing rates for the IS02/DS02 
cycles, carriers should review the final Federal Register notice in Jan 
02 to make sure they meet the new qualification requirements. Upon 
MTMC's review of applicant's submission, if carriers do not meet the 
qualification requirements, their rates will be administratively 
removed from the system. Carriers failing to successfully complete the 
required re-qualification process during the submission period will be 
allowed to continue to participate in the current winter cycle but will 
be ineligible for traffic in succeeding cycles. Future applicants must 
qualify under the new qualification procedures.
    2. Financial Ratios.
    Current: Carriers must certify financial statements meets a 1:1 
quick ratio or better.
    Proposed: All participants must meet and maintain a 1:1 Quick ratio 
or better, a 1:1 Current ratio or better, and a 2:1 Debt to Equity 
ratio or less. The following definitions are provided for clarification 
purposes only. If there are further questions, carriers should consult 
with their own accountants for

[[Page 56086]]

clarification and how to best present financial data.
    The quick ratio measures the ability of a business to meet their 
current bills. Quick ratio is cash plus receivable/current liabilities. 
This is similar to current ratio with the exception that inventory and 
prepaids are subtracted from the total current assets prior to making 
the computation. These items are deleted prior to computing the ratio 
because inventory and prepaids are not easily converted to cash to pay 
debts. Future if a company needs to liquidate inventory or prepaids to 
pay bills, they are in liquidation process and not really a going 
concern.
    Current ratio is company's current assets/current liabilities. 
Current assets are defined as cash, receivables, inventories, and 
prepaid items (insurance, deposits, etc). Current liabilities are what 
you owe within the coming 12 month period. Included as current 
liabilities are normal accounts payable and next 12 months of payments 
on company loans/note payable.
    Debt to equity is total liabilities divided by company's equity. 
Another way of stating this is that equity is the company's worth and 
debt to equity measures debt to worth. For example if your car costs 
$15,000 but your loan is $10,000 your equity in the car is $5,000 and 
your debt to equity ratio is 2 to 1. Thus for every dollar of equity 
you owe two dollars. (2  x  5,000 equals your debt of $10,000).
    3. Financial documentation.
    Current: Submit hard copy of financial statements at time of 
application.
    Proposed: Upon request, carriers will provide MTMC financial 
statements accompanied by either an audit report or review memorandum 
prepared by their auditors. Financial statements must be prepared 
according to generally accepted accounting principles using the accrual 
basis, including balance sheets and profit/loss statements. Financial 
statements must include all documents referenced in any footnotes or in 
any audit or review memorandums. No pro forma statements will be 
accepted in lieu of actual financial statements. We may also elect to 
request copies of your company income tax returns for the past three 
years. MTMC reserves the right to obtain services from an independent 
third party source to conduct financial risk analysis of carrier's 
financials. This analysis will compare the company analyzed with 
appropriate industry norms. This information may be used in a carrier 
review board action to assist in the determination of financial risk to 
the government. The financial statements must document the business 
operations of the single business entity or organization that seeks to 
qualify to do business with the DOD. Combined or consolidated 
statements that include the finances of other companies will not be 
accepted. Letters of guarantee from a parent company will not be 
accepted.
    4. Cargo Liability Insurance Minimum.
    Current: Minimums are $10,800 per shipment and $150,000 amount per 
aggregate at any one place and time (per incident).
    Proposed: Cargo liability insurance will be equal to $22,500 per 
shipment and $315,000 per incident. Carriers must have their insurance 
company provide directly to MTMC current cargo liability insurance 
certificates by electronic means or fax. These levels must be 
maintained throughout DOD approval.
    5. Performance Bond.
    Current: International carriers must provide a performance bond in 
the face amount of either $100,000 or 2.5% of their DOD international 
revenue for the previous year, whichever, is greater. There is no 
current bond requirement in the Domestic program.
    Proposed: Carriers must have their surety company provide a signed 
copy of their performance bond directly to MTMC electronically or by 
fax. A performance bond will be required in both the international and 
domestic program. However, there are differences in the requirements. 
The value of each cycle's International Program continuous performance 
bond must be equal to $100,000 or 2.5% percent of the projected 
international revenue based on previous year cycle data, whichever is 
greater. The International bond requirement will change from an annual 
submission to a semi-annual submission, upon request from MTMC. Note: 
For the purpose of re-qualification, all current International 
participants will be notified individually, if an increase in their 
performance bond is required.
    The value of the continuous Domestic bond will be equal to $50,000 
or 2.5% percent of the value of revenue received from DOD personal 
property domestic traffic in the previous complete calendar year, 
whichever is greater.

    Note: Because no bond was previously required for the purpose of 
re-qualification, all domestic carriers must submit a performance 
bond in the minimum amount of $50,000. MTMC will then contact each 
individual Domestic carrier at a later time to request an increased 
bond (if applicable).

    The purpose of this performance bond requirement is to ensure that 
the DOD is compensated for reprocurement costs caused by the carrier's 
failure to perform agreed services.
    6. Carrier experience requirement.
    Current: There is no minimum.
    Proposed: Both International and Domestic carriers must have a 
minimum of 5 years commercial and/or government experience to be 
considered for DOD approval, using the date on your operating 
authority, or if deregulated the date on your Articles of 
Incorporation.
    7. Safety Rating.
    Current: Carrier's Safety Rating is not reviewed.
    Proposed: MTMC will reserve the right to obtain and use a carrier's 
Department of Transportation Safety Rating for verification of 
authority and any reported safety infractions, which may be used in 
Carrier Review Boards.
    8. Change of Ownership.
    Current: Carrier submits new qualification package.
    Proposed: MTMC approval of changes in ownership of previously 
approved carriers is required. MTMC approval will be based on a review 
of the sales agreement and other items similar to that set out in the 
Federal Acquisition Regulation subpart 42.12. The new asset owner 
(transferee) must assume ALL obligations under the agreement as if they 
were the original party. The transferor guarantees performance by the 
transferee. All three parties (Government, transferor, and transferee) 
will sign a novation agreement.

Additional Information

    1. For all Domestic Program applicants and participants, MTMC 
proposes to continue to require all affiliates of other Domestic and 
International Program applicants and participants to declare (common 
financial and/or administrative control) their affiliations. Affiliates 
means associated business concerns or individuals if directly or 
indirectly, (a) either one controls or can control the other or (b) a 
third party controls or can control both. For all International Program 
applicants and participants, MTMC proposes to continue to require all 
affiliates of the other Domestic and International Program applicants 
and participants to both declare their affiliations to MTMC, and to 
refrain from competing in the same personal property code of service/
channel (code/channel) combinations served by any of their affiliates. 
If MTMC adjusts the codes of service and/or channels at any time in the 
future, this rule will continue for the new or altered codes and/or 
channels without further notice, and Program participants will be

[[Page 56087]]

required to adjust their service and update their documentation with 
MTMC.
    2. MTMC intends to enforce these enhanced qualification 
requirements by reviewing information about commercial participant 
performance and finances obtained from a variety of sources including 
information provided directly to MTMC, public databases, and commercial 
sources. The latter may include commercial performance databases, 
members of the personal property industry, and members of the general 
public. If a Program participant violates Program requirements, it will 
be administratively placed in a nonuse status pending resolution of the 
violation using the procedures contained in MTMC Regulations 15-1. When 
carrier declarations do not appear to be consistent with known factors 
or circumstances, they will be identified for further investigation and 
possible referral to the U.S. Justice Department for action.
    3. MTMC proposes to require that all Program applicants and 
participants accept the cost of complying with these more stringent 
requirements as part of their cost of doing business. We further 
anticipate that adoption of the new qualification procedures and 
standards will result in many offsetting tangible and intangible 
benefits to military service members and their families, the personal 
property industry, to DOD, the military services, U.S. Transportation 
Command, and MTMC as organizations. Military service members will 
benefit from having their personal property moved in an efficient 
manner by carriers that possess the necessary means of doing business 
and that do not go out of business and/or hold shipments hostage. 
Personal property agents will benefit from knowing that a DOD approved 
carrier is financially stable and has the means to pay its bills in a 
timely manner. DOD organizations will benefit from dealing with healthy 
carriers that do not suffer catastrophic business failures that require 
extensive and expensive transportation reprocurement efforts.
    MTMC envisions the adoption of more stringent qualification 
requirements as part of a continuing process in which MTMC moves from 
price-based procurement of transportation services to a best value, or 
quality plus price, approach.
    The revised qualification process, procedures, regulations and How 
To Do Business Book will be superseded by the new streamlined 
requirements. MTMC will publish all Program requirements in its Website 
``How to Do Business with the DOD'', and the Federal Register as 
appropriate.
    MTMC has previously received many informal comments, primarily from 
commercial personal property transportation providers supporting the 
idea of eliminating financially and operationally risky carriers from 
the Program. We agree in general terms with these comments for both 
legal and operational reasons. We now propose to change carrier 
qualification requirement in the DOD Personal Property Program to 
implement this military/industry consensus.

Paperwork Reduction Act

    The Paperwork Reduction Act, 44 U.S.C. 3501 et seq., does not apply 
because no information requirements or records keeping responsibilities 
are imposed on offerors, contractors, or members of the public.

Regulatory Flexibility Act

    This change is related to public contracts and is designed to 
streamline and strengthen the DOD personal property carrier 
qualification program. This change is not considered rule making within 
the meaning of the Regulatory Flexibility Act, 5, U.S.C. 601-612.

Luz D. Ortiz,
Army Federal Register Liaison Officer.
[FR Doc. 01-27863 Filed 11-5-01; 8:45 am]
BILLING CODE 3710-08-M