[Federal Register Volume 67, Number 53 (Tuesday, March 19, 2002)]
[Notices]
[Pages 12540-12544]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 02-6582]


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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.''

AGENCY: Department of the Army, Military Traffic Management Command 
(MTMC), DoD.

ACTION:  Notice; final policy.

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SUMMARY: MTMC has established new qualifying procedures to be able to 
participate in the Department of Defense (DOD) Personal Property 
Program (hereafter referred to as ``The Procedures''). These procedures 
were finalized after review of comments received in response to our 
proposal published in the Federal Register (66 FR 56084), on November 
6, 2001. Details of these comments are at the end of this notice, under 
``Background.'' MTMC, as Program Manager of the DOD Personal Property 
Shipment and Storage Program (hereafter referred to as ``The Program'') 
has streamlined and strengthened the carrier qualification process. All 
present and future participants (commercial carriers) in the Domestic 
and International Personal Property Programs are required to use our 
streamlined qualification process using the web, email and/or fax, and 
meet the new financial requirements as further discussed in this 
document.

EFFECTIVE DATES: April 15, 2002.

FOR FURTHER INFORMATION CONTACT: Ms. Sylvia Walker, HQ Military Traffic 
Management Command, ATTN: MTPP-HQ, Room 10N67, Hoffman Bldg II, 200 
Stovall St., Alexandria, VA 22332-5000, telephone (703) 428-2982, fax 
(703) 428-3321 or email [email protected]

SUPPLEMENTARY INFORMATION: To further DoD's goal of making the Personal 
Property Qualification Program stronger and more streamlined, changes 
are being implemented to:
    a. Simplify and reduce paperwork involved in the carrier 
qualification process.
    b. Shorten the approval processing time.
    c. Meet MTMC's legal obligation to conduct business with 
responsible commercial carriers only.
    d. Assess any financial risk to the Government.
    e. Improve Program performance and quality assurance.
    f. Incorporate suggestions made by the carrier industry.
    MTMC's intent is to incorporate common commercial business 
practices, and take advantage of efficiencies gained from the use of 
technology to streamline and strengthen the carrier qualification 
process. These changes, and the new requirements, supersede the current 
``How To Do Business MTMC Pamphlet 55-4.'' ``The Procedures'' will be 
updated and available for your use on the MTMC home page at 
www.mtmc.army.mil on the Internet. Carriers currently participating in 
``The Program'' must submit requested documentation

[[Page 12541]]

between April 15-May 15, 2002. New carriers must comply with the new 
procedures upon application. New applications will be accepted after 
the moratorium is lifted.

    Note: On November 6, 2001, MTMC imposed a 1-year moratorium on 
accepting new carrier qualification applications.

    If a carrier currently participating in ``The Program'' does not 
meet the new requirements, and approval is revoked, the carrier may re-
apply as a ``new'' carrier only after the moratorium is lifted.
    1. The new procedures are as follows:
    a. Requirements for Documentation: Carriers currently in the 
program are required to submit four (4) qualification forms during 
April 15-May 15, 2002. All forms must be received no later than 
midnight (EST) on May 15, 2002. The forms are as follows:
    (1) Electronic Tender of Service Signature Sheet (ETOSSS).
    (2) Certificate of Cargo Liability Insurance (MTHQ Form 49-R).
    (3) Performance Bond (that is effective 2002 Winter Cycle).
    (4) List of Countries and Codes of Service (LOCCS).
    These forms must be submitted electronically via the Internet or by 
fax to (703) 428-3321. Carriers should have internal capability to 
access the Internet, but we do not mandate this requirement. A carrier 
may elect to use a third party vendor to electronically submit 
qualification documentation, but assumes all responsibility for all 
documents arriving within the established time-frame. You can access 
the forms by going to www.mtmc.army.mil, click on Personal Property, 
click on Carrier Approval, click on Carrier Qualification Home Page, 
and Carrier Qualification Registration Page. There you will find 
instructions for completing all the documents. Instructions for 
accessing the forms will also be included in ``the Procedures,'' which 
is also located at www.mtmc.army.mil on MTMC's web site.
    Documentation will be reviewed on a first come, first served basis. 
The submission date will be determined by the electronic date on the 
Electronic Tender of Service Signature Sheet received in MTMC's 
database via electronic means. After completing all required 
documentation, the MTMC computer will send back a dated response saying 
that we have received all the required documentation. It will be the 
carrier's responsibility to ensure any electronic or faxed 
documentation has been submitted to MTMC by the required deadline. MTMC 
will not accept late submissions after midnight (EST) on May 15, 2002.
    During the transition period while documents are being processed, 
carriers currently participating may continue to do business with DoD. 
Before filing rates for the IW02/DW02 cycles, carriers should consider 
the contents of this exam Federal Register notice to make sure they 
comply with the new requirements. Upon MTMC's review of each 
submission, carriers not meeting the qualification requirements will 
have 21 calendar days from the date of notification from MTMC, to 
provide additional information. If approval is revoked, the carrier's 
rates will be administratively removed. New carriers must submit 
previously listed forms at time of application.
    b. Financial Ratios: For carriers currently participating, a quick 
ratio of 1:1 or better is required and a debt to equity ratio of 4:1 is 
desired. New carriers (those applying after the moratorium is lifted) 
must meet the 1:1 and 4:1 at the time of application.
    For carriers currently participating, the status of their debt to 
equity ratio will be determined upon submission of their 2002 financial 
statements as detailed in paragraph C of this document. Carriers 
currently participating that do not meet the desired ratio will not be 
automatically removed from MTMC's program, as they are not intended to 
be ``pass/fail'' standards. Rather, those not meeting the 4:1 ratio 
must provide an explanation of the reason why in writing. If the 
explanation is acceptable, carriers will be allowed to stay in the 
program, but will be re-evaluated within one year. If the explanation 
is not acceptable, MTMC will require additional information to be 
provided so that a financial risk assessment can be performed. As 
always, MTMC reserves the right to convene a Carrier Review Board, if 
it deems necessary. The carrier will not lose their approval status 
until the financial risk assessment has been completed.
    The purpose of the desired ratio, and the possible requirement for 
additional information, is to assess the risk the government assumes in 
doing business with individual carriers. MTMC's goal is to deal with 
only financially viable companies. MTMC realize that sometimes those 
with the greatest debt load are those making the effort to invest in 
the future of their company, to better serve our military customers. 
And, they are seen as the best credit risks to lend money to. However, 
this is not always the case, and we must weed out those that don't fall 
into this category.
    The following definitions are provided for clarification purposes 
only. If there are further questions on the definitions, or how to best 
present financial data, carriers should consult their own accountants.
    Quick Ratio (1:1). The quick ratio, measures the ability of a 
business to meet their current bills. Quick ratio is cash plus 
receivables divided by current liability. 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. Further, if a 
company needs to liquidate inventory or prepaids to pay bills, they are 
in liquidation process and not really a going concern. MTMC recognizes 
the industry's uniqueness in that many transportation related costs are 
incurred and paid after the military shipment is picked-up from the 
member and prior to delivery or placement in SIT. This lag time causes 
a mismatch between revenues and expenses. If the expenses are included 
in the financial statements and identifed separately as prepaid 
transportation expenses or unbilled receivables, MTMC will consider 
them in the Quick Ratio analysis.
    Debt to Equity Ratio (4:1). Debt to equity is total liabilities 
divided by the company's equity.
    c. Financial Statement Requirements: Annually, carriers must 
provide audited financial statements with an auditor's report, or 
reviewed financial statements with an accountant review report. 
Financial statements must be prepared according to generally accepted 
accounting principles using the accrual basis, including balance sheets 
and profit/loss statements. Financial statements, audit, or review 
memorandums must include all referenced footnotes. A carrier may 
voluntarily provide company tax returns in addition to the financial 
statements, if they do desire. Statements must be transmitted 
electronically or via fax to (703) 428-3321, reflecting the signature 
of the company's executive stating that they are correct to the best of 
their knowledge. These statements and other factors will be evaluated 
by MTMC to determine the need for any additional actions.
    Carriers currently participating in the program are not required to 
provide financial statements during the April 15-May 15, 2002, 
timeframe. Year 2002 statements must be submitted within 120-calendar 
days, of year-end, normally defined as December 31, 2002. Under this 
scenario, the financial

[[Page 12542]]

statements would be submitted no later than May 1, 2003. If a company 
closes their books on a fiscal year basis (or other than December 31, 
2002), then financial statements and reports should be submitted within 
120 calendar days of that date. For example, a carrier currently 
participating in the program closing out their books October 31, 2002, 
would be required to submit the financial statements no later than 
March 1, 2003. Companies desiring to change their report dates must 
coordinate this with the Chief of MTMC's Internal Review Office at 
(703) 428-3205.
    Once the moratorium is lifted, new carriers applying for initial 
approval must submit their most recent financial statements to MTMC at 
the time of application. These statements must meet at least our 
minimum requirements. Upon approval, these new carriers must submit 
annual financial statements electronically or by fax, in accordance 
with when they close their books (as stated in the previous paragraph).
    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 embed 
the finances of other companies will not be accepted. Letters of 
guarantee from a parent company will also not be accepted. However, for 
reporting purposes, a carrier may submit one document that reflects 
several companies separate financial information, as long as the 
financial information is reported in each individual company's name and 
reflects that company's account information. Each individual company 
must comply with desired ratio minimums, as detailed in paragraph b. 
New companies must meet required ratio minimums at time of application. 
In other words, MTMC wants to see the health of the individual 
companies. MTMC will not accept truly consolidated reports where there 
is no separation from one company to another.
    Additional Information: If MTMC does not receive financial 
statements within the 120 calendar day time-frame, the company may be 
placed in nonuse due to non-compliance with program requirements. No 
pro forma statements will be accepted in lieu of actual financial 
statements. Additionally, 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 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.
    d. Cargo Liability Insurance: For Domestic and International 
programs, the cargo liability minimum amount per shipment will be 
$22,500. The aggregate amount will remain $150,000. The Certificate of 
Cargo Liability Insurance form (MTHQ Form 49R) located on MTMC's 
website, must reflect a signature of the insurance representative as 
proof of insurance. No other forms will be accepted.
    e. Performance Bonds: Performance Bonds are required in both the 
international and domestic interstate programs. The bond requirement 
does not apply to domestic intrastate carriers at this time.
    For the International program, the bond requirement will remain at 
$100,000 or 2.5%, of the international revenue based on previous year 
revenue, whichever is greater. International carriers must submit 
(electronically or by fax) a ``continuous, until cancelled,'' bond, 
that reflects signatures of the surety representative and a carrier 
representative listed on the ETOSSS. MTMC will review the international 
bond amount semi-annually. If it is determined the bond needs to be 
increased, the carrier will be notified in writing and provided 30 days 
to submit a bond or a rider to the bond on file reflecting the updated 
amount. MTMC will entertain written requests for an additional 30 days 
to increase the bond amount on a case-by-case basis. Since all 
international carriers currently participating already have a bond in 
place, no submission is required at this time. The current bond will 
remain in effect until you are notified that there is a requirement to 
increase the bond. Future international carriers must have the bond in 
place 1 month before the cycle begins in which they wish to 
participate.
    For the domestic interstate program, the bond must be $50,000 and 
have an effective date of November 1, 2002. Domestic interstate 
carriers currently participating in the program must submit a 
``continuous until cancelled'' bond that reflects signatures of the 
surety representative and a carrier representative listed on the 
ETOSSS, electronically or by fax, in the amount of $50,000, effective 
winter cycle 2002. In future years, the bond will be 2.5% of your 
domestic interstate personal property revenue based on the previous 
year or $50,000, whichever is greater. MTMC will review this annually. 
If it is determined the bond needs to be increased, the carrier will be 
notified in writing and provided 30 days to submit a bond or a rider to 
the bond on file reflecting the updated amount. MTMC will entertain 
written requests for an additional 30 days to increase the bond amount 
on a case-by-case basis. Future domestic carriers must have the bond in 
place 1 month before the cycle in which they wish to participate 
begins.
    f. Experience Requirements: The company must have 3 years 
Government and/or commercial experience in the movement of Personal 
Property. MTMC will use the date on the operating authority, or if the 
state is deregulated, the date on the state's Articles of Incorporation 
for determining the 3-year experience. MTMC will require proof at time 
of application of the 3-year experience (such as, bills of lading, 
letters of reference, etc. of personal property movement). Carriers 
currently participating in the program are exempt from this 
requirement. However, new carriers must comply with the 3-year 
experience rule, and provide the proof at the time of application.
    Additionally, carriers must continually have two (2) key employees 
(i.e. involved in the management of the company) with at least three 
years experience. the names of these individuals are required to be 
included on the ETOSSS.
    g. Notification Requirements: All carriers are required to notify 
MTMC within 45 calendar days of a change of ownership, a change of 
corporate name, or change of key personnel.
    (1) Change of Ownership: When a company changes ownership, a 
novation agreement must be submitted to MTMC. Approval will be based on 
a review of the sales agreement and evidence to show that the carrier 
complies with all carrier qualification requirements. The new asset 
owner (transferee) must assume all obligations of the carrier as if 
they were the original owner.
    (2) Change of Name: When a company changes their name, they must 
submit a change of name notification.
    (3) Change of Key Personnel: When a company changes key personnel 
they must submit an updated ETOSSS.
    Detailed instructions on the novation process, change of name 
notification and change of key personnel can be located in the ``How to 
do Business in the DOD Personal Property Program'' pamphlet located at 
www.mtmc.army.mil on MTMC's website.
    2. MTMC will use the Department of Transportation (DOT) SAFER 
system to obtain a carrier's safety rating, verify operating authority, 
and note any safety infractions. This safety rating may be used when 
carriers are seeking initial/

[[Page 12543]]

additional approval or in Carrier Review Board actions.
    3. Though nothing changes in the Common Financial and/or 
Administration Control (CFAC) arena as a result of this streamlining 
and strengthening initiative, domestic and international carriers are 
reminded of the continuing requirement to declare CFAC (affiliate) 
relationships with other participating carriers in accordance with the 
Tender of Service. This declaration will continue to be accomplished on 
the ETOSSS and will be submitted electronically to MTMC (as stated 
previously). Please note we do intend to reduce the incentive for paper 
companies in our future program.
    CFAC (affiliates) means associated business concerns or individuals 
directly or indirectly, where (a) either one controls or can control 
the other(s) or where (b) a third party controls or can control them 
both. All currently participating carriers in the International Program 
and new international carriers will continue to be required to refrain 
from competing, i.e. submitting rates, in the same code of service/
channel combinations served by any of their affiliates. Carriers 
failing to disclose CFAC (affiliate) relationships may be removed from 
the Program for a period of up to 2 years and may be prosecuted for 
filing a false official statement in violation of 18 USC 1001.

Background

    A notice of proposed implementation to establish new procedures to 
participate in the Department of Defense Personal Property Program was 
published in the Federal Register, 66 FR 56084, Tuesday, November 6, 
2001. In response to this notice, the carrier associations and 
individual carriers and agents submitted numerous comments. The 
comments were all carefully considered and were the subject of 
discussion at various meetings. Listed below are the comments and 
MTMC's response:
    Comment 1: Electronic qualification procedures. Could smaller 
carriers utilize the services of a third party to accomplish the 
required electronic submission, if necessary? Also there was a comment 
on declaring Common Financial and/or Administrative Control (CFAC) 
using the ETOSSS form.
    Response: While we prefer carriers to have internal capability to 
access the Internet, we do not mandate this requirement. A carrier may 
elect to use a third party vendor to submit qualification documentation 
electronically via the Internet. The CFAC statement declaring 
international CFAC and domestic CFAS is on the ETOSSS form.
    Comment 2: Application for re-qualification. There was a concern 
with using the term ``Re-apply'' for qualification for current 
participants.
    Response: We will not use the terminology ``re-apply.'' Instead, we 
will use ``comply with'' when referring to all current participants. 
Current carrier participants must comply with all new requirements, as 
detailed in this document.
    Comment 3: MTMC should consider staggering the application process 
in stages and should consider the impact on the rate cycle to allow 
carriers to incorporate any additional costs in their rate submission.
    Response: We decided to accept electronic applications April 15-May 
15, 2002, on a first-come, first-served basis. By doing this, carriers 
will be able to incorporate any additional expenses in their rates for 
Winter 2002.
    Comment 4: Carriers do not want to be placed in nonuse due to not 
meeting the new standard, without the opportunity to address the 
issues.
    Response: Once documentation is submitted, we will review them for 
compliance with our program rules. if we find the company does not meet 
the minimum requirements, they will not be placed in immediate nonuse 
and will be afforded the opportunity to address our concerns within 21 
calendar days of notification.
    Comment 5: Carriers do not want to meet a debt to equity 
requirement. They cited problems in classifying the purchase of new 
equipment and being properly credited for when a shipment has been 
picked up but not delivered, so they could bill.
    Response: While we decided to have a Debt to Equity requirement, it 
is not a pass/fail system. We are allowing for flexibility in the 
financial ratios, as long as the carrier shows continued improvement, 
or shows evidence justifying that satisfies MTMC. Additionally, the 
Debt to Equity requirement was made less stringent (4:1 versus 2:1) and 
we removed the requirement for a current ratio. The objective is to 
encourage participating carriers to manage debt in a responsible manner 
consistent with industry norms.
    Comment 6: Carriers did not want to submit copies of their company 
income tax returns.
    Response: We are not requiring copies of the income tax returns, 
but a carrier may voluntarily provide them in addition to the financial 
statements, if they so desire.
    Comment 7: The $315,000 aggregate limit seems quite high when 
compared to the $22,500 shipment cargo liability minimum. The 
likelihood of 14 shipments at risk at one time is remote. The amount 
per shipment limit of $22,500 would present no problem, as the 
``average'' mover in the program carries a $50,000 per shipment limit.
    Response: The amount per aggregate minimum of $150,000 will not be 
increased. The amount per shipment on cargo liability is increased to 
$22,500.
    Comment 8: There were concerns regarding the bond in the Domestic 
program. The heaviest burden of the bonding costs will fall on carriers 
that do not perform very many moves per year to recoup the added cost 
of the bond. This is especially true for intrastate carriers, where 
there may only be a handful of moves per year within a given state.
    Response: The bond is protection for the Government in the event of 
a carrier's failure to move the shipment. 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 upon services. We excluded intrastate carriers from the bond 
requirement.
    Comment 9: Comments indicated that 5 years company experience was 
too long and some were against any minimum experience requirement. 
Also, MTMC's proposal to measure this experience from either the date 
shown on the operating authority or the date reflected on the Articles 
of Incorporation does not accomplish measurement of experience. Some 
suggested incorporating measurement by the experience of personnel.
    Response: We want to do business with companies that have already 
weathered start up costs, etc. However, we reduced the carrier 
experience requirement to three years. The only way to determine this 
experience is the date shown on the operating authority or the date 
reflected on the Articles of Incorporation. We also exempted carriers 
currently participating from this requirement. In addition, we added 
the requirement for carriers to continually have two (2) key employees 
(responsible fro the management of the company) with at least 3 years 
experience in the movement of household goods.
    Comment 10: Carriers are concerned that the information in the 
SAFER system is not correct.
    Response: We plan to still use the SAFER system as a source for 
information. However, if necessary, the carrier will be given the 
opportunity to provide documentation that counters those findings for 
further consideration.

[[Page 12544]]

    Comment 11: There was a concern regarding the seller of a company 
being held responsible for a period of time when a company has been 
sold.
    Response: We removed the requirement for the seller to have 
responsibility after the sale. MTMC will require the new owner to 
certify their acceptance of the carrier's liabilities and obligations.
    Comment 12: Carriers want to submit a combined or consolidated 
financial statement.
    Response: We will only accept stand-alone financial statements in 
the name of the company that holds the approval. MTMC continues to 
believe that carriers should qualify on their own strength and merit 
(i.e., company, can stand independently). However, for reporting 
purposes, a carrier may submit one document that reflects several 
companies separate financial information, as long as the financial 
information is reported on each individual company's name and reflects 
that company's account information. Each individual company must meet 
the ratio minimums as detailed in this document. In other words, we 
want to see the health of the individual companies. MTMC will not 
accept truly consolidated reports where there is no separation from one 
company to another.

Paperwork Reduction Act.

    The Paperwork Reduction Act, 44 U.S.C. 3501 et seq., does not apply 
because no new 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.

Patricia K. Hunt,
Col. USAF, DCS, Passenger and Personal Property.
[FR Doc. 02-6582 Filed 3-18-02; 8:45 am]
BILLING CODE 3710-08-M