Travel Process Reengineering: DOD Faces Challenges in Using Industry
Practices to Reduce Costs (Letter Report, 03/02/95,
GAO/AIMD/NSIAD-95-90).

With processing costs accounting for at least 30 percent of the $3.5
billion that the Pentagon spent on travel in fiscal year 1993, adopting
private industry's "best practices" for travel management could save
millions of dollars. The Defense Department (DOD) needs to streamline
its complex processing system, which involves 700 voucher-processing
centers, multiple travel agencies, and more than 1,300 regulations.
"Best practices" in the private sector include empowering employees to
make travel decisions, reducing the number of travel agents to as few as
one, consolidating multiple travel-processing centers into a single
facility, and simplifying travel policies to less than 20 pages. GAO
summarized this report in testimony before Congress; see: Business
Process Reengineering: DOD Has a Significant Opportunity to Reduce
Travel Costs by Using Industry Practices, by Jack L. Brock, Director of
Information Resources Management for National Security and International
Affairs, before the Subcommittee on Oversight of Government Management
and the District of Columbia, Senate Committee on Governmental Affairs.
GAO/T-AIMD-95-101, Mar. 28, 1995 (18 pages).

--------------------------- Indexing Terms -----------------------------

 REPORTNUM:  AIMD/NSIAD-95-90
     TITLE:  Travel Process Reengineering: DOD Faces Challenges in Using 
             Industry Practices to Reduce Costs
      DATE:  03/02/95
   SUBJECT:  Travel agents
             Travel costs
             Federal employees
             Travel allowances
             Defense cost control
             Accounting procedures
             Claims processing costs
IDENTIFIER:  National Performance Review
             Defense Performance Review
             Joint Financial Management Improvement Program
             
******************************************************************
** This file contains an ASCII representation of the text of a  **
** GAO report.  Delineations within the text indicating chapter **
** titles, headings, and bullets are preserved.  Major          **
** divisions and subdivisions of the text, such as Chapters,    **
** Sections, and Appendixes, are identified by double and       **
** single lines.  The numbers on the right end of these lines   **
** indicate the position of each of the subsections in the      **
** document outline.  These numbers do NOT correspond with the  **
** page numbers of the printed product.                         **
**                                                              **
** No attempt has been made to display graphic images, although **
** figure captions are reproduced.  Tables are included, but    **
** may not resemble those in the printed version.               **
**                                                              **
** Please see the PDF (Portable Document Format) file, when     **
** available, for a complete electronic file of the printed     **
** document's contents.                                         **
**                                                              **
** A printed copy of this report may be obtained from the GAO   **
** Document Distribution Center.  For further details, please   **
** send an e-mail message to:                                   **
**                                                              **
**                                            **
**                                                              **
** with the message 'info' in the body.                         **
******************************************************************


Cover
================================================================ COVER


Report to the Chairman, Subcommittee on Oversight of Government
Management and the District of Columbia, Committee on Governmental
Affairs, U.S.  Senate

March 1995

TRAVEL PROCESS REENGINEERING - DOD
FACES CHALLENGES IN USING INDUSTRY
PRACTICES TO REDUCE COSTS

GAO/AIMD/NSIAD-95-90

DOD Travel Process Reengineering

(511291)


Abbreviations
=============================================================== ABBREV

  DOD - Department of Defense
  DPR - Defense Performance Review
  GAO - General Accounting Office
  JFMIP - Joint Financial Management Improvement Program
  NSA - National Security Agency

Letter
=============================================================== LETTER


B-259460

March 2, 1995

The Honorable William S.  Cohen
Chairman, Subcommittee on Oversight
 of Government Management
 and the District of Columbia
Committee on Governmental Affairs
United States Senate

Dear Mr.  Chairman: 

This report responds to your request that we assess travel management
in the Department of Defense (DOD) using the "best practices" of
private organizations as benchmarks.  The report provides the results
of our review, including information on DOD's temporary duty travel
processes and its estimates of travel costs.  It also includes an
assessment of DOD's ongoing initiatives to improve its travel
processes. 


   RESULTS IN BRIEF
------------------------------------------------------------ Letter :1

DOD has an opportunity to significantly reduce costs and streamline
travel management--a process that currently involves multiple travel
agents, uses 700 voucher processing centers, and is governed by 1,357
pages of regulations.  While DOD reported that it spent about $3.5
billion on temporary duty travel in fiscal year 1993, it could not
identify actual processing costs.  DOD estimated that its processing
costs may be at least 30 percent of the direct travel cost--well
above the 10 percent average reported for private companies and the 6
percent rate that industry considers an efficient operation. 

In contrast, leading companies have been able to dramatically improve
service and reduce processing costs by reengineering their travel
management and implementing "best practices." These practices include
empowering employees to make travel decisions, reducing the number of
travel agents used to as few as one, consolidating multiple travel
processing centers into a single center, and simplifying travel
policies to less than 20 pages. 

DOD could save hundreds of millions of dollars in travel processing
costs by following the example of leading companies.  DOD has
recognized this and, in July 1994, chartered a task force to
reengineer travel management.  The task force recommended, and the
Deputy Secretary agreed, that DOD consider applying private industry
best practices as part of its reengineering effort.  A transition
team is now tasked with developing an implementation mechanism. 
However, the Department faces an imposing challenge in fundamentally
changing one of its basic business processes.  Sustained commitment
and oversight by top management will be critical to ensure success. 


   BACKGROUND
------------------------------------------------------------ Letter :2

DOD reported that it spent about $3.5 billion in direct costs and
processed about 8.2 million vouchers for temporary duty travel in
fiscal year 1993.  Even though actual indirect costs are unknown, DOD
estimated that it spent 30 percent of direct costs to process
temporary duty travel.\1 DOD employees-- both civilian and military
personnel worldwide--perform various types of travel to carry out
mission and business functions.  This report focuses on temporary
duty travel, which includes travel for business, deployment, and
training purposes.  Another primary type of travel, permanent change
of station, involves relocation of personnel. 

DOD travel processing is done on a decentralized basis.  Travel
processing generally includes the following elements: 

  -- authorizing the funding and appropriate means of travel and
     issuing travel orders;

  -- arranging transportation and accommodations and developing
     itineraries;

  -- making travel expenditures, purchasing tickets, and collecting
     receipts;

  -- preparing and processing vouchers based on receipts and other
     supporting documents; and

  -- reconciling accounts, auditing vouchers, making payments, and
     generating management reports. 

Private industry has travel processes similar to those of DOD.  In
recent years, many companies have reengineered their travel processes
to make dramatic improvements in service and to reduce costs. 
Business process reengineering is a management technique that can
achieve dramatic improvements in cost, quality, and customer service
by making fundamental changes in the way an organization defines its
mission and performs its work. 

Several DOD organizations have initiated efforts to improve travel
management processes and to reduce associated costs.  For example, in
July 1994, the Under Secretaries of Defense for Personnel and
Readiness and for Acquisition and Technology, the DOD Comptroller,
and the Director of Administration and Management chartered an
agencywide task force to reengineer the Department's travel
processing.  The task force was charged with taking a "clean sheet of
paper" approach to evaluating current processes and developing a new
system to manage temporary duty travel for all DOD organizations. 
This new system is to meet operational mission requirements, improve
customer service, and reduce costs. 

The National Security Agency has an ongoing effort to assess its
existing processes and gather information from industry on ways to
streamline management and reduce costs.  Also, an Air Force
reinvention lab is experimenting with a new travel process.  This
effort includes reducing the number of people and steps involved in
the process, and then automating any remaining steps. 


--------------------
\1 According to DOD, the cost of lost productivity of the traveler,
who must take time to support the administrative process, is an
additional 10 to 15 percent of direct travel costs. 


   OBJECTIVES, SCOPE, AND
   METHODOLOGY
------------------------------------------------------------ Letter :3

As agreed with your office, the objectives of this review were to (1)
review DOD's travel management processes and costs, (2) identify best
practices that private industry has used in reengineering travel
management and compare these practices to DOD's current travel
practices, and (3) assess DOD's initiatives to improve travel
processes.  We focused our review on processes and costs to manage
temporary duty travel.  We did not assess the need for travel by DOD
or private companies or the types of travel performed.  We also did
not compare the direct cost of DOD travel with that of private
industry to determine cost-effectiveness, and we did not
independently verify the accuracy of travel processing cost data
provided by DOD and private sector organizations. 

To review DOD's travel management processes and costs, we obtained
prior studies and reports and interviewed officials from DOD
headquarters, each military service, and the Defense Finance and
Accounting Service.  We obtained data on DOD-wide travel processes,
developed flowcharts of generic travel processes, and reviewed cost
data available on travel operations. 

To identify the best practices resulting from private industry's
reengineering of travel management, we researched literature on
travel management at various university, military, and public library
facilities.  As a result of our research, we identified nine
consultants in the travel industry.  These consultants assisted us in
identifying 20 companies that use "best practices" in travel
management.  Of the 20 companies identified, we selected 2 for more
detailed study--General Electric Corporation and Allied Signal
Corporation.  We selected these companies based on criteria that we
developed regarding such aspects of travel management as total
expenditures, number of vouchers processed, and actions taken to
reduce processing costs.  We also used criteria on travel management
efficiency from an American Express report on 1,550 randomly selected
private and public sector organizations.\2 During our visits to the
two companies selected, we obtained information on company travel
policies, direct and indirect travel costs, and travel management
improvement initiatives. 

To assess DOD initiatives to improve travel management processes, we
interviewed officials from the DOD Task Force to Reengineer Travel,
the National Security Agency and Air Force travel reinvention
laboratories, the Defense Finance and Accounting Service, and the
Washington Headquarters Service.  We obtained documentation
concerning efforts by these organizations to improve travel
management and progress made to date.  We did not independently
verify any cost savings provided by these organizations. 

We conducted our review from July 1994 to January 1995 in accordance
with generally accepted government auditing standards.  We performed
our work at military, public, and private organizations in Cincinnati
and Dayton, Ohio; Phoenix and Tempe, Arizona; and the Washington,
D.C., metropolitan area.  We discussed the contents of this report
with senior representatives of the DOD Task Force to Reengineer
Travel and have incorporated their comments where appropriate.  These
officials generally agreed with our findings, conclusions, and
recommendations. 


--------------------
\2 Jeffrey B.  Lang, The American Express Guide to Corporate Travel
Management (New York:  American Management Association, 1994). 


   DOD TRAVEL PROCESSES AND COST
   ESTIMATES
------------------------------------------------------------ Letter :4

DOD has not fully identified its agencywide travel processes and
costs.  DOD's travel operations are decentralized and include
numerous steps that vary by location.  However, DOD officials
identified some common processing steps that are performed
agencywide.  Although DOD does not capture the cost of various
administrative processes such as travel management, a DOD-wide task
force recently estimated that indirect travel costs may be 30 percent
of direct costs. 


      DOD TRAVEL PROCESSES
---------------------------------------------------------- Letter :4.1

According to DOD officials, travel processing differs not only among
the military services, but within each service.  The number and type
of steps to complete the processes vary depending upon local policies
and the degree to which automation is used.  However, DOD officials
pointed out that certain steps are usually performed at all
locations. 

For example, prior to a trip, the traveler obtains information, which
is used by a clerk to prepare a written travel order.  The travel
order then must be approved by the traveler's supervisor.  The
administrative/budget office reviews the travel order, assigns a
travel order number and an accounting code to the travel order, and
establishes an obligation of funds.  If the traveler needs a cash
advance, the local disbursing/travel office computes and pays the
advance.  Because there is sometimes no single point for a DOD
traveler to make all travel arrangements, travelers may have to rely
on several offices to make transportation, lodging, and car rental
arrangements. 

After returning from a trip, the traveler must also complete numerous
steps.  For example, the traveler manually prepares a travel expense
voucher and attaches receipts and other supporting documents.  The
voucher is approved by the traveler's supervisor and sent to one of
over 700 voucher processing centers for computation.  To compute the
proper expense, the processing center usually refers to DOD's travel
regulations, which total 1,357 pages.  A supervisor then audits the
expense, particularly to identify any disallowances.  A clerk sorts
the five copies of the voucher and distributes them.  A disbursing
office collects from the traveler any unused advances or reimburses
the traveler for any amounts due, depending on the claim.  The
disbursing office then records the payment and files vouchers and
supporting documents. 

Appendix I depicts the typical steps and complexities involved in
processing DOD travel.  Although the figure does not capture the
variations among services or within individual services, it provides
an overview of DOD's multistep processing procedures.  DOD officials
verified that the figure accurately summarizes travel processes. 

Although DOD has not identified travel steps for all locations, a
recent study of four DOD locations lists (1) the number of steps from
identifying the need to travel through reimbursing a traveler, (2)
the time to complete each step, and (3) the elapsed time in workdays
to complete all steps.\3 Table 1 summarizes these data, which
highlight the variation among DOD locations. 



                                Table 1
                
                  Number of Steps and Time to Complete
                Travel Processing at Four DOD Locations

                                               Hours to        Elapsed
                               Number of       complete     processing
Location                           steps          steps   time in days
-------------------------  -------------  -------------  -------------
A                                     47            5.9             19
B                                     27            4.1              7
C                                     19            3.4              8
D                                     28            5.0             12
----------------------------------------------------------------------

--------------------
\3 Functional Economic Analysis of the Department of Defense Travel
System, Naval Postgraduate School, September 14, 1994. 


      COST ESTIMATE OF DOD'S
      TRAVEL OPERATIONS
---------------------------------------------------------- Letter :4.2

DOD has made several efforts to determine its travel processing
costs.  In early 1994, the Director of the Defense Performance
Review\4 (DPR) made a statement indicating that DOD spends more to
process travel than it spends on actual travel.  However, DPR
officials could not provide us with any data to substantiate this
claim. 

In July 1994, DOD chartered an agencywide task force to assess its
current travel network and develop a "fair and equitable" temporary
duty travel system for all DOD organizations.  The task force found
that it would be difficult for DOD to determine its actual costs to
complete travel processing steps because the Department's accounting
systems do not record such costs. 

Nonetheless, the task force estimated that during fiscal year 1993,
DOD spent $500 million, or 14 percent of direct temporary duty travel
costs, to complete several processing steps.  These steps include
order writing, airline ticket payment and reconciliation, and voucher
payment.  The task force identified other travel management
activities, such as internal processing, arranging travel, and
training, but did not attempt to estimate their individual costs. 
Taking these activities into account, the task force concluded that
30 percent of direct costs may be spent to process temporary duty
travel.  Further information on task force efforts is included in a
later section of this report. 


--------------------
\4 The Defense Performance Review was established to implement the
governmentwide National Performance Review initiative within DOD. 


   INDUSTRY BEST PRACTICES HAVE
   RESULTED IN EFFICIENT TRAVEL
   MANAGEMENT PROCESSES
------------------------------------------------------------ Letter :5

Many private sector companies have reengineered their travel
processes and implemented a variety of initiatives to improve the
efficiency and effectiveness of their travel operations.  Successful
initiatives, deemed "best practices," have resulted in dramatic
reductions in travel processing costs.  In efficient operations,
indirect travel processing costs average about 6 percent of direct
travel costs.  Two leading companies in travel process
reengineering--General Electric and Allied Signal Corporation--used
best practices to reduce their travel processing costs to well below
the 6 percent target.  Their efforts included consolidating multiple
travel processing centers, reducing the number of travel agents used,
and simplifying travel regulations. 


      PROCESSING COSTS DETERMINE
      EFFICIENCY OF OPERATIONS
---------------------------------------------------------- Letter :5.1

The efficiency of an organization's travel management operations can
be measured by assessing processing costs as a percentage of direct
travel costs.  On the basis of information provided by 1,550 randomly
selected private and public sector organizations, American Express
recently reported that a company's cost to process travel averages
about 10 percent of direct travel and entertainment expenses.  Less
efficient companies, the report stated, spend 15 percent or more;
more efficient companies spend 6 percent or less. 


      BEST PRACTICES IDENTIFIED IN
      COMPANIES WITH EFFICIENT
      TRAVEL MANAGEMENT PROGRAMS
---------------------------------------------------------- Letter :5.2

Efficient travel operations are often the result of a variety of
initiatives implemented by private companies to reengineer processes
and reduce costs.  These successful initiatives, or "best practices,"
can serve as benchmarks or examples for all of industry to follow. 

During our initial survey, we identified 20 companies whose practices
could be followed by other organizations to manage travel.  Using a
methodology we developed based on previous GAO assessments of best
commercial practices in other areas, we selected General Electric and
Allied Signal for further study.  These companies had reduced their
processing costs to well below the 6 percent standard for efficient
operations by using best practices.  For instance, while General
Electric representatives could not provide savings estimates in
dollars, they estimated that they reduced travel processing costs to
3.2 percent of direct travel costs.  Allied Signal reduced its costs
even further--to under 1 percent--and saved about $2 million the
first year after implementing revised processes.  Table 2 provides
reported travel data for the two companies. 



                                Table 2
                
                Annual Travel Data for General Electric
                 and Allied Signal as of November 1994

                         (Dollars in millions)

                                                Processing
                                                 cost as a
                                                percent of      Travel
                            Annual      Annual      annual    vouchers
                            travel  processing      travel   processed
Company                       cost        cost        cost    annually
----------------------  ----------  ----------  ----------  ----------
General Electric              $750         $24         3.2     600,000
Allied Signal              $170 to        $1.5  .75 to .88     174,000
                              $200
----------------------------------------------------------------------
In general, the two companies implemented the following practices to
improve the efficiency and effectiveness of their travel operations. 

  -- Empowering travelers to decide when travel is necessary

Both General Electric and Allied Signal no longer require employees
to obtain supervisory approval before traveling.  Rather, employees
are empowered to decide what travel is needed to carry out their
company's mission.  For example, General Electric representatives
stated that travelers are to use good business sense and to treat the
company's travel money like their own.  Allied's practice is to allow
employees to make travel decisions that result in the least expense
to the company, provided that this does not result in unnecessary
inconvenience or ineffective use of company time. 

  -- Eliminating prior approval of travel and travel orders

In concert with empowering employees to make travel decisions,
neither company requires a formal travel authorization document. 
Instead, supervisors receive reports of travelers' actual expenses
after travel is completed.  Any inconsistencies or concerns are
addressed at that time. 

  -- Mandating use of a corporate charge card for travel expenses and
     cash advances

Both companies require travelers to use corporate credit cards for
transportation, hotel, car rental, and other major expenses, as well
as for cash advances.  By requiring the use of corporate cards, both
companies have reduced their overall levels of cash advances and
outstanding balances.  Allied Signal, in fact, requires that
travelers justify instances when credit cards are used for less than
90 percent of expenses.  Subsequent to travel, Allied Signal
travelers have the option of receiving reimbursement and paying their
own credit card charges, or having Allied submit payments directly to
the credit card company.  General Electric has its own corporate
credit card that employees are required to use. 

  -- Reducing the number of travel agents used

Prior to reengineering, both companies used numerous travel agents to
make travel arrangements.  Specifically, General Electric had
contracts with over 300 agents while Allied had over 40.  Since
reengineering, General Electric has eliminated all but one travel
agent, and considers its relationship with this agent to be a
"partnership," with both working to reduce direct travel costs. 
Allied has one agent to handle 95 percent of its travel arrangements
and a second agent to handle the other 5 percent. 

  -- Consolidating travel processing centers

In the past, Allied had at least 23 travel voucher processing centers
while General Electric had as many as 40.  Each company has since
consolidated its voucher processing centers into a single location. 

  -- Simplifying travel policies

Both companies revised and shortened their travel policies, which
they considered to be too cumbersome and complex.  General Electric's
draft policy is now contained in 2 pages, while Allied Signal's
travel policy totals 11 pages. 

  -- Automating voucher processing

While General Electric travelers still manually prepare expense
reports, Allied Signal travelers have the option of using an
automated system.  Allied Signal representatives told us that they
spend about $10.00 to process a manual expense report, but only about
$3.00 to process an electronic report.  Due to additional
improvements, Allied expects the cost to process the automated
expense report to decline even further, to about $1.50, in the near
future. 

  -- Conducting random audits of travel vouchers

General Electric and Allied Signal no longer audit each travel
expense report as they did in the past.  Currently, General Electric
conducts detailed audits of only 5 to 10 percent of its reports,
while Allied Signal audits about 45 percent. 

Figure 1 illustrates the general travel steps followed by these two
companies under their streamlined approaches.  As previously stated,
appendix I illustrates DOD's travel process. 

   Figure 1:  General Electric and
   Allied Signal Travel Processes

   (See figure in printed
   edition.)

General Electric and Allied Signal representatives told us that they
are continuously pursuing additional ways to improve travel
processing and reduce costs. 


   DOD PRACTICES, SUBJECT TO
   FEDERAL LEGAL AND
   INTERNAL CONTROL REQUIREMENTS,
   DIFFER WIDELY FROM INDUSTRY
   BEST PRACTICES
------------------------------------------------------------ Letter :6

There are striking differences between the travel practices and costs
for travel of DOD and private industry.  DOD has an opportunity to
save hundreds of millions of dollars by applying industry best
practices in its travel management reengineering effort; however,
applying such practices will not be a simple matter.  It will involve
consideration of applicable statutory and regulatory requirements and
changing or waiving some of these requirements.  Federal law and
regulations also require that DOD provide assurance that adequate
internal controls are in place over travel processing to guard
against misuse of government funds. 


      COMPARISON BETWEEN PRIVATE
      SECTOR AND DOD TRAVEL
      PROCESSES AND COSTS
---------------------------------------------------------- Letter :6.1

Our comparison of the travel management practices of the two private
companies and DOD shows significant differences, as illustrated in
table 3. 



                                Table 3
                
                 Differences Between Private Sector and
                    DOD Travel Management Practices

                                    General     Allied      Department
Private sector best practice        Electric    Signal      of Defense
----------------------------------  ----------  ----------  ----------
Employee can travel without prior   Yes         Yes         No
approval

Employee can travel without         Yes         Yes         No
authorization document

Travelers must use corporate        Yes         Yes         No
credit card

Number of travel agents is limited  One agent   Two agents  Multiple
and these agents provide full       provides    provide     agents;
services                            full        full        some
                                    services    services    provide
                                                            full
                                                            services

Expense reporting is automated      No          Partly      No

Number of processing centers is     1           1           700
limited                             center      center      centers

Travel policies are simplified      2 page      11 page     1,357
                                    policy      policy      pages
                                                            of
                                                            regulation
                                                            s

Expense reports audited             Random      Random      100
                                                            percent
----------------------------------------------------------------------
The differences between the private sector and DOD are also reflected
in the costs to manage travel.  As previously stated, General
Electric and Allied Signal have reduced their indirect travel costs
to 3.2 percent and under 1 percent of direct travel costs,
respectively--much less than the 6 percent rate considered efficient. 
In comparison, according to one estimate, DOD may be spending 30
percent of its direct travel cost to process travel.  If DOD applied
industry best practices and reduced its travel processing costs to
what industry considers an efficient level, the Department could save
hundreds of millions of dollars. 


      EFFECTIVE REENGINEERING
      INVOLVES CONSIDERATION OF
      LEGAL REQUIREMENTS AND
      NEEDED INTERNAL CONTROLS
---------------------------------------------------------- Letter :6.2

Despite the potential to achieve savings and efficiency improvements
similar to those realized by private industry, reengineering travel
management at DOD will not be a simple matter of adopting private
sector practices.  Federal statutory and regulatory requirements
could affect DOD's consideration of industry best practices as
alternatives to current travel management procedures.  In addition,
the efficiency gains of revised practices must be balanced with
adequate safeguards for federal funds. 


         LEGAL REQUIREMENTS TO
         CONSIDER IN APPLYING BEST
         PRACTICES
-------------------------------------------------------- Letter :6.2.1

Numerous statutes and regulations govern official travel by federal
civilian and military personnel.  Statutes applicable to DOD cover a
range of activities--from providing employees on official travel with
per diem allowances to authorizing travel by dependent family members
to attend burial services for deceased military personnel.  DOD uses
the Federal Travel Regulations issued by the General Services
Administration as a basis for developing and issuing its Joint Travel
Regulations, Volume 2, for civilian employee travel, while its travel
policies for military personnel are found in the Joint Federal Travel
Regulations, Volume 1, which the Department issues. 

Statutes governing federal travel are broad authorizations that
generally would not impede DOD efforts to adopt management practices
similar to those of private industry.  However, in some specific
instances, statutory changes may be necessary.  One example involves
the requirement for prior authorization of travel.  As previously
discussed, a best practice in private industry is to permit travel
without prior authorization.  However, it is unclear how far DOD
could pursue such a policy for military personnel because 37 U.S.C. 
404 requires that military personnel travel "under orders."

Further, applying industry best practices at DOD to permit civilian
employees to travel without prior authorization may require changes
or waivers to both the Federal Travel Regulations and DOD's Joint
Travel Regulations. 


         DOD MUST MAINTAIN
         INTERNAL CONTROLS IN
         REENGINEERING TRAVEL
-------------------------------------------------------- Letter :6.2.2

In addition to the above-mentioned statutes and regulations, DOD is
required under 31 U.S.C.  3512(b) to establish and maintain effective
internal control systems that, among other things, safeguard assets
and ensure the use of budget authority in accordance with laws,
regulations, and policies.  Payment systems, including those for
travel, should therefore provide reasonable assurance that payment
transactions are properly authorized, documented, and made within the
allowed limits.  Further, agencies are required under 31 U.S.C. 
3512(d) to annually evaluate their internal control systems and
report to the President and the Congress on the results of these
evaluations. 

To help achieve these objectives, agencies must adopt internal
controls consistent with standards GAO has issued in Title 2 of its
Policy and Procedures Manual for Guidance of Federal Agencies. 
Although GAO's standards call for control systems that help ensure
proper authorizations, effective safeguards of assets, and reliable
records, the specific techniques needed to achieve these objectives,
with certain exceptions, can vary and are left to agencies to select
based on their needs and systems capabilities. 

A number of agencies are seeking to reduce administrative costs and
streamline employee travel and payment systems.\5 However,
improvements should only be made within the framework of adequate
controls that provide reasonable assurance that the control
objectives will be achieved and are cost-effective. 


--------------------
\5 We frequently receive requests for interpretations as to whether
proposed systems changes would satisfy internal control standards in
the Policy and Procedures Manual.  If we determine that effective
implementation of these proposals would satisfy control objectives,
we respond favorably, stating that we have no objection to agencies
implementing their proposals. 


   DOD TRAVEL REENGINEERING
   EFFORTS SHOW INITIAL PROMISE
------------------------------------------------------------ Letter :7

Like private industry, Defense has recognized the need to improve
travel management, lower costs, and improve service.  Last July, DOD
created an agencywide task force to examine its travel processes and
policies and develop proposals for a "clean sheet" approach to travel
management.  The task force proposed implementing a travel system
that included many of the characteristics of industry best practices. 
The Deputy Secretary has approved the task force recommendations and
has chartered a transition team to develop implementation mechanisms. 
However, it is likely that moving from planning to implementation
will pose a difficult challenge for the Department.  There are also
other independent efforts by several DOD organizations to reengineer
travel.  These efforts vary in providing examples or pilots for the
DOD-wide initiative. 


      TASK FORCE RECOMMENDATIONS
      CONSISTENT WITH INDUSTRY
      BEST PRACTICES
---------------------------------------------------------- Letter :7.1

As previously stated, the objectives of the DOD-wide task force
included meeting operational mission requirements, reducing the
overall cost of travel, and improving customer service.  The task
force was charged with providing a conceptual framework for the new
system, developing a detailed program for moving DOD towards meeting
the objectives of the new system, and providing a set of system
specifications that will serve as a guideline for proposed policy
changes.  In carrying out its work, the task force reviewed studies
of travel management developed by both the Department and the private
sector, obtained benchmarking data from the National Security
Agency's (NSA) study of best industry practices, determined
high-level travel processes, identified available cost data for those
processes, and conducted focus groups at four DOD locations to
identify customer satisfaction indicators. 

In its January 1995 report, the task force made a number of
recommendations that, if successfully implemented, could greatly
simplify Defense's travel processes and align them more closely with
industry best practices.  For example, the task force recommended

  -- simplifying travel rules and reissuing regulations in a single
     document of 10 pages,

  -- delegating budget and expense approval to supervisors who
     authorize travel,

  -- mandating use of commercial travel offices for all arrangements
     under a standard DOD travel services contract,

  -- simplifying voucher computation,

  -- eliminating cash transactions, and

  -- conducting random audits to ensure oversight and control. 

The task force did not, however, have sufficient documentation on
DOD's current processes to model the impact of proposed travel
process changes on meeting its customer service and cost savings
objectives.  Although the task force did not determine the amount of
projected savings, it believes that its recommended improvements will
result in cost savings. 

On January 23, 1995, the Deputy Secretary endorsed the task force's
recommendations and delegated responsibility to the DOD Comptroller
for continuing the reengineering effort through a transition team. 
This transition team is charged with conducting pilots for the new
travel system, marketing the system throughout DOD, developing
recommendations for implementing a revised system, and establishing
coordination mechanisms and milestones for carrying out these
objectives. 


      IMPLEMENTATION ISSUES WILL
      PROVE CHALLENGING
---------------------------------------------------------- Letter :7.2

DOD is at a critical juncture in making dramatic improvements in its
travel processing.  The Department has identified the need for
improvement, developed a strategy for moving forward, and
demonstrated top management support for the initiative.  However, the
Department still faces formidable challenges in progressing from
planning to implementation. 

Perhaps the single most difficult challenge will be the Department's
own strong internal culture.  DOD's culture has traditionally
supported multiple applications to carry out similar administrative
functions.  The inherent desire to "grow your own" has frequently
limited success in other DOD process improvement initiatives. 
Implementing industry practices, such as consolidating decentralized
operations and empowering employees to make travel decisions, would
also entail major changes in DOD's culture.  The task force report
recognizes these issues and the need to overcome departmental
resistance during the transition phase.  Sustained commitment and
oversight by top management are also critical to ensure progress. 


      INDEPENDENT EFFORTS VARY IN
      SUPPORTING DEFENSEWIDE
      INITIATIVE
---------------------------------------------------------- Letter :7.3

Several DOD organizations have independent initiatives to improve
their travel management.  Although coordination of these initiatives
has been informal, such initiatives may provide models or pilots to
support a DOD-wide reengineering effort. 

For example, NSA has applied a structured approach to its ongoing
effort, accumulating baseline costs from which to measure future
progress and reengineer its travel processes.  According to NSA
officials, improvements will be based on information gathered from
their survey of 40 companies that significantly reduced their travel
processing costs by implementing many of the best practices already
discussed.  NSA estimated that after reengineering, its cost to
process a trip will decrease from 25 percent to about 7 percent of
the direct cost of travel.  In its report, the DOD task force
recommended agencywide use of some of the practices that NSA was
planning to implement. 

Further, the DOD task force reviewed the efforts of an Air Force
reinvention lab, which--according to Air Force officials--is charged
with experimenting with new travel processes.  The lab is testing a
new travel process at one Air Force unit.  This process includes
reducing the number of people and steps involved in the process and
then automating the remaining steps.  We believe that this initiative
serves as a pilot for the Air Force, as well as for DOD.  Lab results
indicate that if reengineered processes are implemented Defensewide,
annual savings could reach $875 million. 

Officials from the Washington Headquarters Service and the Defense
Finance and Accounting Service told us that they also began
initiatives to improve travel processing.  However, these efforts are
aimed at automating current manual processes.  As such, these efforts
do not provide good reengineering models for DOD.  The Defense
Finance and Accounting Service has since suspended its initiative,
awaiting results from the DOD-wide task force on reengineering
travel. 

DOD is also participating in a governmentwide travel management
improvement effort.  The Joint Financial Management Improvement
Program (JFMIP) is a cooperative undertaking of GAO, Treasury, the
Office of Management and Budget, and the Office of Personnel
Management.  In August 1994, JFMIP established an interagency task
force to study ways to improve federal travel policies and
procedures. 


   CONCLUSIONS
------------------------------------------------------------ Letter :8

DOD's current travel management processes stand in striking contrast
to the best practices adopted by the private sector.  Clearly, DOD's
travel management processes are wasteful and burdensome.  The
demonstrated success of best practice companies in providing
essentially similar travel services serves as a model for the
Department to use in gauging its progress in reengineering travel
management.  If DOD could successfully apply industry travel
practices as part of its reengineering effort, the Department could
save hundreds of millions of dollars. 

DOD's travel task force and projects within NSA and the Air Force are
commendable first steps in the reengineering process.  However, good
intentions and good first steps will not guarantee success.  Clearly
articulated and agreed-upon milestones and performance measures must
be established and followed to ensure project integrity. 

Further, pilot efforts must be structured to document the cost,
benefits, and savings to be gained from system implementation.  Such
information is critical in evaluating the potential for making
further investments in improving travel management.  Pilots could
also help identify the need for changes or waivers to applicable
statutes and regulations and ensure that adequate controls are in
place to safeguard against misuse of federal funds.  Additionally,
demonstrated benefits are required to gain support throughout the
organization for process changes. 

Most importantly, the Department needs to recognize that the
fundamental process improvements anticipated by the task force
represent a real change to a basic business process.  Managing such
change is difficult within any organization; it is a special
challenge within DOD.  Sustained top management commitment and
oversight are essential for this effort to stay on course. 


   RECOMMENDATIONS
------------------------------------------------------------ Letter :9

To improve management of travel processes and reduce costs, we
recommend that the Secretary of Defense direct the travel
reengineering transition team to

  -- establish milestones for implementation of the task force
     recommendations,

  -- structure pilot efforts as a means of (1) identifying and
     documenting projected costs, benefits, and savings, (2)
     determining the need for changes or waivers to applicable
     statutes and regulations, and (3) ensuring that adequate
     controls are maintained to safeguard government assets prior to
     agencywide implementation of proposed travel process changes,
     and

  -- establish performance indicators to monitor progress towards
     meeting travel improvement objectives. 

We also recommend that the Secretary of Defense provide the
transition team with (1) the necessary resources and authority to
carry out its mandate and (2) the leadership and oversight needed to
gain acceptance, maintain progress, and ensure that process changes
are implemented consistently throughout the Department. 


---------------------------------------------------------- Letter :9.1

As agreed with your office, unless you publicly announce the contents
of this report earlier, we plan no further distribution until 30 days
from the date of this report.  We will then send copies to the
Secretary of Defense, the Director of the Office of Management and
Budget, and other interested congressional committees.  Copies will
also be sent to others upon request. 

Please contact me at (202) 512-6240 if you or your staff have any
questions about this report.  Other major contributors are listed in
appendix II. 

Sincerely yours,

Jack L.  Brock, Jr.
Director, Information Resources Management/
 National Security and International Affairs


DOD'S TRAVEL PROCESS
=========================================================== Appendix I



   (See figure in printed
   edition.)



   (See figure in printed
   edition.)



   (See figure in printed
   edition.)


MAJOR CONTRIBUTORS TO THIS REPORT
========================================================== Appendix II

ACCOUNTING AND INFORMATION
MANAGEMENT DIVISION, WASHINGTON,
D.C. 

Carol A.  Langelier, Assistant Director
Sondra F.  McCauley, Evaluator-in-Charge
Patrick R.  Dugan, Auditor
Michael W.  Gilmore, Auditor

CINCINNATI REGIONAL OFFICE

Leonard L.  Benson, Senior Evaluator
Benjamin F.  Jordan, Jr., Staff Evaluator

OFFICE OF THE GENERAL COUNSEL

Douglas H.  Hilton, Assistant General Counsel

*** End of document. ***