Defense Transportation: DOD Needs a Comprehensive Approach to
Planning for Implementing Its New Personal Property Program
(31-MAY-07, GAO-07-671).
The Department of Defense (DOD) has been working to improve its
personal property program since the mid-1990s to fix
long-standing problems, such as excessive loss or damage to
servicemembers' property and poor quality of service from moving
companies. DOD plans to replace its current program with Families
First, a program that promises to offer servicemembers an
improved claims process and quality of service. GAO was mandated
to (1) assess the steps DOD has taken to achieve the goals and
benefits of the Families First program; (2) evaluate the growth
in costs of the program, including the costs for a new
information management system, since GAO's last assessment in
2003; and (3) assess the extent to which DOD faces management
challenges--such as staffing--in implementing Families First. To
address these objectives, GAO analyzed DOD's program, funding and
staffing data, and interviewed personal property officials and
stakeholders.
-------------------------Indexing Terms-------------------------
REPORTNUM: GAO-07-671
ACCNO: A70073
TITLE: Defense Transportation: DOD Needs a Comprehensive
Approach to Planning for Implementing Its New Personal Property
Program
DATE: 05/31/2007
SUBJECT: Cost analysis
Defense cost control
Families
Household goods
Legacy systems
Military personnel
Personal property
Program evaluation
Program management
Software
Strategic planning
Transportation costs
DOD Families First Personal Property
Program
DOD Personal Property Program
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GAO-07-671
* [1]Results in Brief
* [2]Background
* [3]DOD Has Taken Some Initial Steps for Families First, but DPS
* [4]DOD Has Taken Some Initial Steps to Achieve the Goals and Be
* [5]DPS Development and Implementation Has Experienced Delays
* [6]DOD Has a Plan to Provide Full Replacement Value without DPS
* [7]Families First Program Could Increase DOD Costs by About $1.
* [8]Actual Growth in Costs of Families First Program Cannot Be A
* [9]Estimated Costs for the Integrated Information Management Sy
* [10]DOD Faces Management Challenges for Families First Program a
* [11]DOD Planning for Families First Did Not Incorporate Some Sou
* [12]Families First Faces Significant Organizational Changes and
* [13]DOD Does Not Have Stakeholders' Agreement on Key Elements of
* [14]Uncertainties Surround Families First Business Rules
* [15]Stakeholders Have Not Agreed to All Essential Functions
for
* [16]Families First Is Not Fully Funded
* [17]Services Vary in the Extent to Which They Have Budgeted
for
* [18]Growing DPS Costs Are Creating Funding Shortfalls
* [19]Conclusions
* [20]Recommendations for Executive Action
* [21]Agency Comments and Our Evaluation
* [22]Appendix I: Scope and Methodology
* [23]Appendix II: Comments from the Department of Defense
* [24]Appendix III: GAO Contact and Staff Acknowledgments
* [25]GAO Contact
* [26]Acknowledgments
* [27]Related GAO Products
* [28]Order by Mail or Phone
Report to Congressional Committees
United States Government Accountability Office
GAO
May 2007
DEFENSE TRANSPORTATION
DOD Needs a Comprehensive Approach to Planning for Implementing Its New
Personal Property Program
GAO-07-671
Contents
Letter 1
Results in Brief 4
Background 7
DOD Has Taken Some Initial Steps for Families First, but DPS Delays Put
Achievement of Program Goals and Benefits at Risk 12
Families First Program Could Increase DOD Costs by About $1.4 Billion over
Current Program Costs through Fiscal Year 2011 20
DOD Faces Management Challenges for Families First Program and Has Not
Developed a Comprehensive Implementation Plan 25
Conclusions 37
Recommendations for Executive Action 38
Agency Comments and Our Evaluation 39
Appendix I Scope and Methodology 41
Appendix II Comments from the Department of Defense 45
Appendix III GAO Contact and Staff Acknowledgments 49
Related GAO Products 50
Tables
Table 1: Coverage and Cost Comparisons for DOD's Current Personal Property
Program versus Families First 10
Table 2: Comparison of Timelines to Implement DPS 16
Table 3: Summary of Information Management System Cost Estimates 25
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separately.
United States Government Accountability Office
Washington, DC 20548
May 31, 2007
The Honorable Carl Levin
Chairman
The Honorable John McCain
Ranking Member
Committee on Armed Services
United States Senate
The Honorable Ike Skelton
ChairmanThe Honorable Duncan Hunter
Ranking Member
Committee on Armed Services
House of Representatives
Military servicemembers and their families are typically relocated many
times during servicemembers' careers. The Department of Defense's (DOD)
personal property program provides household goods transportation and
storage services^1 for military personnel and their families when they
relocate. DOD spent more than $1.8 billion in fiscal year 2006 to move
more than 680,000 shipments. The quality of these moving services directly
affects the quality of life for servicemembers and their families, which
has become increasingly important as servicemembers face increased
demands. However, as we have previously reported, DOD has experienced
long-standing problems with its personal property program, especially poor
quality of service from moving companies that results in excessive loss or
damage to servicemembers' property and high claims costs incurred by the
government. Moreover, a DOD analysis indicated that the program's legacy
computer system for data management does not meet DOD's information
technology standards and is costly to operate and maintain. In an effort
to test alternative approaches and address some of these problems, DOD has
spent more than 11 years trying to improve the program through lessons
learned from its pilot programs.
^1Household goods transportation includes moving privately owned vehicles.
DOD decided to replace its personal property program with a new program
known as Families First. The three goals of the Families First program are
improving the quality of service from moving companies,^2 streamlining the
claims process for losses or damages incurred during a move, and
developing an integrated information management system. In addition, the
John Warner National Defense Authorization Act for 2007^3 mandated that
DOD provide full replacement value coverage to servicemembers for damages
or losses incurred during their moves by March 1, 2008. With full
replacement value, a servicemember would receive enough funds to replace
or repair a lost or damaged item at its present value. DOD's current
personal property program provides servicemembers a minimum level of
depreciated value coverage that does not fully compensate them for lost or
damaged goods. DOD plans to incorporate full replacement value as an
additional benefit of Families First and provide this coverage at no
additional cost to servicemembers.
Since 1999, we have completed several assessments of DOD's personal
property program, including reviews of several aspects of DOD's personal
property pilot programs. In 2003, we evaluated the methodology used to
estimate the costs associated with Families First that the services would
incur. The Families First program was initially expected to increase the
services' costs for DOD's personal property program by 13 percent, but we
questioned part of the methodology used to generate this estimate and
recommended that DOD provide the military services and Congress additional
information to quantify the risk associated with achieving the projected
13 percent cost estimate. In 2005, DOD reevaluated its estimated 13
percent cost increase and quantified the risks of implementing Families
First within the expected cost increase. We reviewed the methodology DOD
used to estimate the cost of implementing the Families First program.^4 We
found at that time that DOD used a reasonable methodology to validate the
estimated increase and quantify the risk.
^2Moving companies include household transportation and service providers
commonly referred to as transportation service providers.
^3Pub. L. No. 109-364, S 363 (2006).
In 2004, DOD began developing the Defense Personal Property System (DPS),
an integrated information management system that will be used to support
Families First. DOD's initial assumption was that DPS could be developed
quickly using commercially available software. However, our analysis
indicates that DOD has missed milestones and costs have grown in
developing and implementing DPS. DOD entered into an 11-month strategic
pause in October 2005 to assess the next steps for DPS. DOD has a history
of challenges in implementing information management systems similar to
DPS, such as the Defense Integrated Military Human Resources System and
the Defense Travel System, which are part of DOD's business systems
modernization efforts. Because of management challenges in implementing
these types of systems, we have placed DOD's business systems
modernization on our high-risk list^5 of programs that are at risk because
of their greater vulnerabilities to fraud, waste, abuse, and
mismanagement.
The John Warner National Defense Authorization Act for Fiscal Year 2007^6
mandated that we review the Families First program. Specifically, we (1)
assessed the steps DOD has taken to achieve the goals and benefits of the
Families First program; (2) evaluated the growth in the cost of the
program since the previous assessment, including the costs for DPS; and
(3) assessed the extent to which DOD faces management challenges--such as
with staffing, developing capabilities, and resources within the DPS
program office--in implementing Families First.
To conduct our assessment of the Families First program, including its
costs, we reviewed prior DOD and GAO reports, documentation regarding
program development, program management staffing and resources, and cost
analyses for Families First and DPS. We also interviewed DOD officials,
private sector moving industry associations, and contractors supporting
DOD efforts. While we did not independently verify DOD's staffing and
resource needs or its cost data, we did determine that the data were
sufficiently reliable for our purposes. We performed our audit work from
September 2006 through May 2007 in accordance with generally accepted
government auditing standards. The scope and methodology we used is
described in greater detail in appendix I.
^4GAO, Defense Transportation: Preliminary Personal Property Pilot Results
Are Inconclusive, [29]GAO/NSIAD-00-52R (Washington, D.C.: Dec. 21, 1999);
Defense Transportation: Final Evaluation Plan Is Needed to Assess
Alternatives to the Current Personal Property Program,
[30]GAO/NSIAD-00-217R (Washington, D.C.: Sept. 27, 2000); Defense
Transportation: Monitoring Costs and Benefits Needed While Implementing a
New Program for Moving Household Goods, [31]GAO-03-367 (Washington, D.C.:
Apr. 18, 2003); and Defense Transportation: DOD Has Adequately Addressed
Congressional Concerns Regarding the Cost of Implementing the New Personal
Property Program Initiatives, [32]GAO-05-715R (Washington, D.C.: June 9,
2005).
^5GAO, High-Risk Series: An Update, [33]GAO-05-207 (Washington, D.C.:
January 2005).
^6Pub. L. No. 109-364, S 363 (2006).
Results in Brief
DOD has taken some initial steps to achieve the goals and benefits of
Families First, but delays in developing a new information management
system have put achieving the overall goals of improving the quality of
service from moving companies and streamlining the claims process at risk.
Families First was designed so that achieving the goals of the program
relies heavily on completion of DPS. DOD has taken steps to implement the
electronic billing and payment systems necessary to support Families First
and is collecting data from a customer satisfaction survey. However, the
Air Force is behind in participating in this part of the program. DOD has
begun developing and testing DPS but has continued to miss milestones, and
the system is now more than 2 years behind schedule. The DPS
implementation schedule was delayed again in February 2007, after
stakeholders from the services and the moving industry participated in DPS
software acceptance testing and identified numerous problems. In total,
this testing generated more than 1,400 problem reports, almost 200 of
which were collectively expected to result in significant changes to the
software. For example, DPS sent the work order for shipments awarded to
one moving company to another moving company; thus, the moving company
that was awarded the shipment did not know the shipment was awarded to it.
Under the revised DPS implementation schedule introduced in March 2007,
DPS program managers plan to use DPS in some shipping offices by fall 2007
on a test basis, with full participation in fall 2008. Since DPS has been
delayed, DOD is in the process of implementing a backup plan to meet the
mandate to provide the Families First benefit of full replacement value
coverage for losses and damages incurred during a move, at no cost to
servicemembers, by March 1, 2008. However, it is uncertain if all
contracts will provide full replacement value by March 1, 2008, for all
types of moves. The reason Surface Deployment and Distribution Command
officials said they created a backup plan for full replacement value is
because they were required by statute to implement it by March 1, 2008,
whether DPS was ready or not. DOD officials said that they did not have a
requirement to produce a plan to accomplish all goals for Families First
by March 1, 2008, and they did not invest resources to do so. As a result,
achieving the overall goals of improving the quality of service and claims
processing remains contingent upon successful implementation of DPS.
The Families First program could increase costs to DOD by $1.4 billion
over current program costs through fiscal year 2011 for two main reasons:
(1) DOD estimates the program will increase costs to the services by 13
percent and (2) DOD has significantly increased the cost estimate for a
new information management system since our last assessment. We were
unable to assess the actual growth in cost because the Families First
program has not been fully implemented. DOD has incorporated a
cost-control mechanism into DPS in an attempt to keep the costs within the
expected increase, but until DPS is implemented the impact of the use of
this mechanism on the Families First program will not be known. In
addition, system costs are growing. The DPS program office has recently
updated its cost estimates for fully implementing and funding DPS through
fiscal year 2011. When DOD first estimated the cost of a new data
management system at about $4 million to $6 million in 2002, it planned to
upgrade the legacy system rather than replace it entirely. In 2004, when
DOD decided to develop an entirely new system, it initially estimated that
DPS could be developed for about $16.5 million, with an average annual
cost of about $4.6 million after the initial investment. This estimate
also proved to be understated as system problems increased after DPS
development began. As of February 2007, the DPS program office estimated
that the costs for maintaining a program office, sustaining the legacy
system through retirement, developing and sustaining DPS, and implementing
a future household goods program through fiscal year 2011 would be about
$180 million if all of the requirements are funded.
DOD faces many management challenges implementing Families First, and it
has not employed comprehensive planning that incorporates sound management
principles and practices and integrates the plans DOD has for parts of
Families First. Sound management practices require developing a
comprehensive plan that includes, among other things, stakeholder
agreement about key elements of a program, such as the program's business
rules and its priorities; a way to manage training and workforce
redeployment issues; and full cost information and funding resources.
Although DOD has spent more than 11 years trying to reengineer the
program, DOD's planning for Families First has not incorporated many of
these sound management practices. DOD has developed several nonintegrated
draft plans to cover individual portions of the Families First program,
such as a draft transition plan for organizational changes and the DPS
program office's plan for DPS development, but there is no comprehensive
plan for the program that addresses the following:
o Organizational changes and staffing issues: The DPS program
office was established on October 1, 2006, and is still
organizing. Additionally, the office is affected by a base
realignment and closure move in which only 1 of 27 civilian
workers plan to move with the program office to Scott Air Force
Base in Illinois. Without adequate staff, DOD may be challenged to
continue DPS development and implementation.
o Stakeholder agreement issues: DOD does not have agreement from
stakeholders about Families First business rules and how DPS
should work. Until agreement is reached, changes to DPS may be
necessary and may lead to higher program costs.
o Costs and funding issues: All of the services have not fully
budgeted for the costs of Families First. Additionally, the DPS
program office has funding shortfalls that affect both staffing
needs and software development. Further, the services vary in how
they interpret the application of the 13 percent increase in costs
to their household goods budgets, and they have not received clear
guidance from DOD on how to calculate the estimated 13 percent
cost increase to their budgets.
Without comprehensive planning, achieving the goals of Families
First will likely remain difficult for DOD. DOD will also likely
continue to face DPS delays and rising costs, problems which limit
its ability to improve servicemembers' quality of life. We are
recommending that DOD expedite an evaluation of the program as
mandated in the John Warner National Defense Authorization Act for
Fiscal Year 2007.^7 We are also recommending that DOD employ
comprehensive planning for the Families First program and address
specific steps to hire and train personnel for the Surface
Deployment and Distribution Command personal property division and
the DPS program office, reach agreement with stakeholders on the
essential requirements for DPS and their priority, and have an
investment strategy for the full cost of Families First.
In commenting on a draft of this report, DOD concurred with both
of our recommendations. To address our first recommendation, DOD
agreed to expedite an evaluation of its program and stated that it
plans to provide Congress with such an evaluation by August 2007
to respond to the mandate in the John Warner National Defense
Authorization Act for Fiscal Year 2007.^8 In concurring with our
second recommendation, DOD listed several steps it has under way
and planned to take. For example, DOD said that hiring actions are
in progress to staff the DPS program office after its relocation
to Scott Air Force Base and that other actions are being
implemented to staff the Surface Deployment and Distribution
Command. DOD also stated that it has implemented a process to
reach agreement with stakeholders on the essential requirements
for DPS and their priority. DOD also stated that the U.S.
Transportation Command will provide some funds and work with the
Office of the Secretary of Defense to obtain additional funding.
We believe that it is important that DOD focus sustained attention
on the program and follow through with the actions planned,
especially given the delays the program has experienced and the
challenges it still faces.
^7Pub. L. No. 109-364, S 363 (2006).
Background
DOD's personal property program is used by personal property
shipping office staff to manage household goods moves for all
military servicemembers and DOD civilians when they relocate. The
military services pay shipment and storage-related costs from
their military personnel accounts' permanent change of station
budgets and pay for loss and damage claims and personal property
shipment office expenses from their operation and maintenance
accounts. Servicemembers generally work with DOD transportation
officials at personal property processing offices to coordinate
their moves. These offices can either be service-specific offices
or joint or consolidated property offices that assist
servicemembers from more than one service. These offices provide
servicemembers with local points of contact for counseling about
their moves and processing paperwork related to shipments of their
personal property. Prior to the reengineering efforts over the
last 11 years, DOD's personal property program had remained
virtually unchanged for nearly 40 years.
^8Pub. L. No. 109-364, S 363 (2006).
DOD's personal property program involves a complex process of
qualifying carriers, soliciting rates, distributing moves,
evaluating moving companies' performance, paying invoices, and
settling claims. Among the program's many challenges is ensuring
that the moving industry provides adequate year-round capacity,
especially during the summer peak moving season when most
servicemembers, as well as the general public, schedule their
moves. In an effort to test alternative approaches and address
some of its challenges, DOD previously evaluated three pilot
programs.^9 From those three pilot programs, DOD submitted a
report to Congress in 2002 with recommendations to improve the
quality of household goods moves for servicemembers that were
originally contained in a U.S. Transportation Command report.
Those recommendations were as follows:
o Reengineer the liability and claims process by adopting
commercial practices of minimum valuation,^10 simplifying the
filing of claims, and providing the servicemember with direct
settlement for claims with the carrier.
o Change the acquisition process to implement performance-based
service contracts^11 (as opposed to the current practice of
providing contracts to the lowest bidder).
o Implement information technology improvements, which could
integrate functions across such areas as personnel,
transportation, financial, and claims.
To respond to these recommendations, DOD developed a new program
called Families First to improve the quality of household goods
moves for servicemembers, DOD civilian employees, and their
families. Families First is a U.S. Transportation Command program
that is executed by the Military Surface Deployment and
Distribution Command, an Army service component command.^12
Since 1989, DOD's personal property system has used the
Transportation Operational Personal Property Standard System, a
legacy data management system known as TOPS, which includes 25
additional legacy systems that support it. The Surface Deployment
and Distribution Command determined that it was not feasible to
upgrade TOPS to support the goals of Families First for several
reasons. TOPS is being phased out because the software is no
longer fully supportable and does not meet DOD's technology
standards, including its security requirements. TOPS also did not
support the Business Management Modernization Program, the program
that preceded the Business Transformation Agency in overseeing
DOD's business transformation efforts. In addition to these
technical considerations, TOPS also has poor reporting and data
capabilities. However, DOD expects that TOPS will need to be
functional for a large part of the Families First rollout, until
DPS is fully operational.
^9The Army Hunter Pilot Program became part of the Full Service Move
Project pilot program. The other pilot programs were the Military Traffic
Management Command's Reengineered Personal Property Program and the Navy's
Servicemember Arranged Move Pilot.
^10Minimum valuation means the minimum degree of "worth" of the shipment.
^11Performance-based contracting means structuring all aspects of an
acquisition around the purpose of the work to be performed as opposed to
either the manner by which the work is to be performed or broad and
imprecise statements of work. 48 C.F.R. S 37.101 (2007) (Hereinafter FAR).
^12This command is commonly referred to as the Surface Deployment and
Distribution Command.
^13The government statutory maximum amount for a claim is $40,000 and
$100,000 under extraordinary circumstances. 31 U.S.C. S 3721(b)(1) (2007).
Under the current system, servicemembers are provided with basic
claims coverage using depreciated value for losses or damages
incurred during a move that allows liability at a rate of $1.25
times the weight of the goods being shipped.^13 For example, if a
shipment's weight is 10,000 pounds, the maximum liability for the
moving company is $12,500. Additional coverage options are
available for the servicemember to purchase. Under the current
program, a servicemember has two options. Under option one, the
servicemember can purchase depreciated value coverage above what
the government currently pays, and under option two, the
servicemember can purchase full replacement value coverage. Under
both options, the servicemember shares the cost with the
government. For moves within the United States and overseas or
stored shipments, servicemembers can obtain additional coverage
from a commercial insurance company. Some private insurance
companies and moving companies sell insurance to cover certain
items of personal property during moves. Additionally, some
homeowner policies may cover some items in shipment. See table 1
for coverage and cost comparisons for the current DOD personal
property program versus what is planned under Families First.
Table 1: Coverage and Cost Comparisons for DOD's Current Personal Property
Program versus Families First
Coverage Servicemember costs Government costs
Current
program
Basic Depreciated value None. Full cost of
coverage coverage up to $1.25 x coverage.^b
shipment weight.
For example, for a move
with 10,000 pounds, the
maximum coverage would
be $12,500.^a
Option 1 of Above basic coverage, For example, for a For example, for a
current servicemember can place move with 10,000 move with 10,000
program additional value on a pounds: pounds:
shipment by purchasing
depreciated value Servicemember pays The government
coverage. $0.64/$100 of pays $0.64/$100 on
valuation above first $12,500 of
$12,500. valuation.
Increasing the
value of the
shipment to $30,000
would cost
servicemember $112.
Option 2 of Full replacement value Servicemember pays The government
current coverage up to $3.50 x approximately pays approximately
program shipment weight three-quarters of one-quarter of the
($21,000 minimum). cost, based on the cost, based on the
weight. weight.
Charge is $0.85/$100 of
the stated valuation. For example, a move For example, a
For example, the total with 10,000 pounds move with 10,000
cost to purchase this would cost pounds would cost
option for a 10,000 servicemember the government
pound shipment is $217.50. $80.
$297.50.^c
Families
First
Generally, full None. Full cost of the
replacement value up to coverage.^e
$4.00 x shipment
weight.^d
Source: GAO analysis of DOD data.
a$1.25 x 10,000 pounds = $12,500.
bAccording to DOD, there is a maximum allowable loss or damage payment for
certain items.
c(($3.50 x 10,000 pounds)/100) x $0.85 = $297.50.
dThe moving company's maximum liability on all shipments will be the
greater of (1) $5,000 per shipment and (2) $4.00 times either the net
weight of the household goods shipment or the gross weight of the
unaccompanied baggage shipment, in pounds, not to exceed $50,000. On all
other loss and damage claims asserted against the moving company, the
company's maximum liability will be limited to $1.25 times the net weight
of the shipment, in pounds.
eFull replacement value coverage applies if a claim is filed with the
moving company within 9 months of delivery. After 9 months, the moving
company is liable for the depreciated value of the items only up to a
maximum of $1.25 times the net weight of the shipment.
We have completed several assessments that evaluated DOD's pilot programs
and plans for implementing Families First.^14 For example, in 2000, we
reported that the U.S. Transportation Command needed to complete an
evaluation plan for its pilot programs and take necessary actions to
resolve outstanding cost issues. In 2003, we evaluated the methodology
used to estimate the costs associated with Families First that the
services would incur. The Families First program was initially expected to
increase the services' costs for DOD's personal property program by 13
percent, but we questioned part of the methodology used to generate this
estimate. Specifically, we recommended that DOD quantify the risks of
implementing the Families First program within the 13 percent estimate. As
part of this evaluation, we also assessed a separate estimate for the cost
of upgrading the information technology system used for managing the
shipment of household goods. We questioned DOD's ability to implement the
upgrades to the information technology system within its cost estimate. We
found that the estimate to implement the information technology
recommendation was slightly higher than the $4 million to $6 million
estimate DOD reported to Congress. In 2005, DOD reevaluated its estimated
13 percent cost increase and quantified the risks of implementing Families
First within the expected cost increase. We found at that time that DOD
used a reasonable methodology to validate the estimated increase and
quantify the risk.
^14 [34]GAO/NSIAD-00-52R , [35]GAO/NSIAD-00-217R , [36]GAO-03-367 , and
[37]GAO-05-715R .
Congress has been concerned about problems in this program, especially
that servicemembers may receive less than what it would cost them to
replace or repair their household goods that are lost or damaged during
shipment. On November 24, 2003, the fiscal year 2004 National Defense
Authorization Act^15 amended the U.S. Code^16 to allow the Secretary of
Defense to include a clause for full replacement value in DOD's contracts
with moving companies. The John Warner National Defense Authorization Act
for Fiscal Year 2007^17 mandated that DOD provide full replacement value
coverage by March 1, 2008, for servicemembers and DOD civilian employees.
With full replacement value, a servicemember would receive enough funds to
replace or repair a lost or damaged item at its present value.^18
^15Pub. L. No. 108-136, S 634 (2003).
^1610 U.S.C. S 2636a.
^17Pub. L. No. 109-364, S 363 (2006).
Additionally, the John Warner National Defense Authorization Act for
Fiscal Year 2007^19 mandated that the Secretary of Defense shall submit to
the congressional defense committees a report containing the
certifications of the Secretary on the following matters with respect to
the program of the Department of Defense known as Families First: (1)
whether there is an alternative to the system under the program that would
provide equal or greater capability at a lower cost; (2) whether the
estimates on costs, and the anticipated schedule and performance
parameters, for the program and system are reasonable; and (3) whether the
management structure for the program is adequate to manage and control
program costs. The mandate did not specify a date for DOD to provide this
information.
DOD Has Taken Some Initial Steps for Families First, but DPS Delays Put
Achievement of Program Goals and Benefits at Risk
DOD has taken some initial steps to achieve the goals and benefits of the
Families First program, but delays in developing a new information
management system have put achieving the program's goals and benefits at
risk. DOD continues to experience delays and missed milestones in
developing and implementing DPS, and the original estimated release date
for DPS has now been pushed back for more than 2 years. To meet the
statutory mandate, DOD has taken steps to provide servicemembers with the
full replacement value coverage benefit because of the delays in
implementing DPS. However, some servicemembers may not be covered by March
1, 2008, and there are other risks associated with this backup plan.
Despite these challenges, Surface Deployment and Distribution Command
officials told us that they expect all types of moves will have full
replacement value by March 1, 2008. DOD continues to rely on the
implementation of DPS to achieve other program goals such as improving the
quality of service and claims processing.
^18According to DOD, when a claim is filed directly with the moving
company or contractor within 9 months of delivery, their maximum liability
on all shipments will be the greater of (1) $5,000 per shipment and (2)
$4.00 times either the net weight of the household goods shipment or the
gross weight of the unaccompanied baggage shipment, in pounds, not to
exceed $50,000. On all other loss and damage claims asserted against the
moving company, the company's maximum liability will be limited to $1.25
times the net weight of the shipment, in pounds.
^19Pub. L. No. 109-364, S 363 (2006).
DOD Has Taken Some Initial Steps to Achieve the Goals and Benefits of Families
First
DOD has taken some initial steps to help achieve the goals and benefits of
the Families First program. To improve the personal property program, DOD
has established three goals for Families First: (1) improving the quality
of service from moving companies by using a best-value approach that
incorporates performance-based service contracts; (2) streamlining the
claims process used for claiming losses or damages incurred during a move;
and (3) developing an integrated information management system, known as
DPS. DOD designed Families First so that achieving the first two goals of
the program relies heavily on completion of the third goal of the program,
DPS. DOD identified numerous benefits of the Families First program,
including reduced storage costs and greater operational flexibility for
moving companies. Two of the program benefits identified by DOD--full
replacement value coverage and expanded counseling support through a
Web-based information system--are intended to directly benefit
servicemembers and promote quality service when moving their personal
belongings.
DOD developed a phased approach to implement Families First and has taken
some steps to accomplish the first and second phases. The first phase,
which began in March 2004, has two main parts: (1) electronic billing and
payment systems and (2) a customer satisfaction survey. The electronic
billing system, known as the Central Web Application, is a government
Web-based system for reviewing and approving services online, as well as
for pricing shipments. The electronic payment system, U.S. Bank's
PowerTrack, is an online payment and transaction tracking system. This
system is expected to reduce the payment cycle for DOD's personal property
moves. While DOD and all services other than the Air Force have made some
progress in implementing the electronic billing and payment systems, the
Air Force is not processing its own bills and payments using these systems
because it is reengineering its payment process and cannot currently
support these systems. DOD is working to fully interface and integrate
electronic billing and payment systems, respectively, with DPS but
continues to experience operational problems, such as invoices being
delayed or lost when being processed.
In addition, as part of the first phase, DOD began data collection for a
customer satisfaction survey, which is intended to support the Families
First goal of improving moving company performance through evaluation of
past performance. Under Families First, servicemembers are expected to
fill out a customer satisfaction survey about their moves, the results of
which will be combined with other data^20 to generate an overall moving
company quality score. The moving companies with the best scores will be
awarded more shipments. This process contributes to the best-value
distribution of shipments.^21 Under DOD's current household goods program,
DOD awards shipments to the company that bids the lowest price for a move.
To generate data for ranking moving companies when Families First is
implemented, DOD has instituted an interim customer satisfaction survey
under the current program. However, interim customer satisfaction survey
response rates have been about 16 percent within the past year, which has
resulted in less than one-third of moving companies' scores being usable.
To compensate for the low response rate, DOD has developed a methodology
upon program implementation to make moving companies' scores statistically
valid so the scores can be used when allocating shipments.^22 However, the
moving companies are concerned about how the low survey response rate will
affect how DOD awards business to them. In addition to developing the
methodology to ensure that moving companies' scores are statistically
valid, DOD has taken several steps it says will increase the customer
satisfaction survey response rate. For example, it has released a
commercial to increase awareness about the survey and added information in
its It's Your Move pamphlet.^23 It also included the customer satisfaction
survey requirement in the Defense Transportation Regulation. DOD also
expects that the survey response rate will improve once DOD implements DPS
and servicemembers can file their surveys electronically within DPS. Both
of these components--the electronic billing and payment systems and the
customer satisfaction survey--are necessary to support Families First.
The second phase of Families First includes the development and
implementation of DPS, which DOD has been working on for more than 2
years. DOD plans to use DPS to implement many key improvements for the
Families First program. For example, Families First implementation
documents state that with DPS, DOD will be able to
^20The moving company's overall score is generated from three things:
performance, claims, and rates.
^21Best-value distribution is the method that will be used to award
shipments to moving companies in Families First. This new traffic
distribution program will award shipments based on best value, not lowest
cost as in the current program. The best-value methodology combines
performance, claims settlement, and rates to identify quality moving
companies.
^22We did not evaluate this methodology.
^23Department of Defense, Military Surface Deployment and Distribution
Command, It's Your Move (Alexandria, Va.: Oct. 1, 2006).
o use best-value distribution when awarding performance-based
service contracts,
o provide Web-based counseling to help servicemembers with their
moves,
o use a commercial-based tariff for domestic moves rather than the
antiquated government tariff currently being used,^24
o provide direct claims settlement with the transportation service
provider, and
o use a "rate reasonableness"^25 strategy that will help DOD
manage the costs of the moving program.
DOD also plans to use DPS to provide the electronic customer
satisfaction survey to servicemembers and to help DOD monitor the
rates moving companies charge it for moving services.
The third, and final, phase of the Families First program includes
adding functionality to DPS so that it can handle more types of
moves, including nontemporary storage (about 16 percent of all
moves) and direct procurement moves (about 8 percent of all
moves).^26
DOD continues to face delays and missed milestones in developing
and implementing DPS. DPS development and implementation has been
pushed back for more than 2 years from the original estimated
release date. DOD began DPS development in May 2004 and DPS was
originally scheduled to be available by October 2005. In October
2005, the Surface Deployment and Distribution Command initiated a
review of the program. DOD then entered into an 11-month strategic
pause for further program review and software testing after it
encountered significant software validation and systems problems,
which resulted in the system not working. DOD subsequently
developed two more implementation timelines, the first in October
2006 and the second in March 2007. See table 2 for a comparison of
DPS implementation timelines.
^24According to DOD, the new tariff marks a departure from previous
tariffs and changes the way that transportation rates apply for interstate
and intrastate movers. This tariff incorporates many of the commonly
applied individual additional service charges into a single
origin/destination service fee that applies along with the transportation
charges in order to simplify the application of the tariff. The other
major change is the use of zip codes to rate shipments. The former
point-to-point distance application has been replaced with a zip
code-to-zip code rating system for determining the transportation charges
and additional services.
^25The Surface Deployment and Distribution Command has developed a rate
reasonableness methodology that will limit the growth in cost of Families
First. According to DOD, this methodology will apply limitations on rates
filed by moving companies in the Families First program to achieve the
goal of keeping cost increases under Families First at 13 percent or less.
Rate reasonableness will be implemented for both the domestic and
international programs. Rates for each combination of pickup and
destination location will have an acceptable high and low rate per
combination.
^26Nontemporary storage is used when a servicemember needs to store goods
for long periods of time. Nontemporary storage includes necessary packing,
crate unpacking, uncrating, transportation to and from place of storage,
storage, and other directly related necessary services. Under the direct
procurement method, the government manages the shipment throughout.
Packing, containerization, delivery, unpacking, storage, and related
services are obtained from commercial firms under a contractual
arrangement or by the use of government facilities and employees.
DPS Development and Implementation Has Experienced Delays
Table 2: Comparison of Timelines to Implement DPS
Revised plan
Original plan as Plan as of as of March
of 2004 October 2006 2007
Software acceptance September January through January
testing for DPS^a through October February 2007 through summer
2005 2007
Site testing of DPS^b No testing May 2007 Starts October
planned through 2007
November 2007
DPS operational; does not October 2005 November 2007 Spring 2008
include nontemporary through January
storage and direct 2008
procurement method moves
DPS fully operational to October 2006 March 2008 Fall 2008
include moves with
nontemporary storage and
direct procurement method
Source: GAO analysis of DOD data.
aPrior to software acceptance testing for DPS, the program underwent
independent testing, commonly known as independent validation and
verification testing. The original time frame for independent testing was
for the third and fourth quarters of fiscal year 2005. The test was
rescheduled and occurred in July through October 2005. This testing led to
the program's strategic pause. Additional independent testing occurred
July through September 2006.
bAccording to DOD, DPS will be tested and operational at 21 test sites.
During the October 2005 internal review of DPS, DOD's review group
recommended improvements in areas such as management, the type of contract
used for DPS, and the DPS development process. The strategic pause
following this review ended in September 2006, but the next schedule for
DPS implementation was not developed until after a new DPS program office
was created in October 2006. This schedule incorporated a phased rollout
approach for DPS.^27 Under this schedule, DPS software acceptance testing
was to occur in winter 2007, followed by increasing use of DPS through
summer and fall 2007. DOD expected DPS to be fully operational in spring
2008.
DPS program managers developed what they described as an aggressive
implementation schedule for two reasons. First, they planned to use DPS to
meet the mandate to provide full replacement value by March 1, 2008.
Second, DPS implementation was needed because the legacy system used with
the current personal property system is not fully supportable and does not
meet DOD information technology security standards. Program and service
officials said that the legacy system has problems interfacing with DOD's
networks. In addition, the legacy system's hardware has been breaking
down. Surface Deployment and Distribution Command officials said that the
number of sites not functioning at any one time varies. To keep the legacy
system working, the Surface Deployment and Distribution Command provided
the services with legacy system "survival kits." These kits included
motherboards and other hardware components that are difficult to find and
are no longer supported commercially. DOD estimates that these survival
kits will keep the legacy systems viable for 4 to 5 years, but some
service personal property officials have expressed concerns that the
legacy systems might not last that long.
DOD delayed the DPS implementation schedule again in February 2007, after
stakeholders from the services and the moving industry participated in DPS
software acceptance testing and found a significant number of problems
with the software. This testing generated more than 1,400 problem reports,
almost 200 of which were collectively expected to result in significant
changes to the software. For example, for a shipment awarded to one moving
company, DPS sent the work order for the shipment to a different moving
company. Thus, the moving company that was awarded the shipment did not
know the shipment was awarded to it.^28 In addition, according to a U.S.
Transportation Command official, some test reports indicated that business
rules still needed to be clarified, such as whether moving companies will
have one or two opportunities per year to file the rates they will charge
DOD to move servicemembers' household goods.^29
^27DOD decided to implement DPS using a phased approach to manage risks
given the difficulties during development.
^28In commenting on a draft of this report, DOD stated that this software
problem has been fixed.
In March 2007, because of the number of test problem reports and overall
concern about DPS functionality, DPS program management officials
significantly altered the timeline for rolling out DPS to address concerns
expressed by military service and moving industry stakeholders regarding
DPS functionality and its implementation schedule. Stakeholders were also
concerned that the implementation schedule called for switching to DPS
during the peak summer season, when both the services and industry would
have to learn a new system while also moving shipments using the current
system. The revised DPS implementation schedule calls for fixing the
issues identified in the test problem reports, continued testing of DPS
through the summer, and adding high-priority changes requested by the
services. Program managers said that DPS should be available for some
shipping offices to use by fall 2007 on a test basis, with all offices
using DPS beginning in spring 2008 for all moves except those using
nontemporary storage and the direct procurement method. Once DPS is
functional for domestic and international household goods moves, program
managers will begin developing the functionality for the third phase of
Families First, which includes moves using nontemporary storage and the
direct procurement method.
DOD Has a Plan to Provide Full Replacement Value without DPS, but Does Not Have
a Plan to Implement the Other Goals and Benefit of Families First without DPS
Because of the delays implementing DPS, DOD has developed a backup plan to
provide servicemembers with the full replacement value coverage benefit,
but its plan to implement the other goals and benefit of Families First
still relies on DPS. When the backup plan was published in December 2006,
it called for the next version of the current program's domestic tariff
and international rate solicitation to include language that made it
mandatory for moving companies to include full replacement value coverage
in the rates submitted to DOD.^30 Using this backup plan in the current
program, the majority of shipments will receive full replacement value
protection by March 1, 2008. The schedule for implementing the backup plan
follows the current program's winter 2007 rate filing schedules for the
domestic intra- and interstate programs and the international programs.
The Surface Deployment and Distribution Command plans to begin accepting
rates under the backup plan beginning in May 2007, and the rates will be
effective from October 1, 2007, through April 1, 2008.
^29According to U.S. Transportation Command officials, this issue was
later resolved, and moving companies will have one opportunity per year to
file the rates they charge DOD to move servicemembers.
^30The international rate solicitation was released in April 2007.
Risk factors associated with DOD's backup plan challenge DOD's ability to
implement the plan. First, the backup plan relies on a legacy system that
is no longer fully supportable. For example, the system still does not
meet security standards. DOD estimates that the survival kits it has sent
to the services can keep the legacy system running for 4 to 5 years.
However, some service officials had concerns that the system would not
last this long. Without the legacy system, staff at the personal property
offices have to work manually to accomplish administrative tasks.
Furthermore, some service officials expressed concern that providing full
replacement value without DPS would give the moving industry an
opportunity to increase prices with no control to limit the cost and may
create some increase in workloads for the claims offices because of the
lack of automation for claims filing. Moreover, most services expressed
concern about the lack of guidance for implementing full replacement value
under the current system instead of within DPS. Some service and Surface
Deployment and Distribution Command officials expressed concerns about
possible increases in their workload because of the magnitude of the
procedural changes as they work to implement full replacement value
without DPS.
Another risk is that thousands of moves may not be covered before the
March 1, 2008, deadline. DOD's contracts for moves within a theater of
operation, those using nontemporary storage, and those using the direct
procurement method do not include full replacement value and may expire
after the March 2008 mandate. DOD stated that it is initiating various
levels of action to ensure full replacement value is implemented by March
2008. According to DOD, as these contracts expire, the new contract will
include full replacement value. The Surface Deployment and Distribution
Command directed that all eligible contracts be modified not later than
March 2008. However, it is still uncertain whether all contracts in place
on March 1, 2008, will cover full replacement value. According to DOD
estimates, in fiscal year 2006, moves that included servicemembers
transferring within a theater of operation accounted for about 7,800
personal property moves, or about 1 percent of the more than 680,000
shipments that occurred. DOD officials also stated that in fiscal year
2006 direct procurement method moves represented almost 8 percent of all
moves. About 16 percent of moves included nontemporary storage.
In a broader sense, DOD's backup plan does not address the other goals or
counseling benefit of Families First; it is designed only to allow DOD to
meet its mandate to provide full replacement value coverage. DOD officials
said that they did not have a requirement to produce a backup plan for the
other goals or counseling benefit and they did not invest resources to do
so. Instead, DOD continues to rely on DPS to achieve the goals and
counseling benefit of Families First. The reason Surface Deployment and
Distribution Command officials said they created a backup plan for full
replacement value is because they were required by statute to implement it
by March 1, 2008, whether DPS was ready or not. For example, the backup
plan does not address how to provide streamlined claims or improved
quality of service from moving companies without DPS, nor does it include
a way to provide the other servicemember benefit of expanded Web
counseling services to help servicemembers with their moves without DPS.
Until DPS is operational, some service officials have said that DOD has at
least one other option for providing expanded counseling services because
the Navy has a program, known as SmartWebMove, which can be used by
members from other services. However, this program is connected to the
legacy system, and deterioration of the legacy system may limit the
feasibility of this option.
Despite these challenges, Surface Deployment and Distribution Command
officials told us that they expect all types of moves will have full
replacement value by March 1, 2008. According to these officials, this
will include nontemporary storage and direct procurement method moves. DOD
continues to rely on the implementation of DPS to achieve other program
goals such as improving the quality of service and claims processing.
Families First Program Could Increase DOD Costs by About $1.4 Billion over
Current Program Costs through Fiscal Year 2011
The Families First program could increase costs to DOD by about $1.4
billion over current program costs through fiscal year 2011 for two main
reasons: (1) DOD estimates the program will increase costs to the services
by 13 percent and (2) DOD has significantly increased the cost estimate
for a new information management system since our last assessment. DOD's
Families First program has not yet been implemented, so we could not
assess the actual growth in costs of the program, although DOD continues
to estimate that the Families First program will increase the cost to the
services for their household goods budgets by an estimated 13 percent, or
as much as $1.2 billion through fiscal year 2011. In addition, the DPS
program office has significantly increased the estimated cost of DPS and
maintaining the DPS program office, which it now expects to cost $180
million through fiscal year 2011.
Actual Growth in Costs of Families First Program Cannot Be Assessed, Although
DOD Continues to Estimate a 13 Percent Increase in Services' Costs to Implement
Families First
We could not assess the actual growth in costs of Families First because
the program has not been implemented; however, DOD continues to estimate
that the costs to the services of the Families First program will be 13
percent higher than costs under the current program. In fiscal year 2006,
the services' total household goods budget was about $1.8 billion, which
would mean the services would have an increase of $240 million annually
above the existing budget in order to move servicemembers' household goods
under Families First in 2007, if the program were fully implemented.^31
DOD will incorporate a cost-control mechanism into DPS, similar to the one
employed in the current program, in an attempt to keep the costs within
the expected increase. However, until DPS is implemented the impact of the
use of this mechanism on the Families First program will not be known.
Based on DOD's total household goods budget, Families First could cost DOD
about $1.2 billion more than the current program over the next 5 years.
DOD continues to inform the services that the Families First program, when
fully implemented, will cost them an additional 13 percent over their
existing household goods budgets, which is a subset of the services'
permanent change of station budgets. According to U.S. Transportation
Command and some personal property officials, this cost increase is in
part because of an expectation by DOD that moving companies will increase
the rates they charge as a result of their additional responsibilities
under the Families First business rules, such as providing full
replacement value. The actual cost of Families First will not be known
until moving companies file the rates they will charge DOD to move
servicemembers, which is expected to take place in March 2008. DOD is
relying on features built into DPS to ensure that the costs remain at or
below the expected cost increase of 13 percent. DPS will incorporate a
cost-control mechanism known as rate reasonableness, which will establish
an acceptable range of rates for each combination of pickup and
destination locations.^32
^31The 2006 household goods portion of the permanent change of station
budget is about $1.8 billion, which, when adjusted for inflation in 2007
using the Gross Domestic Product Price Index inflation rate of 2.0
percent, is about $1.84 billion. Thirteen percent of $1.84 billion is
$2.07 billion, which is about $240 million more than the current program
would have cost for 2007. Over 5 years, this results in a $1.2 billion
increase over the current program's costs.
The program delays in implementing Families First decrease the certainty
of the cost estimate because the methodology is based on certain
assumptions and data that may change with time. For example, the cost
methodology used to estimate the 13 percent increase was adjusted to
account for fewer small businesses participating DOD-wide than
participated in the pilot programs. However, according to DOD officials,
the percentage of small business participation in Families First will be
similar to the current DOD participation rate of 70 percent, which is
significantly larger than the 30 percent assumed in the 2002 cost
estimate. DOD's evaluation of the pilot programs demonstrated that small
businesses were 14 to 74 percent more expensive per shipment compared to
the current program. As a result, DOD may have underestimated the cost of
having small businesses participate in Families First.
Estimated Costs for the Integrated Information Management System Have
Significantly Increased since Our Last Assessment
DOD's estimated costs for an integrated information management system,
known as DPS, have significantly increased since our last assessment in
2003. The estimates for developing an information management system to
support Families First have increased from $4 million to $6 million to
$86.0 million, and the total cost is expected to be about $180 million
through fiscal year 2011 once annual operating costs are added.
In a 2002 report,^33 DOD estimated that implementing the information
technology improvements to enhance its data management capabilities for
Families First would cost $4 million to $6 million. This estimate was
based on expanding the use of an upgraded, Web-based version of the
existing legacy system that was implemented on a small scale during one of
DOD's pilot programs. In our April 2003 review of that estimate, we
questioned whether DOD would be able to implement its new personal
property program, including the technology improvements, within the
estimated range.^34 In addition, we noted that although DOD had developed
a plan of action for designing the new system, the plan did not include
monitoring the costs and benefits during its implementation or the extent
to which system changes were being achieved within an acceptable cost
range, such as the $4 million to $6 million estimate.
^32Moving companies submit rates for each combination, and DPS will
automatically reject rates that are outside the established ranges. Moving
companies then have one opportunity to resubmit new rates to replace the
rejected rates. If resubmitted rates are still outside the rate
reasonableness range, the moving companies will be prevented from being
awarded shipments for that combination of pickup and drop-off destinations
for 1 year.
^33Department of Defense, U.S. Transportation Command Personal Property
Pilot Programs Evaluation Report, June 2002.
According to DOD officials and documents, in January 2004, DOD decided to
implement the technology improvements to support Families First by
developing an entirely new information management system, which came to be
known as DPS. In a January 2004 report, the Surface Deployment and
Distribution Command said that the legacy system evaluated under the
previous cost estimate was expensive to operate and maintain and could not
be modified to become compliant with DOD technology standards or to
support the objectives of the Families First program.^35 At that time, DOD
estimated that DPS could be developed for about $16.5 million, with an
average annual cost of about $4.6 million after the initial investment.
This estimate assumed that DPS could be developed using
commercial-off-the-shelf or government-off-the-shelf software to account
for about 75 percent of the new system. The use of existing commercial and
government software was expected to keep the cost of the system low,
because using ready-made software reduces the need to develop original
software. For example, the Navy developed a counseling program, known as
SmartWebMove, which was originally planned to be incorporated into DPS as
its counseling module so that DOD would not need to develop original
software as part of DPS to provide this Families First benefit. However,
the Navy's counseling module was not incorporated into DPS.^36 The Navy,
however, is still using SmartWebMove while DPS is being developed.
Since the 2004 estimate, the cost of DPS has continued to increase. As of
February 2007, DOD reports that it spent $51.5 million developing DPS,
which is significantly higher than any previous DOD estimate. This cost
includes about $8.2 million for capital hardware, $24.9 million for
capital software, and $18.5 million in operating costs. According to DOD
Families First officials, after the DPS contract was awarded, software
developers determined that DPS would require a much larger percentage of
new software development than expected because of the unique needs of the
DOD personal property stakeholders, which has caused the cost to rise
significantly. In addition, the costs for developing, testing, and making
DPS available for use now include the cost of the Joint Program Management
Office for Household Goods Systems, which was established on October 1,
2006. The original estimates did not account for a separate program office
to manage the development and operation of DPS, sustain the legacy system,
or evaluate future options for DOD's household goods program. Based on our
analysis of program office budget planning documents from February 2007,
the DPS program office estimated that the costs for maintaining a program
office, sustaining the legacy system through retirement, developing and
sustaining DPS, and implementing a future household goods program through
fiscal year 2011will be $180 million if all of the requirements are
funded. Additional delays in the schedule are likely to further increase
the costs associated with the program. However, when the legacy system is
no longer needed, DOD expects that it will not have to budget for this
additional cost, which is about $21 million annually. Summary information
on DPS cost estimates appears in table 3.
^34 [38]GAO-03-367 .
^35Department of Defense, U.S. Transportation Command, Defense Personal
Property System: Economic Analysis, January 8, 2004.
^36We asked current program officials if they knew why previous program
officials had not used SmartWebMove, and they said they did not know why
it was not used. In commenting on a draft of this report, DOD stated that
it sought various software options and did not prescribe a specific
software solution such as SmartWebMove in order to contract for a
best-value solution.
Table 3: Summary of Information Management System Cost Estimates
Dollars in millions
Original Initial DPS Estimate as of
estimate estimate (2004) February 2007
What is included Upgrades to the Incorporating A separate program
legacy system available office, sustaining the
software legacy system, and
evaluating future
options for DOD's
household goods
program
System development 4 to 6 16.5 86.0^a
Average annual Not estimated 4.6 15.2
operating cost
(fiscal years
2007-2011)^b
Total estimated Not applicable 47.0 180.0^c
costs through
fiscal year 2011^b
Source: GAO analysis of DOD data.
aThe $86.0 million in system development costs for DPS includes actual and
projected capital hardware and capital software costs from fiscal year
2004 through fiscal year 2011.
bAccording to DOD, the estimates for fiscal year 2009 and beyond are
initial estimates that have not been approved through the U.S.
Transportation Command Chief Information Officer Program Review Process,
and may change significantly as potential requirements for a future
household goods program become better defined.
^cTo calculate the total estimated costs for DPS from fiscal year 2007
through fiscal year 2011, we added the capital software, capital hardware,
and operating costs of DPS for those years using budget documents provided
by the DPS program managers. These costs include DPS program office cost
estimates for fiscal years 2008 through 2011 and the $51.5 million spent
developing DPS from fiscal year 2004 through fiscal year 2007.
Calculations are based on fiscal year 2007 data.
DOD Faces Management Challenges for Families First Program and Has Not Developed
a Comprehensive Implementation Plan
DOD faces management challenges for the Families First program, and it has
not employed comprehensive planning that incorporates many sound
management principles and practices. Families First offices, including the
DPS program office, continue to experience organizational challenges and
staffing shortfalls. Moreover, Families First does not have stakeholders'
agreement on some elements of the program, such as business rules and
essential DPS functions. Additionally, the Families First program faces
uncertain funding.
DOD Planning for Families First Did Not Incorporate Some Sound Management
Principles and Practices
Sound management practices require employing comprehensive planning to
manage program implementation.^37 Comprehensive planning should include
many things, such as integrated approaches to manage training and
workforce redeployment issues; a qualified, trained, and well-led team to
reengineer the program; stakeholder agreement about key elements of a
program, including the program's business rules and its priorities; and
full cost information and funding resources. However, DOD's planning for
Families First has not incorporated some of these sound management
practices. Instead, DOD has developed several nonintegrated plans to cover
individual portions of the Families First program. For example, DOD has a
draft transition plan for organizational changes and the DPS program
office has a plan for DPS development. However, DOD does not have a
comprehensive plan with timelines for implementing Families First that
manages all of its efforts simultaneously. Without an integrated,
comprehensive plan, the program's implementation is at risk.
Families First Faces Significant Organizational Changes and Staffing Shortfalls
The offices supporting Families First, including the program office now
overseeing the development and implementation of DPS, are undergoing
organizational changes and experiencing staffing shortfalls that affect
DOD's ability to support Families First at a critical time in its
implementation. When the first phase of Families First implementation and
DPS development began in 2004, the Surface Deployment and Distribution
Command, which is under the U.S. Transportation Command, managed all
elements of the program. In December 2005, almost 2 years after DPS
development started, the Surface Deployment and Distribution Command
established a DPS program management office based on a recommendation made
by a DOD review group. The review group suggested that the Surface
Deployment and Distribution Command establish a clear management structure
for DPS because there was no single point of authority and there was no
acquisition-certified program manager. On October 1, 2006, the U.S.
Transportation Command transferred this office from the Surface Deployment
and Distribution Command to the U.S. Transportation Command. The new
office, named the Joint Program Management Office for Household Goods
Systems, is under the leadership of the U.S. Transportation Command's
Program Executive Office for Distribution Services. The DPS program office
and the program executive office are now led by officials with acquisition
experience.
^37The Business Process Reengineering Assessment Guide found in GAO,
Defense Systems Modernization: Management of Integrated Military Human
Capital Program Needs Additional Improvements, [39]GAO-05-189 (Washington,
D.C.: Feb. 11, 2005); Best Practices Relevant to Any IT Business Systems
Acquisition and Complementary Best Practices Relevant to Commercial
Component-Based IT Business Systems Acquisitions found in Information
Technology: DOD's Acquisition Policies and Guidance Need to Incorporate
Additional Best Practices and Controls, [40]GAO-04-722 (Washington, D.C.:
July 30, 2004); and Results-Oriented Cultures: Implementation Steps to
Assist Mergers and Organizational Transformations, [41]GAO-03-669
(Washington, D.C.: July 2, 2003).
The DPS program office has several tasks:
o mature the program office structure and processes;
o sustain the legacy system currently being used through the
development of its replacement, DPS;
o quickly implement DPS in phases; and
o evaluate alternatives for the future of DOD household goods
services, including options for outsourcing.
Although DOD's establishment of the DPS program office addresses
some of the concerns about DPS program management raised in DOD's
review, the Joint Program Management Office for Household Goods
Systems was not established until a few months prior to a critical
phase of DPS development and continues to organize while also
facing staffing challenges. The DPS program office had a draft
organization chart as of March 2007, but filling staff positions
has been complicated by a base realignment and closure move to
Scott Air Force Base in Illinois from the office's current
location in Alexandria, Virginia. This move is scheduled to take
place in the fourth quarter of fiscal year 2007. The program
office's draft transition plan transfers several positions from
the Surface Deployment and Distribution Command to the DPS program
office. However, this has created human capital challenges, as
many of the staff are choosing to retire or leave rather than
move. These workforce planning issues are significantly affecting
the DPS program office. According to DPS program management
officials, as of April 2007, only 1 of 27 civilians in the program
office planned to transfer to Scott Air Force Base. Thus, while
Families First and DPS are at a critical stage of development,
both the Surface Deployment and Distribution Command and the DPS
program office are losing many of their senior leaders who possess
technical and program knowledge.
The DPS program office is working to mitigate these human capital
planning challenges by seeking authority to hire over current
staffing limits, seeking temporary functional support from other
Surface Deployment and Distribution Command and U.S.
Transportation Command offices, and continuing to seek support
from the services and industry as software testers. As of April
2007, hiring actions had been accelerated and some job
announcements had been made. The program office is also using
contractor support but is facing challenges with this as well. For
example, in March 2007 several contractors were not able to
complete tasks for the program office because of paperwork
processing issues. In addition, in March 2007, the DPS program
office asked each of the services to provide two or three
full-time servicemembers to continue conducting DPS software
testing at the Surface Deployment and Distribution Command
headquarters in Alexandria, Virginia. While the services plan to
provide some human capital support, current service plans indicate
that they cannot provide the servicemember support DPS management
officials originally sought because each service will need its
staff during the busy, peak moving season that coincides with DPS
testing. For example, the Navy is planning to provide five
part-time testers at Navy bases. The Army is planning to provide
five part-time testers at Army bases. The Marine Corps plans to
provide one full-time person to test at program headquarters as
well as one support staff member at its testing site at Camp
Lejeune in North Carolina. The Air Force is also providing
full-time support from its joint personal property shipping office
in Colorado Springs, Colorado. Overall, it is not clear how
successful these temporary mitigation efforts will be in providing
staff with the skills these offices need to implement both DPS and
Families First. However, DOD stated that its joint stakeholder
advisory team of testers will be sufficient to fulfill the mission
required by the DPS program office.
Surface Deployment and Distribution Command officials, who will
manage and provide oversight of the current DOD personal property
program and implementation of the Families First program, said
that they are also facing additional workload and workforce
challenges as they administer the electronic billing and payment
systems as well as the customer satisfaction survey. These
officials are administering these processes without the automation
they expect DPS will provide while also experiencing staff
reductions and changes as a result of a base realignment and
closure move.
As of April 2007, the U.S. Transportation Command has made some
progress to staff the DPS program office, but it is not clear how
successful its measures will be. Until the U.S. Transportation
Command is able to ensure that the DPS program office has adequate
and capable human capital resources, it may be unable to
successfully implement DPS.
The John Warner National Defense Authorization Act for Fiscal Year
2007^38 mandated that the Secretary of Defense submit to the
congressional defense committees a report containing the
certifications of the Secretary on the following matters with
respect to the program of the Department of Defense known as
Families First: (1) whether there is an alternative to the system
under the program that would provide equal or greater capability
at a lower cost; (2) whether the estimates on costs, and the
anticipated schedule and performance parameters, for the program
and system are reasonable; and (3) whether the management
structure for the program is adequate to manage and control
program costs. When the U.S. Transportation Command established
the DPS program office, it included an evaluation of materiel
alternatives for the future of household goods services as part of
the office's mission. The mandate did not specify a date for DOD
to provide this information to the congressional defense
committees. The U.S. Transportation Command is responsible for
leading, with the assistance of the DPS program office, the
evaluation of alternatives. The DPS program office is responsible
for evaluating how to implement the chosen alternative. It is
unclear when the DPS program office will be able to evaluate
materiel alternatives for the program because (1) U.S.
Transportation Command officials told us they were focusing on
developing and implementing DPS and (2) the DPS program office has
not yet been resourced to evaluate the materiel alternatives.
DOD Does Not Have Stakeholders' Agreement on Key Elements of
Families First
DOD does not have stakeholders' agreement on some elements of
Families First, which puts the implementation of the program at
risk. DOD does not have stakeholders' agreement in two
interrelated areas: (1) business rules issues, including whether
existing and proposed rules will actually enable accomplishment of
a key program goal, and (2) the essential functions needed for
DPS.
Uncertainties Surround Families First Business Rules
Stakeholders, including the military services, have not all agreed
to some elements of Families First business rules and have not
taken action to implement all of the business rules because it is
unclear to them if the rules are final. At the end of our audit
work, the U.S. Transportation Command was still evaluating whether
the business rules would have to be published again for comment by
stakeholders. However, in commenting on a draft of this report in
May 2007, DOD stated that the business rules are now considered
final.^39 Business rules help define how policies are to be
implemented. DPS requirements and functions are derived from these
business rules. For example, in late March 2007, several months
into DPS testing, DOD was still evaluating a business rule as to
whether moving companies should have the opportunity to file the
rates they charge DOD to move servicemembers' household goods once
or twice per year. In the current program, rates are filed twice
per year. Under Families First business rules, moving companies
would file rates only once per year. In April 2007, DOD decided to
continue with its Families First business rule where moving
companies only file rates once per year.^40
^38Pub. L. No. 109-364, S 363 (2006).
^39In commenting on a draft of our report, DOD stated that it had
representatives from the military services, the household goods industry
and experts from the Surface Deployment and Distribution Command teamed
together to create the Families First business rules. It also stated that
these rules were provided to the services and industry for their comment
and that the services have not indicated that they could not use the
business rules developed by the Surface Deployment and Distribution
Command. While we understand that several years ago when DPS was first
being developed, these groups came together to discuss DPS requirements,
our evidence indicates that (1) DOD may not have had the level of
agreement with stakeholders it originally thought when it compiled the
requirements for DPS and (2) DPS testing in January and February 2007
illustrated that some requirements were either ill-defined when
requirements were generated or that it was not until stakeholders were
able to test the functionality of the requirements that it was discovered
there was a disconnect in how the requirement was defined and the
functionality that was actually needed.
^40According to DOD, although moving companies file rates once per year,
the annual filing includes two sets of rates, one set covering the summer
cycle and one covering the winter cycle.
Within DOD, debate continues about whether Families First business
rules will allow DOD to accomplish its goal of improving the
quality of service from moving companies by using a best-value
approach that incorporates performance-based service contracts.
Some DOD officials (and industry representatives) question DOD's
proposed practice of allocating business to moving companies using
a system where companies that receive less than the best
performance score are still allocated business. For example, under
Families First rules, moving companies will be ranked into four
groups based on their performance scores. Those companies with the
best scores will be placed into the first group and receive the
most DOD business. However, DOD officials said that even those
companies that are in the fourth group, with the lowest
performance scores, are expected to receive some business from
DOD. According to DOD officials and industry representatives, one
reason DOD will do this is to keep providing business to those
companies that may not otherwise be able to stay open during the
nonpeak moving season. These stakeholders said that this helps
ensure that there will be enough capacity during peak moving
season. However, some servicemembers' household goods may be moved
by companies that did not receive high performance scores, and
therefore they may not receive quality moves.^41 If this is not
resolved, DOD may be challenged to meet the program's goal of
improving the quality of service from moving companies.
Additionally, during the course of our work, stakeholders
indicated that they did not consider the business rules final.
However, DOD, in commenting on a draft of this report, stated that
the business rules are now considered final. Stakeholders
indicated that they do not yet know what will be expected of them
under Families First or what DPS must include to fully support the
program. Stakeholders said that the business rules are not
considered final until they have been published in the Defense
Transportation Regulation. The U.S. Transportation Command
published business rules for phase one of the program in the
Defense Transportation Regulation on February 20, 2007. However,
it has not published business rules for the second and third
phases of Families First in the Defense Transportation Regulation.
The business rules have only been published on the Surface
Deployment and Distribution Command's Web site and once in the
Federal Register so that stakeholders could comment on them.
During our review, U.S. Transportation Command officials indicated
that DOD planned to publish the business rules again in the
Federal Register in June 2007 so that stakeholders could comment
on them again and said that DOD would finalize the business rules
in July 2007. It is unclear whether DOD still plans to publish the
rules again in the Federal Register. Along with the uncertainty
surrounding the business rules, stakeholders do not have
procedural guidance and do not yet know what is expected of them
under Families First. For example, an Air Force personal property
official told us the Air Force needs the finalized Families First
business rules so that it can train its staff on these new rules,
which the personal property official described as being vastly
different from the current program's business rules. However, the
Air Force personal property official said the Air Force is
hesitant to develop a training curriculum on business rules that
are not finalized. Additionally, without final business rules, the
services cannot set up internal regulations to support the
business rules. Moreover, representatives from the services and
the moving industry are concerned that without a formal set of
business rules on which to develop DPS, they cannot evaluate
whether the computer system fully supports the Families First
business rules. Service officials and industry representatives
continue to have questions about Families First business rules and
DPS implementation.
^41Although DOD plans to have a minimum performance score, DOD personal
property officials called the current minimum score generous and noted
that it could change over time. In responding to a draft of this report,
DOD said that it believes that the mandatory requirement for moving
companies to provide full replacement value coverage on all DOD household
goods moves will drive companies to reduce the occurrence of damages and
therefore improve the quality of moves.
Finally, the moving companies have concerns about the Families
First business rules that define how DOD generates the performance
scores used to rank them in the first, second, third, or fourth
groups. The majority of a moving company's performance score comes
from a customer satisfaction survey. However, servicemember
response rates for the survey have been low (about 16 percent
within the past year) and, because of this, most moving companies'
scores are not statistically valid for generating a performance
score. Although DOD has, as part of its business rules, devised a
methodology to make moving company performance scores valid until
survey response rates improve,^42 industry representatives are
still concerned that moving companies will be negatively affected
by low response rates. In commenting on a draft of this report,
DOD stated that while it values the opinion of the moving
industry, its personal property program does not require consensus
by industry. DOD stated that the main focus of the department is
to provide a quality personal property program for servicemembers
while being good stewards of taxpayer dollars.
Stakeholders Have Not Agreed to All Essential Functions for DPS
Another fundamental challenge facing DOD in implementing DPS is
that stakeholders, such as the military services and the moving
industry, have not agreed to all of the essential functions of DPS
and how they should operate when DPS is made available to
servicemembers to use. Service officials told us that prior to the
development of the DPS program office, the Surface Deployment and
Distribution Command held many meetings to understand what the
services wanted DPS to provide servicemembers and personal
property officials. However, service officials said that officials
overseeing DPS development at that time did not include all of
those requirements when first developing DPS. A Surface Deployment
and Distribution Command official said that the contract for DPS
was written from a requirements list generated by military service
and moving industry stakeholder participation. For example, there
was a General Officer Steering Committee, Council of Colonels and
Captains, and moving industry stakeholder groups, which met to
discuss DPS requirements. In early 2007, after the U.S.
Transportation Command took over DPS, stakeholders had their first
opportunity to test DPS. During these tests, stakeholders
identified functions that they expected within DPS but that did
not work the way they expected. This resulted in DPS not providing
the functionality service officials expected, and this, in turn,
could affect the services' workloads. A U.S. Transportation
Command official said that it is possible that there was
miscommunication during earlier meetings to define requirements
and that it was not until stakeholders were able to test DPS
functionality that these issues were identified. For example, DPS
users wanted to obtain the status of a moved shipment. When DPS
was programmed, it only displayed whether the shipment was in the
system. However, users wanted more detail in terms of where the
shipment was at a certain point in time. DPS program management is
still in the process of identifying and prioritizing the
requirements for DPS, but currently lacks stakeholders' agreement
about all of those requirements and their priority. For example,
some stakeholders disagree with the categories assigned to some of
the test problem reports, because none of the reports were placed
in categories 1 or 2, which are used for the most severe types of
problems. Further, the moving industry expected that DPS would
interface with their computer systems, but this is not yet part of
DPS.
^42The Surface Deployment and Distribution Command plans to use a hybrid
performance score that will give moving companies credit for all surveys
earned and supplement each moving company with just enough neutral surveys
to achieve statistical validity, when applicable. The neutral surveys are
each equal to the median performance score in each market.
DPS program officials said that earlier phases of DPS development
lacked a mechanism for systematically reviewing DPS problems and
requirements and identifying how to fix them. The U.S.
Transportation Command and the Surface Deployment and Distribution
Command formed a Functional Requirements Board to review and
prioritize the problems identified during testing that must be
fixed and to address other proposed changes to DPS. The Functional
Requirements Board is composed of representatives from the
services, the Surface Deployment and Distribution Command, and the
U.S. Transportation Command and meets monthly to discuss which
testing problems should be the highest priority for correcting.
The prioritized list of test problems is then reviewed by a
Configuration Control Board, which is composed of DPS program
managers, service representatives, DPS development contractors,
and software engineers who decide which of the DPS problems can be
corrected after considering the resources available. As of March
2007, according to DOD, the Functional Requirements Board had
developed initial DPS functional requirements, reviewed many
proposed system enhancements, and prioritized the services' top
five needs in each DPS module. In addition to stakeholders'
requirements, additional priorities for DPS may also come from the
business rules. This, too, could affect the DPS implementation
timeline, as well as implementation of Families First.
Another challenge is that without stakeholders' agreement, DPS
requirements continue to change. DPS development is being
administered using a firm-fixed-price contract.^43 With a
firm-fixed-price contract all major modifications to DPS require
negotiation with the contractor, which may lead to additional
administrative costs.
Families First Is Not Fully Funded
Even though Families First is projected to cost the services about
$1.2 billion over the next 5 years, and DPS is expected to cost
about $180 million through fiscal year 2011, the department has
not set aside funding to fully cover these costs. The services
have taken different approaches in budgeting for the increased
costs expected to implement the Families First program, ranging
from the Army requesting the entire estimated 13 percent increase
to the Navy not requesting any increase at all, in part because
they have not received clear guidance from DOD about how to
calculate the estimated increase to their budgets. Moreover, the
growing cost of DPS has led to funding shortfalls in the DPS
program office that are affecting both staffing needs and software
development.
Services Vary in the Extent to Which They Have Budgeted for Families First
The services vary in the extent to which they have budgeted for
the increased costs expected to implement the Families First
program. As previously discussed, DOD estimates that the Families
First program will increase the services' moving budgets by 13
percent above the current budgets needed to move household goods,
and DOD has informed the services to budget based on this
estimate. However, some personal property officials expressed
concerns about DOD's ability to implement the Families First
program within the expected increase of 13 percent; these
officials expect that the cost increase will be significantly
more. As a result, the services vary in the degree to which they
have budgeted for Families First. According to service officials,
the services have taken the following actions to budget for
Families First:
^43A firm-fixed-price contract provides for a price that is not subject to
any adjustment on the basis of the contractor's cost experience in
performing the contract. FAR section 16.202-1.
o The Army has submitted a budget request for the entire 13
percent increase to the household goods portion of its budget in
fiscal years 2008 and 2009.
o The Coast Guard requested the 13 percent increase based on its
entire permanent change of station budget, of which household
goods is just a portion.
o The Air Force submitted a budget that included the 13 percent
cost increase for Families First in fiscal year 2008, but the
Office of the Secretary of Defense did not agree with the Air
Force's budget submission and reduced its funding for permanent
change of station moves.
o The Marine Corps has requested funding in fiscal years 2007,
2008, and 2009 only for its estimated full replacement value cost.
o The Navy has not requested any of the expected 13 percent cost
increase.
In addition, some personal property officials stated that they are
having difficulty budgeting because they have not received clear
guidance about how to calculate the increase. As a result, the
services also vary in how they interpret the effect of the 13
percent cost estimate on their household goods budgets. For
example, the Air Force estimated its typical annual expected
increase in the current household goods program and then added 13
percent. Army officials told us they were unclear whether the
household goods program would be increasing by 13 percent every
year or just the first year of Families First. A Coast Guard
budget official interpreted the 13 percent increase as an increase
to just those portions of the budget that apply to the rates
charged by moving companies. Neither the Surface Deployment and
Distribution Command nor the Office of the Secretary of Defense
Comptroller have provided clear guidance on how the services are
supposed to apply the 13 percent estimate to their household goods
budgets. As a result, the services may continue to apply the 13
percent in different ways, which could result in the program not
being fully funded.
According to some service officials, if the expected increase in
Families First cost is not included in their budgets and program
costs begin to rise as Families First is implemented, then the
services may have to consider measures to reduce their household
goods budgets. This could affect the number of moves the services
can make and could ultimately impact the services' flexibility in
meeting force management needs. Surface Deployment and
Distribution Command officials said they plan to monitor the cost
of Families First in two ways. First, these officials will use the
rate reasonableness methodology to keep the cost at the estimated
13 percent increase. Further, they plan to use reporting functions
in DPS to monitor program costs. However, it is unclear how
officials will monitor the costs of the program without a fully
functioning DPS. Additionally, although the services plan to
monitor the actual cost of the program as part of their normal
budget processes, there is no plan to provide updated estimates to
the services about the cost of the program prior to the services
actually incurring the cost. Further, without clear guidance to
the services about how to apply the 13 percent cost increase to
their permanent change of station budgets, it is unclear whether
the services will budget appropriately for the projected Families
First cost increase. Without updated information about whether the
estimated increase remains accurate as Families First is
implemented, the services may not budget for Families First or may
budget inaccurately for the program.
Growing DPS Costs Are Creating Funding Shortfalls
As a result of the growing costs of DPS, the DPS program office is
experiencing funding shortfalls that are affecting both staffing
needs and software development. As of April 2007, the U.S.
Transportation Command had not identified how it would fully fund
its projected costs of DPS, which it estimated in February 2007 to
be about $180 million through fiscal year 2011.^44 Without these
funds, the U.S. Transportation Command will be challenged to staff
the DPS program office and complete DPS software development. The
U.S. Transportation Command has been trying to fund DPS and the
DPS program office from its transportation working capital fund.
In fiscal year 2007, the U.S. Transportation Command reallocated
about $7.5 million from its transportation working capital fund to
support DPS. According to a U.S. Transportation Command budget
planning document, this resulted in other U.S. Transportation
Command information technology program delays or affected their
ability to provide some services. Even with the reallocation, the
U.S. Transportation Command had to defer about $9.7 million needed
for high-priority software changes and development essential for
DPS to fiscal year 2008. The DPS program office has an anticipated
shortfall for fiscal year 2008 of $21 million, which includes
staff training, contractor support, and funds for staff travel.
Travel funds are important since the DPS contractor will be in
Virginia and the program staff will be located at Scott Air Force
Base in Illinois.
^44As of February 2007, the DPS program office estimated that the costs
for maintaining a program office, sustaining the legacy system through
retirement, developing and sustaining DPS, and implementing a future
household goods program through fiscal year 2011 would be about $180
million if all of the requirements are funded.
However, the U.S. Transportation Command has not yet developed a
detailed budget plan to resource DPS or the DPS program office.
The information technology portion of the U.S. Transportation
Command's transportation working capital fund has an annual budget
of about $400 million. The DPS program office estimates that it
will cost from $28 million to $43 million annually to support DPS
and the program office for fiscal years 2008 through 2012. This is
from 7 to about 11 percent of the U.S. Transportation Command's
information technology portion of the transportation working
capital budget. The U.S. Transportation Command has asked the
Office of the Secretary of Defense for $5 million during fiscal
year 2008, but the request has not yet been approved.
Additionally, U.S. Transportation Command officials said that they
have informed the services that they expect them to provide funds
for some additional DPS requirements.
DPS program office officials based their current cost estimates
for DPS and the program office on the aggressive timeline for
implementing DPS before it changed in February 2007. Additional
delays in the schedule because of problems developing the software
will likely increase the costs associated with the program. At the
time of our review, it was too early in the DPS implementation
process to determine if the oversight provided by the program
office will be effective in keeping DPS costs under control given
the ongoing changes to the DPS implementation schedule and the
significant number of software changes identified during software
testing.
Conclusions
Despite DOD's recent focus on its personal property program,
long-standing problems persist. The department has invested
millions of dollars trying to improve the program since the
mid-1990s with little real progress. DOD's Families First program
is intended to address many of these long-standing problems but
has faced a myriad of management problems and is now at a critical
juncture in its implementation. The underlying problem is that DOD
has not developed a comprehensive plan to organize, staff, and
fund Families First. Until DOD develops a detailed plan to
adequately recruit and retain qualified personnel, gain
stakeholder agreement about essential requirements for DPS, and
set aside resources such as funding and staff, it will be unable
to effectively address the challenges to the program. Relying on
DPS to achieve program goals--without analyzing alternatives as
required by Congress--puts Families First at risk. Moreover, at a
time when our nation faces increasing financial constraints and it
is increasingly important for DOD to maximize the return on its
investment in new systems, DPS costs are continuing to increase
while DOD has little to show for its 11 years of reengineering
efforts and millions of dollars of investment. Without a
reexamination of the program as required by the mandate and urgent
attention commensurate with the program's importance to millions
of servicemembers and their families, these problems are likely to
continue to negatively affect servicemembers' quality of life when
they are required to move.
Recommendations for Executive Action
We are making the following two recommendations to the Secretary
of Defense. To address long-standing problems in DOD's personal
property program we recommend that the Secretary of Defense direct
the Commander, U.S. Transportation Command, to expedite the
evaluation of the Families First program the John Warner National
Defense Authorization Act for Fiscal Year 2007 mandated the
department conduct.^45 This act mandates that the report contain
the certifications of the Secretary of Defense on the following
matters with respect to the Families First program: (1) whether
there is an alternative to the system under the program that would
provide equal or greater capability at a lower cost; (2) whether
the estimates on costs, and the anticipated schedule and
performance parameters, for the program and system are reasonable;
and (3) whether the management structure for the program is
adequate to manage and control program costs.
We also recommend that DOD employ comprehensive planning to
implement the Families First program and its associated system. At
a minimum, this planning should address specific steps to
o hire and train personnel so that the Surface Deployment and
Distribution Command personal property division and the DPS
program office have the human capital needed to develop and
implement DPS and
o reach agreement with stakeholders on the essential requirements
for DPS and their priority to facilitate the development of DPS.
In addition, this comprehensive plan should include an investment
strategy that reflects the full cost of accomplishing the goals of
Families First and milestones for implementation.
^45Pub. L. No. 109-364, S 363 (2006).
Agency Comments and Our Evaluation
In written comments on a draft of this report, DOD concurred with
both of our recommendations and cited specific actions it has
taken and will take for each recommendation. We believe DOD's
planned actions, if implemented, have the potential to improve the
outcome of the Families First program. However, we also believe it
is critical that DOD sustain focus on the program, especially
given the delays the program has experienced and the challenges it
still faces.
DOD concurred with our recommendation to expedite the evaluation
of the Families First program that the John Warner National
Defense Authorization Act for Fiscal Year 2007^46 mandated the
department conduct. In its comments, DOD said that it plans to
provide this evaluation of its household goods program to Congress
in August 2007. We modified our recommendation to include the
details of what the act requires.
DOD also concurred with our recommendation that it should employ
comprehensive planning to implement the Families First program. In
addition, DOD provided technical comments suggesting that we
include the Surface Deployment and Distribution Command personal
property division as part of this recommendation. We agree, and
have modified this recommendation accordingly. Our recommendation
now indicates that at a minimum, this planning should include
specific steps to hire and train personnel for the Surface
Deployment and Distribution Command personal property division and
the DPS program office, address specific steps to reach agreement
with stakeholders on the essential requirements for DPS and their
priority, and include an investment strategy that reflects the
full cost of accomplishing the goals of Families First and
milestones for implementation.
DOD cited specific actions it has taken or will take to implement
this recommendation. For example, DOD said that hiring actions are
in progress to staff the DPS program office after its relocation
to Scott Air Force Base and that other actions are being
implemented to staff the Surface Deployment and Distribution
Command. In addition, DOD stated that it has implemented a process
to reach agreement with stakeholders on the essential requirements
for DPS and their priority by establishing the Functional
Requirements Board^47 and the Configuration Control Board. DOD
stated that this structure has helped to stabilize the functional
requirements for DPS. Finally, DOD stated that the U.S.
Transportation Command will provide almost $91 million for DPS
development, testing, fielding, and maintenance and that there is
a DPS line item in the U.S. Transportation Command's
transportation working capital fund budget. The U.S.
Transportation Command is also working with the Office of the
Secretary of Defense to provide almost $2.8 million of
operating/maintenance dollars from transformation funding. DOD's
comments also state that the U.S. Transportation Command will
provide funds internally, if required, to fund DPS and the DPS
program office. However, DOD's comments did not address how the
department intends to develop an investment strategy to cover the
over $1 billion in increased costs associated with implementing
Families First. Developing such a plan for Families First will be
critical for the program's future success.
^46Pub. L. No. 109-364, S 363 (2006).
^47In DOD's comments, it refers to this board as the Functional Review
Board.
DOD also provided technical and editorial comments, which we have
incorporated as appropriate. DOD's comments are reprinted in
appendix II.
We are sending copies of this report to interested congressional
committees; the Secretary of Defense; the Secretaries of the Army,
Navy, and Air Force; the Commander, U.S. Transportation Command;
the Office of the Assistant Deputy Under Secretary of Defense
(Transportation Policy); and the Director, Office of Management
and Budget. We will make copies available to others upon request.
In addition, the report will be available at no charge on the GAO
Web site at http://www.gao.gov .
If you or your staff have any questions about this report, please
contact me at (404) 679-1816 or [email protected]. Contact points
for our Offices of Congressional Relations and Public Affairs may
be found on the last page of this report. GAO staff who made major
contributions to this report are listed in appendix III.
John Pendleton
Acting Director, Defense Capabilities and
Management
Appendix I: Scope and Methodology
To evaluate the Department of Defense's (DOD) Families First
program, we obtained documentation from and met with DOD officials
and stakeholders in the Washington, D.C., area from
o the Military Surface Deployment and Distribution Command;
o the Joint Program Management Office for Household Goods Systems;
o Transportation and personal property offices of the Army, Navy,
Air Force, Marine Corps, and Coast Guard;
o three moving industry associations, including the American
Moving and Storage Association, the Household Goods Forwarders
Association of America, and the Military Mobility Coalition; and
o the Offices of the Secretary of Defense, including
Transportation Policy and the Comptroller.
We also met with DOD officials at Scott Air Force Base, Illinois,
from the
o U.S. Transportation Command's Program Executive Office for
Distribution Services;
o U.S. Transportation Command's Strategy, Policy, Programs and
Logistics Directorate; and
o U.S. Transportation Command's Program Analysis and Financial
Management Directorate.
To assess the steps DOD has taken to achieve the goals and
benefits of the Families First program with or without a new
information management system, we identified the goals and
benefits of the Families First program by analyzing Families First
planning documents and related studies, such as briefings to the
U.S. Transportation Command, and verified these goals with
personal property officials from the Surface Deployment and
Distribution Command. We compared the status of the Families First
program to its stated goals by examining Families First
implementation timelines provided by program officials and by
interviewing officials and stakeholders from the offices listed.
We limited our evaluation of the benefits of the Families First
program to those benefits that pertain to the servicemembers,
specifically full replacement value coverage and expanded
counseling services.
We determined DOD's ability to achieve the goals and benefits of
Families First with or without a new information management system
by monitoring the status of the Defense Personal Property System
(DPS) throughout the course of our review. This included observing
demonstrations of DPS as it was presented to representatives from
the services and moving industry, reviewing test problem reports
generated during DPS software acceptance testing, and examining
briefings in which DPS program management and stakeholders
reevaluated the DPS implementation schedule. We also reviewed a
Federal Register notice provided by Surface Deployment and
Distribution Command officials, which described its plans for
implementing the full replacement value benefit of Families First
without DPS. We analyzed the current program business rules and
requirements and compared them to the goals and benefits of
Families First to determine if alternatives existed in the current
program to implement them without DPS. We also interviewed the
officials and stakeholders listed. We asked these officials and
stakeholders to provide alternatives for achieving the Families
First goals and benefits without DPS. When an alternative was
identified, we questioned officials and stakeholders about the
feasibility and possible challenges of implementing Families First
goals and benefits without DPS.
To evaluate the growth in the cost of the program since our
previous assessment, we determined that we could not evaluate the
actual growth in costs because data were unavailable as the
program has not yet been implemented. However, we determined that
DOD was still advising the services to budget for the previously
estimated 13 percent cost increase for Families First. To
understand this estimated increase, we reviewed the estimated cost
of the Families First program from our two previous reports
related to the cost of the Families First program.^1 We analyzed
the size of the services' current permanent change of station
budgets and assessed how the cost of the Families First program
would increase those budgets using information provided by the
Office of the Secretary of Defense Comptroller. Families First
program management officials stated that DOD would use a
cost-control mechanism known as rate reasonableness to ensure that
program costs do not exceed the estimated increase. We analyzed
Families First business rules and planning documents, such as its
concept of operations, to determine the feasibility and
limitations of the rate reasonableness approach. We interviewed
officials from the Military Surface Deployment and Distribution
Command and the U.S. Transportation Command Office for
Transportation Policy to determine whether their estimate of the
cost of Families First has changed since our previous assessment
and what their plans were to keep the cost of the Families First
program within the estimate. We also asked officials from the
Military Surface Deployment and Distribution Command if they had
plans to monitor the costs during implementation of the program.
Although we did not independently test the reliability of data DOD
extracted from its data system to develop costs or independently
verify the analysis used to generate cost estimates, we determined
the data were sufficiently reliable for the purposes of our report
because they are the same data DOD decision makers use to manage
the program.
^1GAO, Defense Transportation: Monitoring Costs and Benefits Needed While
Implementing a New Program for Moving Household Goods, [58]GAO-03-367
(Washington, D.C.: Apr. 18, 2003), and Defense Transportation: DOD Has
Adequately Addressed Congressional Concerns Regarding the Cost of
Implementing the New Personal Property Program Initiatives,
[59]GAO-05-715R (Washington, D.C.: June 9, 2005).
To assess the growth in the estimated cost of DPS, we reviewed our
previous report, which contained DOD's estimate of the cost of
improving its information technology system.^2 We compared this
estimate to estimates contained in the U.S. Transportation Command
budget planning documents and the DPS economic analysis completed
in 2003,^3 which also documented how DOD's concept for information
technology system improvements changed since our last review. To
obtain updated information about the current costs of developing
and fielding DPS, we analyzed budget documents provided by the
Joint Program Management Office for Household Goods Systems as of
February 2007. To understand the U.S. Transportation Command's
transportation working capital fund Chief Information Officer
Program Review Process, we reviewed related documents, such as the
Chief Information Office Program Review Process business flow and
interviewed budget officials at the U.S. Transportation Command's
Program Analysis and Financial Management directorate. Although we
did not independently test the reliability of data DOD extracted
from its data system to develop costs or the analysis used to
generate cost estimates, we determined that the data were
sufficiently reliable for the purposes of our report because they
are the same data DOD decision makers use to manage the program.
To assess the extent to which DOD faces management challenges in
implementing the Families First program, we analyzed documents,
such as Families First program meeting minutes and management
briefings to the General Officer Steering Committee, the Council
of Colonels and Captains, and the U.S. Transportation Command,
which identified difficulties in implementing the Families First
program. We also identified best practices for business
reengineering and transformation, which we used to compare the
process by which DOD is implementing the Families First program.
These best practices were found in prior GAO reports.^4 We also
reviewed documents pertaining to the Joint Program Management
Office for Household Goods Systems, including the draft
organization chart, the draft transition plan for the office's
move to Scott Air Force Base as part of a base realignment and
closure move, and draft budget documents for developing and
implementing DPS. We also interviewed officials and stakeholders.
We did not evaluate DOD's decision to implement the Families First
program or develop DPS, nor did we evaluate the solicitation
process for awarding the DPS contract.
^2 [60]GAO-03-367 .
^3Department of Defense, U.S. Transportation Command, Economic Analysis:
Defense Personal Property System, January 8, 2004.
^4The Business Process Reengineering Assessment Guide found in GAO,
Defense Systems Modernization: Management of Integrated Military Human
Capital Program Needs Additional Improvements, [61]GAO-05-189 (Washington,
D.C.: Feb. 11, 2005); Best Practices Relevant to Any IT Business Systems
Acquisition and Complementary Best Practices Relevant to Commercial
Component-Based IT Business Systems Acquisitions found in Information
Technology: DOD's Acquisition Policies and Guidance Need to Incorporate
Additional Best Practices and Controls, [62]GAO-04-722 (Washington, D.C.:
July 30, 2004); Results-Oriented Cultures: Implementation Steps to Assist
Mergers and Organizational Transformations, [63]GAO-03-669 (Washington,
D.C.: July 2, 2003); and Agencies' Annual Performance Plans Under the
Results Act: An Assessment Guide to Facilitate Congressional
Decisionmaking, GAO/GGD/AIMD-10.1.18 (Washington, D.C.: February 1998).
We conducted this performance audit from September 2006 through
May 2007 in accordance with generally accepted government auditing
standards. Those standards require that we plan and perform the
audit to obtain sufficient, appropriate evidence to provide a
reasonable basis for our findings and conclusions based on our
audit objectives. We believe that the evidence obtained provides a
reasonable basis for our findings and conclusions based on our
audit objectives.
Appendix II: Comments from the Department of Defense
Appendix III: GAO Contact and Staff Acknowledgments
GAO Contact
John Pendleton (404) 679-1816 or [email protected]
Acknowledgments
In addition to the contact named above, Lawson Gist, Jr.,
Assistant Director; Krislin Bolling; Renee S. Brown; Michelle
Cooper; Arthur L. James, Jr.; Tina M. Kirschbaum; Lonnie
McAllister; Maewanda Michael-Jackson; Charles W. Perdue; and
Bethann Ritter made key contributions to this report.
Related GAO Products
Defense Transportation: DOD Has Adequately Addressed Congressional
Concerns Regarding the Cost of Implementing the New Personal
Property Program Initiatives. [44]GAO-05-715R . Washington, D.C.:
June 9, 2005.
Defense Transportation: Monitoring Costs and Benefits Needed While
Implementing a New Program for Moving Household Goods.
[45]GAO-03-367 . Washington, D.C.: April 18, 2003.
Defense Transportation: Final Evaluation Plan Is Needed to Assess
Alternatives to the Current Personal Property Program.
[46]GAO/NSIAD-00-217R . Washington, D.C.: September 27, 2000.
Defense Transportation: The Army's Hunter Pilot Project Is
Inconclusive but Provides Lessons Learned. [47]GAO/NSIAD-99-129 .
Washington, D.C.: June 23, 1999.
Defense Transportation: Plan Needed for Evaluating the Navy
Personal Property Pilot. [48]GAO/NSIAD-99-138 . Washington, D.C.:
June 23, 1999.
Defense Transportation: Efforts to Improve DOD's Personal Property
Program. [49]GAO/T-NSIAD-99-106 . Washington, D.C.: March 18,
1999.
Defense Transportation: The Army's Hunter Pilot Project to
Outsource Relocation Services. [50]GAO/NSIAD-98-149 . Washington,
D.C.: June 10, 1998.
Defense Transportation: Reengineering the DOD Personal Property
Program. [51]GAO/NSIAD-97-49 . Washington, D.C.: November 27,
1996.
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Highlights of [65]GAO-07-671 , a report to congressional committees
May 2007
DEFENSE TRANSPORTATION
DOD Needs a Comprehensive Approach to Planning for Implementing Its New
Personal Property Program
The Department of Defense (DOD) has been working to improve its personal
property program since the mid-1990s to fix long-standing problems, such
as excessive loss or damage to servicemembers' property and poor quality
of service from moving companies. DOD plans to replace its current program
with Families First, a program that promises to offer servicemembers an
improved claims process and quality of service. GAO was mandated to (1)
assess the steps DOD has taken to achieve the goals and benefits of the
Families First program; (2) evaluate the growth in costs of the program,
including the costs for a new information management system, since GAO's
last assessment in 2003; and (3) assess the extent to which DOD faces
management challenges--such as staffing--in implementing Families First.
To address these objectives, GAO analyzed DOD's program, funding and
staffing data, and interviewed personal property officials and
stakeholders.
[66]What GAO Recommends
GAO recommends that DOD expedite an evaluation of its Families First
program and employ comprehensive planning to implement Families First that
includes specific steps to address staffing problems, gain stakeholders'
agreement on Defense Personal Property System (DPS) requirements, and seek
adequate funding to implement the program. DOD concurred with both of our
recommendations.
DOD has taken some initial steps to achieve the goals and benefits of
Families First, but delays in developing a new information management
system have put the overall goals of improving the quality of service from
moving companies and streamlining the claims process at risk. The
information management system, the Defense Personal Property System (DPS),
is now more than 2 years behind schedule. DOD has missed DPS milestones
because of software development issues and is now working to address
issues identified in recent software testing. Since DPS has been delayed,
DOD is in the process of implementing a backup plan to meet a statutory
mandate to provide servicemembers with the full replacement value of goods
lost or damaged during a move by March 1, 2008. However, there are risks
and costs associated with DOD's backup plan because it relies on an
increasingly unreliable legacy computer system; also, DOD's plan may not
cover all moves by March 1, 2008.
The Families First program could increase costs to DOD by $1.4 billion
over current program costs through fiscal year 2011 for two main reasons:
(1) DOD estimates the program will increase costs to the services'
household goods budgets by 13 percent and (2) DOD has significantly
increased the cost estimate for a new information management system since
GAO's last assessment. While DOD's estimate that the Families First
program will increase costs by 13 percent has not changed since 2005, all
of the services have not yet fully budgeted for this cost increase, which
GAO analysis shows could be about $1.2 billion. Additionally, DOD has
increased its estimate for an information management system for Families
First because it decided to develop DPS rather than upgrade the legacy
system. DOD estimated that the upgrade would cost $4 million to $6
million, and the program office estimated that DPS will cost about $180
million through fiscal year 2011.
DOD's personal property program faces many management
challenges--especially staffing, in addition to program requirements and
funding problems--because it has not employed comprehensive planning.
Sound management practices require a comprehensive approach that includes
plans to assemble a qualified, trained, and well-led team; gain
stakeholders' agreement about key program elements, such as business rules
to define how the moving industry will serve military members; and
estimate and plan for adequate resources. DOD has developed several draft
plans to address individual portions of Families First and DPS, such as
the draft transition plan for moving the DPS program office as part of a
base realignment and closure move from Virginia to Illinois, but there is
no overall plan that addresses how DOD will (1) fill significant staffing
shortfalls in the newly formed DPS program office, (2) gain agreement from
stakeholders, and (3) fund the significant and growing costs associated
with the program. For example, DOD has not identified sources to fully
fund DPS development and operations. Without a comprehensive plan,
achieving the goals of the Families First program will likely remain
difficult.
References
Visible links
29. http://www.gao.gov/cgi-bin/getrpt?GAO/NSIAD-00-52R
30. http://www.gao.gov/cgi-bin/getrpt?GAO/NSIAD-00-217R
31. http://www.gao.gov/cgi-bin/getrpt?GAO-03-367
32. http://www.gao.gov/cgi-bin/getrpt?GAO-05-715R
33. http://www.gao.gov/cgi-bin/getrpt?GAO-05-207
34. http://www.gao.gov/cgi-bin/getrpt?GAO/NSIAD-00-52R
35. http://www.gao.gov/cgi-bin/getrpt?GAO/NSIAD-00-217R
36. http://www.gao.gov/cgi-bin/getrpt?GAO-03-367
37. http://www.gao.gov/cgi-bin/getrpt?GAO-05-715R
38. http://www.gao.gov/cgi-bin/getrpt?GAO-03-367
39. http://www.gao.gov/cgi-bin/getrpt?GAO-05-189
40. http://www.gao.gov/cgi-bin/getrpt?GAO-04-722
41. http://www.gao.gov/cgi-bin/getrpt?GAO-03-669
44. http://www.gao.gov/cgi-bin/getrpt?GAO-05-715R
45. http://www.gao.gov/cgi-bin/getrpt?GAO-03-367
46. http://www.gao.gov/cgi-bin/getrpt?GAO/NSIAD-00-217R
47. http://www.gao.gov/cgi-bin/getrpt?GAO/NSIAD-99-129
48. http://www.gao.gov/cgi-bin/getrpt?GAO/NSIAD-99-138
49. http://www.gao.gov/cgi-bin/getrpt?GAO/T-NSIAD-99-106
50. http://www.gao.gov/cgi-bin/getrpt?GAO/NSIAD-98-149
51. http://www.gao.gov/cgi-bin/getrpt?GAO/NSIAD-97-49
58. http://www.gao.gov/cgi-bin/getrpt?GAO-03-367
59. http://www.gao.gov/cgi-bin/getrpt?GAO-05-715R
60. http://www.gao.gov/cgi-bin/getrpt?GAO-03-367
61. http://www.gao.gov/cgi-bin/getrpt?GAO-05-189
62. http://www.gao.gov/cgi-bin/getrpt?GAO-04-722
63. http://www.gao.gov/cgi-bin/getrpt?GAO-03-669
64. http://www.gao.gov/cgi-bin/getrpt?GAO-07-671
65. http://www.gao.gov/cgi-bin/getrpt?GAO-07-671
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