Defense Transportation: Streamlining of the U.S. Transportation Command
Is Needed (Chapter Report, 02/22/96, GAO/NSIAD-96-60).

Pursuant to a congressional request, GAO reviewed whether the Department
of Defense (DOD) is providing cost-effective and efficient
transportation operations, focusing on: (1) the factors that increase
DOD transportation costs; and (2) DOD efforts to reengineer its
transportation operations.

GAO found that: (1) DOD transportation customers pay more for basic
transportation service than component commands; (2) customers requesting
basic containerized water transportation service are charged double and
triple the underlying carrier cost; (3) increased DOD transportation
costs are driven by fragmented and duplicative organizational structures
and billing procedures, and the need to maintain mobilization
capability; (4) the U.S. Transportation Command (USTRANSCOM) can improve
its service to customers by consolidating its component billing
functions; (5) organizational structure duplication and overlap is
interfering with DOD reengineering efforts; (6) past studies have
advocated consolidating DOD transportation operations, but these actions
have not been implemented because of widespread DOD and congressional
opposition; (7) DOD guidance does not address situations in which
USTRANSCOM components charge customers for mobilization requirements;
and (8) DOD will not be able to implement its reengineering efforts if
it does not address its organizational structural problems.

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

 REPORTNUM:  NSIAD-96-60
     TITLE:  Defense Transportation: Streamlining of the U.S. 
             Transportation Command Is Needed
      DATE:  02/22/96
   SUBJECT:  Transportation costs
             Transportation operations
             Reengineering (management)
             Federal agency reorganization
             Cost effectiveness analysis
             Defense cost control
             Billing procedures
             Mobilization
             Defense contingency planning
IDENTIFIER:  Defense Business Operations Fund
             Desert Shield
             Desert Storm
             Military Standard Transportation and Movement Procedures 
             System
             
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Cover
================================================================ COVER


Report to the Chairman, Subcommittee on Military Readiness, Committee
on National Security, House of Representatives

February 1996

DEFENSE TRANSPORTATION -
STREAMLINING OF THE U.S. 
TRANSPORTATION COMMAND IS NEEDED

GAO/NSIAD-96-60

Defense Transportation

(709075)


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

  AMC - Air Mobility Command
  CONUS - Continental United States
  DBOF - Defense Business Operations Fund
  DBOF-T - Defense Business Operations Fund-Transportation
  DOD - Department of Defense
  GAO - General Accounting Office
  MSC - Military Sealift Command
  MTMC - Military Traffic Management Command
  USTRANSCOM - U.  S.  Transportation Command

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


B-266061

February 22, 1996

The Honorable Herbert H.  Bateman
Chairman, Subcommittee on Military
 Readiness
Committee on National Security
House of Representatives

Dear Mr.  Chairman: 

This report responds to a request by the former Chairman,
Subcommittee on Readiness, House Committee on Armed Services, that we
determine whether the Department of Defense can provide efficient and
effective defense transportation in a changing national security
environment.  The report contains recommendations to the Secretary of
Defense concerning the organization of the U.S.  Transportation
Command and its component commands--the Military Traffic Management
Command, the Military Sealift Command, and the Air Mobility Command. 

We are sending copies of this report to the Secretaries of Defense,
the Army, the Navy, and the Air Force; the Commander-in-Chief, U.S. 
Transportation Command; and the Director of the Office of Management
and Budget. 

Please contact me at (202) 512-4300 if you or your staff have any
questions concerning this report.  Major contributors to this report
are listed in appendix V. 

Sincerely yours,

Henry L.  Hinton, Jr.
Assistant Comptroller General


EXECUTIVE SUMMARY
============================================================ Chapter 0


   PURPOSE
---------------------------------------------------------- Chapter 0:1

A number of studies since World War II have found that defense
traffic management processes are fragmented and inefficient,
reflecting the conflicts and duplication inherent in a traffic
management organizational structure consisting of multiple
transportation agencies, each with separate service and modal
responsibilities.  As a result, various actions have been taken to
move functions from one transportation agency to another and improve
military transportation effectiveness.  In 1987, the Secretary of
Defense, recognizing the need for additional improvements,
established the U.S.  Transportation Command (USTRANSCOM) to unify
defense transportation under a single manager during war,
contingencies, and exercises.  In 1992, the Secretary expanded
USTRANSCOM's role to include peacetime transportation. 

The former Chairman of the Subcommittee on Readiness, House Committee
on Armed Services, asked GAO to determine whether the Department of
Defense (DOD) can provide efficient and effective defense
transportation in a changing national security environment. 
Specifically, GAO's objectives were to determine (1) whether DOD is
providing cost-effective and efficient transportation, (2) what
factors drive transportation costs, and (3) whether any actions are
necessary to ensure a successful reengineering of defense
transportation that will improve efficiency and reduce costs. 


   BACKGROUND
---------------------------------------------------------- Chapter 0:2

As the single DOD manager of all defense transportation services,
USTRANSCOM executes its mission through three component commands--the
Army's Military Traffic Management Command (MTMC), for land
transportation and port operations; the Navy's Military Sealift
Command (MSC), for sea transport; and the Air Force's Air Mobility
Command (AMC), for air transport.  Within this report, defense
transportation refers to common-user transportation, defined by DOD
as transportation and transportation services provided on a common
basis for two or more DOD agencies and, as authorized, non-DOD
agencies. 

USTRANSCOM's responsibilities include financial management of all
defense transportation.  It operates under the Defense Business
Operations Fund (DBOF) system of financial management.  Under this
concept, DOD customers place orders with the component commands,
which then contract for the services and/or provide the services
using their own resources.  In turn, the component commands charge
customers for their services.  Customers predominately use funds from
their operations and maintenance appropriations to reimburse the
component commands.  The component commands use these reimbursements
to pay their suppliers or to fund the cost of expending in-house
resources. 

In fiscal year 1994, USTRANSCOM and its components paid approximately
$5.6 billion to provide defense transportation services.  These costs
included purchased transportation and administrative and support
costs incurred by USTRANSCOM and its component commands. 


   RESULTS IN BRIEF
---------------------------------------------------------- Chapter 0:3

Defense transportation costs are substantially higher than necessary. 
DOD customers frequently pay prices for transportation services that
are double or triple the cost of the basic transportation.  For
example, customers may pay MTMC and MSC $3,800 to arrange movement of
a container load of cargo by commercial carriers from California to
Korea; however, DOD is charged only $1,250 by the commercial carrier
for this service. 

Key factors driving these higher costs are USTRANSCOM's fragmented
and inefficient organizational structure and management processes,
and the need to maintain a mobilization capability.  Separate
processes are a product of separate commands.  Much of defense cargo
today moves intermodally, by air, land, and sea transport.  However,
USTRANSCOM retains an outdated and inefficient, modally oriented,
organizational structure, with many collocated facilities.  Each
separate component command incurs operational and support costs. 
Customers receive bills from each component command for each mode of
transportation, rather than a single intermodal bill from only one
component.  Separate billing systems are inefficient, adding people
and cost, and confusing to customers who pay for the inefficiencies. 
Salaries and wages alone for the commands in fiscal year 1994 were
more than $1 billion.  Another factor driving higher costs is the
need to maintain a mobilization capability.  For example, USTRANSCOM
maintains an extensive water port structure, employing more than
1,200 people, at a cost in fiscal year 1994 of over $70 million.  The
ports are largely unused during peacetime because most cargo moves
commercially.  However, the port facilities do provide capacity that
may be needed for a wartime surge.  DOD's guidance for handling the
cost of maintaining a mobilization capability does not cover all
situations in which USTRANSCOM components charge their customers for
costs that appear to be for mobilization requirements. 

While DOD has recently begun reengineering the defense transportation
system to improve its processes and reduce costs, it is not
concurrently looking at how the organizational structure should be
redesigned.  It will address organizational structure only after the
process changes have been completed.  GAO's work shows that the
inefficiency of the organizational structure has been a long-standing
issue in addressing the effectiveness of defense transportation. 
Waiting to address this issue until process improvements are made
will likely represent a significant barrier to achieving the full
benefits of the reengineering efforts. 


   PRINCIPAL FINDINGS
---------------------------------------------------------- Chapter 0:4


      DEFENSE TRANSPORTATION COSTS
      ARE HIGH
-------------------------------------------------------- Chapter 0:4.1

Customers using defense transportation services pay substantially
more than the component commands do for basic commercial
transportation.  GAO developed a number of examples to show the
disparity between what USTRANSCOM pays for commercial transportation
services it procures and what MSC and MTMC charge their customers. 
GAO focused its work on MTMC and MSC as examples because they
basically have similar organizational structures.  However, while the
examples do not specifically address AMC, GAO notes that AMC does
have staff performing transportation functions similar to MTMC and
MSC such as shipment routing and billing. 

At the time of GAO's review, customers requesting basic containerized
water transportation from the U.S.  East Coast to Europe were charged
double the underlying ocean carrier costs.  For shipments from the
U.S.  West Coast to Japan and Korea, customers were charged nearly
triple the underlying costs.  For high-volume military shipping
routes from interior points in the United States to interior points
overseas, customers were sometimes charged double the underlying
carrier costs. 


      FRAGMENTED TRAFFIC
      MANAGEMENT PROCESSES,
      MODALLY ORIENTED
      ORGANIZATIONAL STRUCTURE,
      AND MOBILIZATION COSTS ARE
      MAJOR FACTORS DRIVING HIGHER
      TRANSPORTATION COSTS
-------------------------------------------------------- Chapter 0:4.2

Higher defense transportation costs are driven by process
fragmentation, duplication, and overlap within the component commands
and the need to maintain mobilization capability.  Transportation
processes--such as rate negotiation, shipment routing, cargo
documentation, and financial management--are fragmented, resulting in
multiple hand offs of information, extensive checking, and control. 
A DOD customer's request for overseas defense transportation services
may require as many as five separate units' actions within MTMC and
MSC to obtain the needed service to move a single shipment.  The
customer is often billed by five separate activities within the
component commands to reimburse the components for their specific
modal services. 

Further, separate organizations require separate staffs and separate
supporting infrastructures, the costs of which are ultimately
included in customer charges.  For example, USTRANSCOM's personnel
costs for salaries and wages in fiscal year 1994 were about $1.2
billion, or about 20 percent of its expenses.  GAO's analysis showed
that, many times, people of two or more components, performing
identical functions, are located at the same sites. 

Lastly, costs to maintain a transportation mobilization capability
also drive higher transportation costs.  For example, MTMC's
extensive port structure, supported by more than 1,200 staff, costing
over $70 million in fiscal year 1994, provides a mobilization
capability that may not be necessary to move cargo during peacetime. 
The ports are largely unused during peacetime because cargo moves by
commercial carriers through commercial ports.  Additionally, MSC, for
some high-volume shipping routes, often uses other than the low-cost
carrier to maintain a mobilization capability.  Ultimately,
USTRANSCOM's customers pay for maintaining this capability through
the rates they are charged by MTMC and MSC.  Although DOD policy
mandates that direct appropriation funding be used for maintaining
capability to expeditiously respond to mobilization conditions, DOD's
guidance does not cover all situations in which USTRANSCOM components
charge their customers for costs that appear to be for mobilization
requirements. 


      REENGINEERING EFFORTS MUST
      INTEGRATE LONG-STANDING
      ORGANIZATIONAL ISSUES TO
      ACHIEVE OPTIMUM RESULTS
-------------------------------------------------------- Chapter 0:4.3

A long-standing concern--the defense transportation system's
organizational structure and the issues of duplication and overlap
inherent in it--is interfering with DOD's ability to successfully
reengineer the transportation system and achieve optimum results. 
The existing component command structure has resulted in separate and
isolated transportation processes along service lines and perpetuated
inefficient transportation processes.  Given the history of
reluctance to change the organizational structure, it is essential
for DOD to consider organizational structure changes as an integral
part of reengineering its business processes. 

Over the years, studies have recommended unifying traffic management
in one organization to improve defense transportation and reduce
costs.  The recommendations were not implemented because of
opposition from the component commands, the services, the Joint
Chiefs of Staff, or the Congress.  Even after its designation as the
single DOD manager of defense transportation during peace and war,
USTRANSCOM has retained the same component command structure that
existed prior to its establishment. 

In 1994, a USTRANSCOM study found that the defense transportation
system continues to be replete with redundant organizational
structure and inefficient and costly processes.  As a result,
USTRANSCOM and the Office of Secretary of Defense are taking steps to
reengineer the defense transportation system.  Both efforts include
actions to improve and consolidate fragmented processes such as
procurement and financial management.  However, both efforts postpone
any actions related to organizational structure issues until after
process changes are completed.  By delaying organizational structure
changes, DOD runs the risk of superimposing reengineered processes on
a fragmented, inefficient, and costly component command
organizational structure.  If these reengineering efforts integrate
processes and organizational structure issues, DOD's ability to
successfully improve efficiency and reduce costs will be
significantly enhanced. 


   RECOMMENDATIONS
---------------------------------------------------------- Chapter 0:5

GAO recommends that the Secretary of Defense ensure that the defense
transportation reengineering efforts simultaneously address process
and organizational structure improvements.  Specifically, the
reengineering efforts should confront, at a minimum,

  the need for separate traffic management component command
     headquarters staff,

  the consolidation of separate field subordinate command traffic
     management staff, and

  then, the elimination of all remaining duplicative field- based
     subordinate command support staff. 

Additionally, GAO recommends that the Secretary clarify which
USTRANSCOM mobilization costs should be passed along to its
customers.  The amounts and purpose of any such costs should be
contained in transportation component command annual financial
statements and in the budget justification statements submitted
annually to the Congress. 


   AGENCY COMMENTS AND GAO'S
   EVALUATION
---------------------------------------------------------- Chapter 0:6

DOD provided written comments on a draft of this report.  It
generally agreed with the report's findings and recommendations.  DOD
acknowledged the difference between the defense transportation system
and private industry charges, as well as the direct impact defense
transportation business processes have on the charges DOD customers
pay.  DOD attributed the difference in part to readiness/mobilization
and overhead costs, and the fact that billing rates are established
18 months prior to budget execution.  DOD said it is addressing these
problems in an ongoing defense transportation reengineering
initiative. 

DOD stated that it is pursuing the objectives of the report's
recommendations as part of its' reengineering initiative.  DOD
explained that in a May 3, 1995, memorandum, the Deputy Secretary of
Defense directed the Under Secretary of Defense (Acquisition and
Technology) to reengineer defense transportation processes.  In
response to the memorandum, the Under Secretary established a task
force to develop a Transportation Reengineering Action plan.  The
plan, completed on June 30, 1995, addressed four major
initiatives--developing a transportation vision, reengineering
transportation acquisition processes, reengineering transportation
financial management processes, and assessing the infrastructure
required to support the proposed reengineered processes.  The plan
will also address handling readiness/mobilization costs.  The first
initiative, developing a transportation vision, was completed October
25, 1995. 

DOD stated that the goal of the reengineering effort is to create a
joint, global, seamless, intermodal transportation system that
eliminates and reduces infrastructure.  Based on GAO's preliminary
review of the plan, it agrees with the plan's goals including a
review of the handling of readiness/mobilization costs, but notes
that previous DOD studies recommending reductions in defense
transportation infrastructure have not always been fully implemented. 
In this regard, GAO plans to monitor DOD's implementation of its
plan. 


INTRODUCTION
============================================================ Chapter 1

The U.S.  Transportation Command (USTRANSCOM) was created in 1987 to
unify defense transportation under a single manager during war,
contingencies, and exercises.  In 1992, the Secretary of Defense
directed that USTRANSCOM's mission be expanded to provide air, land,
and sea transportation in time of peace and war. 


   USTRANSCOM AND COMPONENT
   COMMAND RESPONSIBILITIES AND
   ORGANIZATIONAL STRUCTURE
---------------------------------------------------------- Chapter 1:1

The mission of USTRANSCOM is to provide air, land, and sea
transportation for DOD, both in time of peace and war.  USTRANSCOM
executes its mission through the three transportation component
commands--Military Traffic Management Command (MTMC), Military
Sealift Command (MSC), and Air Mobility Command (AMC).  The
responsibilities of each of the component commands are as follows: 

  MTMC, the DOD manager for traffic management, land transportation,
     ocean terminals, and intermodal container management, manages
     freight movement, personal property shipment, and passenger
     traffic worldwide, operates water terminals throughout the
     world, and monitors traffic movements through all terminals. 

  MSC, the DOD manager for sealift, is a ship operator and
     contracting agency for commercial shipping necessary to deliver
     cargo and petroleum worldwide and manages the Afloat
     Prepositioning Force that is used for forward deployment and
     early on-site availability of supplies and equipment. 

  AMC, the DOD manager for airlift, is an airlift operator and the
     contracting agency for commercial augmentation airlift for
     wartime deployment of fighting forces and support of peacetime
     activities. 

Figure 1.1 shows that the organizational structure of USTRANSCOM is
divided into three separate transportation component commands:  AMC,
MTMC, and MSC. 

   Figure 1.1:  Organizational
   Structure of USTRANSCOM

   (See figure in printed
   edition.)

   Source:  USTRANSCOM, AMC, MTMC,
   and MSC mission directives.

   (See figure in printed
   edition.)


      FINANCIAL MANAGEMENT
-------------------------------------------------------- Chapter 1:1.1

USTRANSCOM is also the DOD financial manager for all defense
transportation\1 in peace and war and is responsible for managing the
transportation portion of the Defense Business Operations Fund (DBOF)
as of October 1, 1992.  The portion of DBOF attributable to
transportation is called DBOF-Transportation (DBOF-T).  Through
DBOF-T, the component commands establish the rates they charge
customers for services that are rendered through the defense
transportation system.  These rates are intended to cover all the
costs of providing services, including the cost of overhead, such as
USTRANSCOM headquarters' operating costs.  Customers pay for
transportation services and the associated overhead through their
appropriated funds. 

DBOF guidance requires that USTRANSCOM recover its total costs from
its customers, including total operating costs for all organizations. 
However, DBOF policy requires that the prices customers pay for
transportation services are to reflect peacetime operating costs
only.  Mobilization costs are to be funded through direct
appropriations. 


--------------------
\1 Within this report, defense transportation refers to common- user
transportation, defined by DOD as transportation and transportation
services provided on a common basis for two or more DOD agencies and,
as authorized, non-DOD agencies. 


   OBJECTIVES, SCOPE, AND
   METHODOLOGY
---------------------------------------------------------- Chapter 1:2

The former Chairman of the Subcommittee on Readiness, House Committee
on Armed Services, asked us to determine whether the Department of
Defense (DOD) can provide efficient and effective defense
transportation in a changing national security environment. 
Specifically, our objectives were to determine (1) whether DOD is
providing cost-effective and efficient transportation, (2) what
factors drive transportation costs, and (3) whether any actions are
necessary to ensure a successful reengineering of defense
transportation that will improve efficiency and reduce costs. 

To determine whether DOD is providing cost-effective and efficient
transportation and to identify what factors drive transportation
costs, we analyzed data on the current USTRANSCOM and component
command structure including costs and number of DOD transportation
personnel.  We also analyzed staffing and operational data for
organizations within both the USTRANSCOM headquarters and the
component commands.  In addition, we analyzed (1) current cost and
billing data to identify trends and (2) DBOF-T data to determine how
defense transportation costs are charged back to customers.  With
regard to customer prices, we compared what the components were
charging their customers and what the components were paying for the
underlying transportation.  In doing so, we analyzed a number of
representative shipments made through MTMC and MSC.  We traced the
history of USTRANSCOM and the component command structure, including
reviews of prior presidential commission, congressional committee,
DOD, independent consultant, and USTRANSCOM studies and reports on
defense transportation. 

To identify potential duplication of functions among the various
organizational levels, we analyzed functional, process, and support
tasks according to roles and mission statements and conducted
extensive headquarters and field level data collection interviews and
discussions to categorize functions, processes, and tasks as
hands-on, transportation information process support, and/or
administrative/management.  We performed the same analyses to
identify whether tasks being performed at various locations had to be
performed at those specific locations. 

To determine whether any actions are necessary to ensure a successful
reengineering of defense transportation that will improve efficiency
and reduce costs, we reviewed data and reports on USTRANSCOM and
Office of the Secretary of Defense reengineering efforts, plans, and
status; reviewed and analyzed reports regarding successful
reengineering techniques and guidelines for assessing reengineering
efforts; contacted and interviewed various defense transportation
system commercial cargo carriers and customers, including
representatives of the U.S.  European Command, the U.S.  Air
Force-Europe, the U.S.  Army-Europe, the U.S.  Central Command
USTRANSCOM Liaison Officer, and the Army-Air Force Exchange Service. 
We also reviewed data and documents from these representatives to
obtain a broad base perspective of carrier and customer comments
regarding the current defense transportation system structure and
results. 

Work was conducted at: 

  Headquarters, USTRANSCOM, Scott Air Force Base, Illinois;

  Headquarters, AMC, Scott Air Force Base, Illinois;

  AMC, 15th Air Force, 60th Aerial Port Squadron, Travis Air Force
     Base, California;

  Headquarters, MTMC, Falls Church, Virginia;

  MTMC-Eastern Area, Bayonne, New Jersey;

  MTMC-Western Area, Oakland Army Base, California;

  MTMC-1302nd Major Port Command, Oakland, California;

  MTMC-Europe, Rotterdam, Netherlands;

  MTMC-1318th Medium Port Command, BENELUX, Rotterdam, Netherlands;

  MTMC-Wheeler Army Air Field, Hawaii;

  MTMC-1316th Medium Port Command, Yokohama, Japan;

  Headquarters, MSC, Navy Yard, Washington, D.C.;

  MSC-Atlantic, Bayonne, New Jersey;

  MSC-Pacific, Oakland, California;

  MSC-Far East, Yokohama, Japan;

  MSC-Europe, London, United Kingdom;

  Headquarters, U.S.  European Command, Stuttgart, Germany;

  USTRANSCOM Liaison Officer for the European Command, Stuttgart,
     Germany;

  Headquarters, U.S.  Army-Europe, Heidelberg, Germany;

  Headquarters, U.S.  Air Force-Europe, Ramstein Air Base, Germany;

  Office of the Deputy Chief of Staff for Logistics, Army
     Transportation, Washington, D.C.;

  Office of the Assistant Commander for Navy Material Transportation,
     Navy Supply Systems Command, Arlington, Virginia;

  Office of the Deputy Chief of Staff for Installations & Logistics,
     U.S.  Marine Corps, Arlington, Virginia;

  Office of the Assistant Executive Director for Transportation,
     Defense Logistics Agency, Alexandria, Virginia;

  Army-Air Force Exchange Service-Pacific Transportation Center,
     Oakland, California;

  Army-Air Force Exchange Service-Atlantic Transportation Center,
     Bayonne, New Jersey;

  Office of the Joint Chiefs of Staff, Washington, D.C.; and

  offices of commercial ocean carriers--American President Lines,
     Ltd., and Sea-Land Service, Inc., Oakland, California. 

We also contacted and interviewed members of the private sector
responsible for reengineering efforts within corporate entities, and
collected and analyzed reengineering information they provided as it
relates to defense transportation.  For example, we spoke with
officials from American President Lines and Aetna Casualty and Life. 
We also reviewed and analyzed pertinent logistics, reengineering, and
transportation studies prepared by major consulting firms, and
discussed observations and conclusions in those reports with
representatives responsible for preparing them. 

DOD provided written comments on a draft of this report.  These
comments are presented and evaluated in chapters 2, 3, and 4, and are
reprinted in appendix IV.  DOD also provided other detailed comments
for our consideration.  We considered these comments and made changes
as appropriate to our report. 

We conducted our work between August 1994 and September 1995 in
accordance with generally accepted government auditing standards. 


DEFENSE TRANSPORTATION COSTS ARE
HIGH
============================================================ Chapter 2

Customers using defense transportation services pay substantially
more than USTRANSCOM's component commands do for basic commercial
transportation.  What USTRANSCOM's component commands charge their
customers to meet transportation requirements often far exceeds,
sometimes two and three times, what the commands pay to obtain those
services.  Our analysis of the key cost factors making up these
charges is discussed in chapter 3. 


   DEFENSE TRANSPORTATION PROCESS
---------------------------------------------------------- Chapter 2:1

Defense transportation services for sustainment and, to a somewhat
lesser extent, deployment are for the most part arranged through and
provided by the commercial transportation sector.  Most cargo is
shipped on commercial U.S.-flag ships, moved pursuant to contracts
with commercial ocean carriers, and is loaded on and off their ships
by private sector or carrier labor.  To the extent the cargo can be
shipped in intermodal containers, it is shipped in containerized
service. 

The rates the component commands charge for services must cover the
expenses USTRANSCOM incurs for the commercial services plus all other
direct, indirect, and overhead expenses.  For example, MSC is
responsible for negotiating the rates and terms of carriage with the
ocean carriers and paying their invoices.  MTMC is responsible for
booking service for individual shipments, preparing shipment
documentation, clearing customs, and supporting MSC's payment
processes.  Each must develop a budget and determine how much to
charge its customers for each service to be provided. 

The rates are developed before the component commands know what the
commercial carriers will charge DOD.  Moreover, in any given year,
the rates may include a factor to recover losses or return profits
from prior years' operations.  Consequently, rates for a given
shipping route from year to year may double or be cut in half even
when the commercial carriers' rates showed little or no change. 


   CUSTOMER CHARGES ARE
   SUBSTANTIALLY HIGHER THAN THE
   AMOUNT THE COMPONENT COMMANDS
   PAY THE COMMERCIAL CARRIERS
---------------------------------------------------------- Chapter 2:2

Our analysis of the component commands' charges for arranging cargo
movements on many of DOD's high-volume, container cargo routes shows
that the charges, in total, are substantially higher--from 24 to 201
percent higher--than the amounts carriers charge DOD.  Although the
charges of an individual component command may not always be higher
than what the component command pays the carriers, the total
(combined MSC/MTMC) charges for each shipment in our analysis were
substantially higher than DOD's carrier costs. 

We developed a number of case examples that illustrate the high costs
customers pay.  (See table 2.1.) They were based on charges for
typical DOD shipments, each consisting of general (dry) cargo, 47
measurement tons each, transported in commercial carrier 40-foot
containers, at rates for the low-cost carrier on each route, during
the first quarter of fiscal year 1995.\1 The examples reflect charges
MSC and MTMC bill their customers for the costs they incur for
negotiating rates with commercial carriers used to move DOD
shipments; for contracting with the underlying carrier and paying its
charges; and for the administrative expenses incurred to document the
shipments and handle booking, manifesting, receiving, and customs
clearance.  The MSC/MTMC charges are compared with the costs of the
underlying carrier--in each case, the low-rate carrier.  It should be
noted that we did not add to the carrier charges any costs that the
customers might otherwise incur were they to do the work themselves
or have some third party do it for them because customers may not
have needed such services for every shipment or they may have been
able to provide such services at little or no additional cost using
existing traffic management staff.  A more comprehensive set of
examples is shown in appendix I. 



                                    Table 2.1
                     
                      Examples Comparing Carrier Costs With
                     Amounts Charged to USTRANSCOM Customers

---------------------------------------  ---------------------------------------
A. Port-to-Port Shipment Cost Comparisons (no local drayage at origin or
destination)\a
--------------------------------------------------------------------------------

Example A.1
From: U.S. East Coast (any port in range)
To: Europe (any port in range)
--------------------------------------------------------------------------------
Cost of low-rate carrier: $1,552.88      Amount charged by USTRANSCOM: $3,292.48
                                         (breakdown: MSC: $2,221.35; MTMC at
                                         origin: $557.89; MTMC at destination:
                                         $513.24)


Percent by which total charges exceeded carrier costs: 112 pe
--------------------------------------------------------------------------------

Example A.2
From: U.S. West Coast (any port in range)
To: Korea (any range)
--------------------------------------------------------------------------------
Cost of low-rate carrier: $1,280.89      Amount charged by USTRANSCOM: $3,815.07
                                         (breakdown: MSC: $2,486.85; MTMC at
                                         origin: $573.87; MTMC at destination:
                                         $754.35)


Percent by which total charges exceeded carrier costs: 198 p
--------------------------------------------------------------------------------

B. Port Area-to-Port Area Shipm
--------------------------------------------------------------------------------

Example B.1
From: Milita Terminal, Bayonne, N.J.
To: Bremerhaven, Germany
--------------------------------------------------------------------------------
Cost of low-rate carrier: $1,712.18      Amount charged by USTRANSCOM: $3,292.48
                                         (breakdown: MSC: $2,221.35; MTMC at
                                         origin: $557.89; MTMC at destination:
                                         $513.24)


Percent by which total charges exceeded carrier costs: 92 pe
--------------------------------------------------------------------------------

Example B.2
From: Militar Terminal-Bay Area, Oakland, Calif.
To: Pusan, Korea
--------------------------------------------------------------------------------
Cost of low-rate carrier: $1,267.32      Amount charged by USTRANSCOM: $3,815.07
(based on carrier's single factor rate)  (breakdown: MSC: $2,486.85; MTMC at
                                         origin: $573.87; MTMC at destination:
                                         $754.35)


Percent by which total charges exceeded carrier costs: 201 p
--------------------------------------------------------------------------------

C. Inland Point-to-Inland Point (line-haul transportation at or
--------------------------------------------------------------------------------

Example C.1
From: Mechan Pa.
To: Frankfurt, Germany
--------------------------------------------------------------------------------
Cost of low-rate carrier: $2,380.65      Amount charged by USTRANSCOM: $3,292.48
(based on carrier's single factor rate)  (breakdown: MSC: $2,221.35; MTMC at
                                         origin: $557.89; MTMC at destination:
                                         $513.24)


Percent by which total charges exceeded carrier costs: 38 pe
--------------------------------------------------------------------------------

Example C.2
From: Defense Distribution Depot Red River, (Texarkana), Tex.
To: Kaisersl Germany
--------------------------------------------------------------------------------
Cost of low-rate carrier: $2,711.05      Amount charged by USTRANSCOM: $3,616.98
                                         (breakdown: MSC: $2,545.85; MTMC at
                                         origin: $557.89; MTMC at destination:
                                         $513.24)


Percent by which total charges exceeded carrier costs: 33 pe
--------------------------------------------------------------------------------

Example C.3
From: Lathro Calif.
To: Seoul, Korea
--------------------------------------------------------------------------------
Cost of low-rate carrier: $1,723.39      Amount charged by USTRANSCOM: $3,815.07
(based on carrier's single factor rate)  (breakdown: MSC: $2,486.85; MTMC at
                                         origin: $573.87; MTMC at destination:
                                         $754.35)


Percent by which total charges exceeded carrier costs: 121 p
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
\a Drayage is any required transportation of the container within a
port area or commercial zone, by truck or rail, to or from the ship. 

MSC and MTMC move or handle other types of shipments, such as in
other sized containers, in noncontainerized service, or in import
service.  The charges for these moves will vary accordingly. 
However, most DOD cargo moves as general cargo, in containerized
export service, in 40-foot containers, making the examples in the
table representative of DOD shipments. 


--------------------
\1 In these and other examples, DOD was contractually obligated to
pay a charge based on full use of the container--here, 59 measurement
tons.  MSC bases its charges to its customers on the same minimum. 
MTMC bases its charges on the actual tonnages, without a minimum. 


   AGENCY COMMENTS AND OUR
   EVALUATION
---------------------------------------------------------- Chapter 2:3

DOD partially concurred with our findings.  DOD acknowledged the
difference between the defense transportation system and private
industry charges.  It attributed the difference to
readiness/mobilization and overhead costs for the entire defense
transportation system, which was designed to support both peacetime
and mobilization/wartime transportation.  According to DOD,
peacetime, industrial policy, and readiness/mobilization costs are
not always severable; and, if all readiness/mobilization costs were
excluded, the difference between defense transportation costs and
private industry charges would be reduced.  It further pointed out
that billing rates are established 18 months prior to budget
execution.  Such stabilized rates are affected by accumulated
operating result factors, which can result in lower, or higher,
charges for some movements. 

We basically agree with DOD's comments.  With regard to the last
comment, our report acknowledges that individual component command
charges were on occasion lower than the underlying transportation
costs.  However, it is the total cost that the customer pays that is
of concern.  Regardless of what the underlying transportation cost
is, the customer is always billed more to cover the costs for the
excessive defense transportation infrastructure, as well as the costs
associated with maintaining a mobilization/readiness capability. 


MAJOR FACTORS THAT DRIVE HIGH
DEFENSE TRANSPORTATION COSTS
============================================================ Chapter 3

Major factors that drive USTRANSCOM's defense transportation costs
higher are (1) USTRANSCOM's fragmented and inefficient organizational
structure and management processes and (2) the need to maintain a
mobilization capability.  Separate processes are a product of
separate commands.  Much of DOD cargo today moves intermodally, by
air, land, and sea transport.  However, USTRANSCOM retains an
outdated and inefficient, modally oriented, organizational structure,
with many collocated facilities.  In fiscal year 1994, USTRANSCOM's
total expenses for defense transportation services were $5.6 billion. 
Neither USTRANSCOM nor the component commands, however, collect
financial information in a manner that allows actual and total cost
of the organizational structure to be developed.  Mobilization and
readiness requirements are also key cost drivers, but again,
financial information is not collected and reported in a manner that
clearly distinguishes the associated costs for these factors. 


   FRAGMENTED MANAGEMENT PROCESSES
   AND INEFFICIENT ORGANIZATION
   STRUCTURE DRIVE DEFENSE
   TRANSPORTATION COSTS HIGHER
---------------------------------------------------------- Chapter 3:1

Factors driving costs of defense transportation higher include (1)
the costs associated with having fragmented transportation processes,
(2) multiple organizational elements to implement these processes,
(3) component command organizational structure that requires
duplicative administrative support at multiple locations and
maintenance of personnel in locations where they may no longer be
necessary to support intermodal transportation processes. 
Fragmentation refers to the fact that no one organization has
responsibility for all aspects of traffic management or is able to
meet customers' needs regardless of transportation mode.  This
situation reflects the fact that management processes were developed
independently of each other.  Although USTRANSCOM was established to
consolidate functions within one organization, because various
component commands retain modal responsibilities, fragmentation
remains, particularly with such areas as negotiating rates to move
cargo, shipment routing, documenting shipments for control and
payment, and customer billing. 


      RATE NEGOTIATION PROCESS
      DIVIDED AMONG MULTIPLE UNITS
-------------------------------------------------------- Chapter 3:1.1

The rate negotiation process is inefficient and not designed to
facilitate customer services.  USTRANSCOM employs five separate
systems and strategies for negotiating rates, and each system
reflects a particular service's approach to procurement. 
Accordingly, it can take as many as five separate USTRANSCOM units to
negotiate the rates for a single shipment.  Thus, a customer may need
to contact five separate units to get all the rates needed to move a
single shipment.  As a result, the customer often experiences delays
in getting needed services and may become interested in circumventing
the system.  Circumvention may be to the customer's immediate
advantage but not advantageous to DOD overall.  Moreover, separate
negotiation units add more people and costs to the system. 

The following are various types of shipments and the units used for
negotiating the rates. 

  For domestic continental United States (CONUS) freight shipments,
     and the CONUS portion of international shipments not moving as
     part of a through-intermodal move, MTMC's Office of the Deputy
     Chief of Staff for Operations, which has a staff of about 20
     traffic management specialists, negotiates for land
     transportation, inland waterway transportation, and less-than-
     plane load air transportation with U.S.  motor carriers,
     railroads, freight forwarders, barge carriers, and air cargo
     companies. 

  For international freight shipments, MSC's Central Technical
     Activity, Contracts and Business Directorate and its staff of
     36, who are primarily contracting specialists, negotiate for
     ocean transportation with ocean carriers. 

  For foreign transportation, MTMC's overseas commands, such as
     MTMC-Europe, Directorate of Inland Theater Transportation,
     negotiate for land, inland waterway, and air rates, as required,
     in their areas of responsibilities. 

  For stevedore and terminal services, MTMC's Office of the Principal
     Assistant Responsible for Contracting, with a staff of seven
     contracting specialists, negotiates contracts with port
     interests.  Other units negotiate for such services overseas. 

  For personal property shipments, another part of MTMC's Office of
     the Deputy Chief of Staff for Operations, which has a staff of
     about 10 traffic management specialists, negotiates household
     goods and unaccompanied baggage freight rates for CONUS land and
     international water and air transportation with through-bill-of-
     lading commercial moving van companies and freight forwarders. 
     MTMC's overseas commands also negotiate rates with overseas
     movers and forwarders for intratheater personal property
     movement. 


      SHIPMENT ROUTING IS
      SEPARATED ALONG MODAL LINES
-------------------------------------------------------- Chapter 3:1.2

Customers cannot go to one, single unit within USTRANSCOM to obtain
information on carriers and routing for all modes or for the movement
of a particular shipment through several modes.  Instead, customers
must deal with multiple organizations and offices.  To the customers,
this adds time, causes delays, and is inconvenient.  Moreover, the
fragmentation adds more people to the organizational structure than
needed. 

First, for domestic CONUS shipments, MTMC is responsible for
providing information to customers requiring routing advice. 
Generally, this information is provided to installation
transportation offices and others, through the CONUS Freight
Management system.  This system is intended to be a comprehensive
freight management information system to standardize and automate
freight traffic management by providing the capability to perform
cost evaluations, select the best value carrier, and perform
prepayment audits of government bills of lading.\1

Second, for international shipments, MTMC provides the routing in
consultation with MSC that has negotiated the movement contract.  The
sealift cargo routing/booking and contract administration functions
were performed by MSC, but in October 1981, following the Harbridge
House, Inc., study, these functions were transferred to MTMC.  MSC
still retains oversight over contractual provisions requiring certain
minimum allocation of cargo to other than the low-cost carriers on
certain ocean liner trade routes and over the statutory regulations
governing the use or nonuse of U.S.-flag ocean carriers. 

Third, for personal property shipments, MTMC has routing systems
separate from its cargo routing systems to route shipments within
CONUS and to and from overseas locations. 

AMC Aerial Port Operations also handles airlift shipment
routing/carrier selection.  In the first quarter of fiscal year 1995,
there were 89 positions in these offices.  The offices included four
sections:  the Cargo Management Section, the Passenger and Traffic
Management Section, the Passenger Reservation Section, and the Air
Transportation Traffic Negotiations Section.  The Cargo Management
Section develops and implements policies and procedures relative to
the movement of cargo and mail to and from AMC bases and other DOD
activities, overseas and domestic, by AMC organic and commercial
contract aircraft.  The Passenger and Traffic Management Section
directs and controls the AMC worldwide traffic management program and
passenger service system.  The Passenger Reservation Section
develops, disseminates, and implements policy and procedural guidance
for establishment and operation of the worldwide AMC passenger
reservation system.  The Air Transportation Traffic Negotiations
Section serves as the command point of contact with the commercial
carriers to move DOD passengers and specified cargo. 


--------------------
\1 A bill of lading is the document transportation officers use to
procure the required commercial freight or personal property
transportation.  It is also used by MTMC and MSC to procure
commercial ocean transportation not covered by an MSC shipping
agreement or contract. 


      DOCUMENTING SHIPMENTS FOR
      CONTROL AND PAYMENT IS
      FRAGMENTED
-------------------------------------------------------- Chapter 3:1.3

Cargo documentation is a process long noted for its fragmentation. 
Depending on the type of move and the component command managing it,
different types of documents are used.  Multiple documents may be
necessary to move a single shipment, but it is often confusing to
customers and commercial carriers.  By not using one standard system,
or not using documentation standard in the private sector, customers'
costs are increased.  Moreover, carriers often have to set up
separate systems, different from those used for their commercial
business, just to service DOD. 

For domestic CONUS shipments, the documentation system is managed by
MTMC using government bills of lading.  In fiscal year 1994, DOD
moved more than 1.2 million shipments, at a cost of nearly $600
million, under the government bill of lading system. 

The documentation system used for international shipments is a
combination of Military Standard Transportation and Movement
Procedures and the government bill of lading system.  Most
international cargo shipments move under the Military Standard
Transportation and Movement Procedures system that uses DOD- unique
documents, such as the Transportation Control and Movement Documents
and ocean cargo manifests.  Because this system is unique to DOD,
commercial carriers must set up a system only for DOD if they want
its business.  A portion of the international cargo program,
shipments moving to and from Hawaii, Guam, and Puerto Rico, and
shipments by foreign-flag carriers, uses the government bill of
lading system.  In fiscal year 1994, DOD moved 7.5 million
measurement tons\2 of freight, at a cost of $735 million, using the
Military Standard Transportation and Movement Procedures system, and
about 0.9 million measurement tons of cargo, at a cost of $106
million, using the government bill of lading system. 

For personal property shipments, both domestic and international, DOD
uses the government bill of lading system.  The documentation system,
however, is separate from the cargo documentation system.  In fiscal
year 1994, DOD spent $540 million for international personal property
shipments. 


--------------------
\2 A measurement ton is a unit of volume, 40 cubic feet. 


      CUSTOMER BILLING PROCESS IS
      ALSO FRAGMENTED
-------------------------------------------------------- Chapter 3:1.4

DOD has no single customer billing policy, procedure, or system for
defense transportation.  Customers receive a bill from each component
command for each mode of transportation, rather than a single
intermodal bill from only one component.  Consequently, when a
noncontainerized freight shipment moves from some interior point in
the United States to an interior point overseas, a customer pays for
the services USTRANSCOM has provided in five parts.  For example, for
one shipment, a customer may have one charge related to shipping
cargo to the port of embarkation, a second charge for MTMC's port
handling, a third charge for MSC's ocean service, a fourth charge for
MTMC's custom clearance and receipt of cargo overseas, and a fifth
charge for line-haul transportation overseas to final point of
destination.  Separate billing systems are inefficient, adding people
and cost, and confusing to customers who pay for the inefficiencies. 

The billing process for different shipments is as follows. 

  For domestic CONUS shipments and shipments destined overseas but
     not part of a through-container move, there is no reimbursement
     billing per se, because the Defense Finance and Accounting
     Service pays the carriers' charges citing the customers' own
     appropriations.  MTMC's administrative expenses related to these
     shipments are paid to MTMC in lump sum, not
     shipment-by-shipment. 

  For international shipments, customers reimburse MTMC and MSC for
     the services.  Customers have to pay MTMC twice, once for the
     booking and documentation service at origin and again for
     clearing customs overseas and managing the shipments through to
     final point of destination.  Customers also pay MSC for the
     ocean and related drayage or inland line-haul services. 

  For the overseas portion of an international shipment not part of a
     through-container move, there is no reimbursement billing per
     se, because the local theater finance office pays the carriers'
     charges citing the customers' own appropriations. 

  If the movement of cargo or passengers requires AMC organic or
     arranged commercial airlift capability, customers reimburse AMC
     for the services. 


   MULTIPLE ORGANIZATIONAL
   ELEMENTS ALSO DRIVE COSTS
   HIGHER
---------------------------------------------------------- Chapter 3:2

Another major factor driving higher costs is the organizational
structure.  The February 1995 USTRANSCOM DBOF budget justifications
submitted to the Congress show USTRANSCOM's costs for fiscal year
1994 as $5.614 billion.  Table 3.1 shows a breakdown by component
command. 



                               Table 3.1
                
                            USTRANSCOM Costs

                         (Dollars in millions)

Component command                               Fiscal year 1994 costs
----------------------------------------  ----------------------------
MTMC                                                              $410
MSC                                                              1,735
AMC                                                              3,469
======================================================================
Total                                                           $5,614
----------------------------------------------------------------------
The figures shown represent all costs, contracted transportation and
port handling/terminal services; expenses for salaries and wages,
travel, supplies, and equipment; contracted services, such as data
processing; payments to other federal agencies, such as the Defense
Finance and Accounting Service; maintenance to facilities;
depreciation for capital assets; expenses for the headquarters of
USTRANSCOM; general and administrative expenses; and overhead.  In
fiscal year 1994, USTRANSCOM spent about $1.2 billion for salaries
and wages of civilian and military personnel. 

Because there are three component commands, there are many instances
of staff performing work in the same functional area.  We focused our
work on MTMC and MSC as examples because they basically have similar
organizational structures.  However, as noted earlier in this
chapter, AMC also has staff performing transportation functions in
areas similar to MTMC and MSC, such as shipment routing and billing. 


      CURRENT ORGANIZATION
-------------------------------------------------------- Chapter 3:2.1

The organizational charts for MTMC and MSC, with numbers of staff
authorized, are shown in appendix II.  In summary, MTMC has

  1 headquarters office;

  1 field operating activity office;

  3 subordinate command headquarters offices;

  2 subordinate command, subcommand headquarters offices;

  4 major port command offices;

  14 medium port command offices;

  6 port detachments;

  1 river terminal;

  1 outport;

  4 ocean cargo clearance authority offices;

  5 ocean cargo booking offices;

  1 overseas inland theater transportation directorate;

  2 privately owned vehicle processing centers;

  2 regional storage management offices; and

  2 Army garrisons. 

It has an authorized staff of 3,511, including 329 military personnel
and 3,182 civilians. 

MSC, for its strategic sealift, or DBOF-T, mission, has

  1 headquarters office;

  1 central technical activity office;

  4 subordinate command headquarters offices;

  3 subordinate command, subarea offices;

  8 MSC port offices;

  3 MSC detachment offices;

  1 subordinate command representative office; and

  4 MSC unit or Fast Sealift Squadron offices. 

It has an authorized staff (DBOF-T only) of 362, including 69
military personnel and 293 civilians. 


      COLLOCATED ACTIVITIES
-------------------------------------------------------- Chapter 3:2.2

Many MTMC and MSC offices are located at the same site or in close
proximity to each other.  Of the 25 MSC offices related to its DBOF-T
mission around the world, 24 are collocated, or in close proximity to
MTMC offices.  Some of these offices are shown in table 3.2. 



                               Table 3.2
                
                   Examples of Collocated or Closely
                            Located Offices

                                    MSC (staff numbers are the
                                    authorized positions for the DBOF-
MTMC                                T mission only)
----------------------------------  ----------------------------------
Headquarters office in the          A headquarters office in
Washington, D.C., area, with a      Washington, D.C., with a staff of
staff of 261.                       96.

A subordinate command office in     A subordinate command office in
Bayonne, N.J., with a staff of      Bayonne, N.J., with a staff of 39.
402.

A subordinate command office in     A subordinate command office in
Oakland, Calif., with a staff of    Oakland, Calif., with a staff of
295.                                31.

A field operating office in         A field operating office, called
Washington, D.C., and other         the Central Technical Activity, in
locations with a staff of 611. \a   Washington, D.C., supporting all
                                    of MSC, with a staff of 51.

An European command office in the   An European command office in the
Netherlands, with a staff of 85.    United Kingdom, with a staff of
                                    43.

A Pacific command office in         MSC has a Pacific command office
Hawaii, with a staff of 49.         in Japan, with a staff of 19.
----------------------------------------------------------------------
\a Approximately 390 are physically located in the Washington, D.C.,
area.  The rest are located at area command or other MTMC sites. 


      DUPLICATIVE STAFF
-------------------------------------------------------- Chapter 3:2.3

Many administrative activities are duplicated between MTMC and MSC. 
Each command has its own headquarters command, subordinate commands,
field operating agencies, and field offices with their own
administrative functions.  Within these units, personnel are
responsible for the same or similar administrative functions.  For
example, each command has staff assigned to carry out public affairs,
internal review, and equal employment opportunity matters.  Each also
has units responsible for legal matters, resource
management/comptroller, information management/computer services, and
plans. 

Resource management and comptroller personnel are responsible for
developing and implementing policies, programs, and standards for
using manpower and for controlling the allocation and prioritization
of manpower resources.  They also are responsible for (1) managing
the budgetary operations of the command, including preparing and
executing the budget and developing and defending the command's DBOF
and, where applicable, appropriated fund budgets and (2) developing
and publishing ocean terminal port handling or ocean service billing
rates, after obtaining USTRANSCOM and Office of the Secretary of
Defense approval.  MTMC has nearly 200 personnel in the resource
management and comptroller areas.  MSC has 75 positions authorized
for its DBOF- T mission for carrying out resource management
and/or/comptroller functions. 

Information management and computer service personnel are responsible
for communications, automation, audio-visual, publications, and
records management, including the development, testing, and fielding
of systems that automate transportation functionality for the
movement of deploying units and freight.  MTMC has over 400 personnel
in the information management and computer areas.  MSC has 15
positions authorized for its DBOF-T mission for carrying out
information management and computer service functions. 

Plans personnel are responsible for the transportation planning
necessary to support the component commands' missions related to
strategic mobility and contingency readiness.  MTMC has about 100
personnel involved in this area.  MSC has about 25 positions
authorized for its DBOF-T mission for carrying out transportation
planning functions. 


      EXTENSIVE MTMC PORT
      OPERATIONS AND TERMINAL
      SERVICE
-------------------------------------------------------- Chapter 3:2.4

MTMC maintains an extensive worldwide port structure to service DOD
cargo that moves almost entirely through commercial channels.  It
operates 26 port and terminal facilities around the world, with more
than 1,200 staff, with a support cost, based on fiscal year 1994
data, exceeding $70 million dollars (not including contract stevedore
costs). 

About 3 decades ago, all transportation moved modally, meaning that
transportation companies typically handled only a single mode of
transportation.  Trucking firms or railroads handled land
transportation, steamship companies handled the ocean transportation,
and air cargo companies handled air movements.  Today, a single
transportation company will pick up materials at the point of origin,
truck them to a seaport, ship them across the ocean, and truck them
to the point of destination, all as a single intermodal move. 

Modal transportation required large numbers of personnel at points
where cargo was transferred from one mode of transportation to
another.  For surface transportation (land and sea), intermodal
transportation became possible when standardized containers could be
transferred between modes without unpacking at transfer points.  When
the transportation industry began moving cargo intermodally, it
required fewer personnel to transfer cargo between modes. 

Today, the majority of cargo shipped by land and sea is moved
intermodally in standardized containers.  When cargo moves
intermodally, containers are packed at the point of origin, moved by
truck to the port of embarkation, loaded on a ship, unloaded at the
port of debarkation, moved by truck to the point of destination, and
unpacked.  With intermodal movements on land and sea, fewer personnel
are needed at the ports for warehousing, packaging, and loading than
were required for modal movements.  For example, according to
transportation studies, a container port requires about 85 percent
less labor than a noncontainerized (breakbulk) port.  The loading and
unloading of containers on ships, rail cars, and trucks are now
achieved with large cranes that require much less manpower than what
was required to pack and unpack crates for shipment. 

MTMC still maintains a heavily staffed worldwide port infrastructure. 
The work performed at the ports has changed from cargo handling
activities to various traffic management activities.  The principal
missions of MTMC units at ports are to accomplish the expeditious
movement and documentation of DOD- sponsored cargo and privately
owned vehicles through the military and commercial terminals and
piers in the command's or unit's area of responsibility and, as
assigned, cargo booking functions.  Generally, these units are
organized substantially the same as they were more than a decade ago
and reflect an era prior to containerization.  Each has an office of
the commander, an administration division, and a combination of
divisions for cargo operations, cargo documentation, and traffic
management.  This is little different from December 1979 when MTMC
began setting up its terminals in a standardized organization of no
more than four divisions to provide a more streamlined, better
understood structure while still preserving sufficient latitude to
provide flexibility to meet local conditions. 

Staff are dispersed as follows: 

  461 located in U.S.  East Coast facilities,

  88 located in U.S.  Gulf Coast facilities,

  176 located in U.S.  West Coast facilities,

  42 located in Caribbean/Central America facilities,

  244 located in European facilities, and

  282 located in Far East facilities. 

The facilities include 4 major port commands, 14 medium port
commands, 6 port detachments, 1 outport, and 1 river terminal. 

USTRANSCOM's rationale for maintaining substantial numbers of
personnel at ports in cargo operations and traffic management when it
ships most cargo through the commercial transportation system,
outside the military ports, is not entirely clear.  MTMC has
recognized the implications of containerization on the need for its
worldwide port system.  In 1975, the Commander of MTMC was quoted as
saying

     "The Bayonne and Oakland terminals have been outmoded by
     transportation distribution technology and are increasingly
     underutilized.  The advent of containerization has had a
     tremendous impact on DOD and commercial cargo transportation,
     with many commercial facilities converting to or adding
     container handling equipment.  In 1970, MTMC elected to move DOD
     container cargo through commercial container facilities on the
     east and west coasts, rather than install duplicate facilities
     at the Bayonne and Oakland terminals.  The commercial facilities
     can meet DOD contingency and support requirements."\3

The 1995 Defense Base Closure and Realignment Commission justified a
recommendation to close two MTMC terminal facilities--Military Ocean
Terminal, Bayonne, New Jersey; and the Oakland Army Base,
California--because the normal workload at these terminals did not
justify continued military operation of the facilities and commercial
ports could handle military cargo requirements. 

Table 3.3 shows the current number of MTMC port and terminal staff by
unit and location. 



                                    Table 3.3
                     
                           MTMC Port and Terminal Staff

Port/
termin   Office of                     Cargo     Traffic
al             the  Administrati  Operations  Management
unit     Commander   ve Division    Division    Division       Other       Total
------  ----------  ------------  ----------  ----------  ----------  ==========
1301st           6             4          26          65           5         106
 Major
 Port
 Comma
 nd,
 Bayon
 ne,
 N.J.
MTMC            16                                                            16
 Port
 Detac
 hment
 ,
 Balti
 more,
 Md.
1303rd           4             7          11          31       205\a         258
 Major
 Port
 Comma
 nd,
 South
 port,
 N.C.
1304th           4             7          20          28           3          62
 Major
 Port
 Comma
 nd,
 North
 Charl
 eston
 ,
 S.C.
MTMC            19                                                            19
 Port
 Detac
 hment
 ,
 Cape
 Canav
 eral,
 Fla.
1314th           4             7          16                       5          32
 Medium
 Port
 Comma
 nd,
 Beaum
 ont,
 Tex.
MTMC            28                                                            28
 Port
 Detac
 hment
 , New
 Orlea
 ns,
 La.
1302nd           3            10          39          56                     108
 Major
 Port
 Comma
 nd,
 Oakla
 nd,
 Calif
 .
1312th          25                                                 2          27
 Medium
 Port
 Comma
 nd,
 Compt
 on,
 Calif
 .
1313th           4             6          14          20                      44
 Medium
 Port
 Comma
 nd,
 Seatt
 le,
 Wash.
MTMC             5                                                             5
 Port
 Detac
 hment
 ,
 Elmen
 dorf
 Air
 Force
 Base,
 Alask
 a
1322nd           2             5          16           7                      30
 Medium
 Port
 Comma
 nd,
 Balbo
 a,
 Panam
 a
MTMC            12                                                            12
 Port
 Detac
 hment
 ,
 Fort
 Bucha
 nan,
 Puert
 o
 Rico
1318th           4                        14          21                      39
 Medium
 Port
 Comma
 nd,
 BENEL
 UX,
 Rotte
 rdam,
 Nethe
 rland
 s
MTMC             5                        12           7                      24
 Rhine
 River
 Termi
 nal,
 Mannh
 eim,
 Germa
 ny
1325th           4            14          20          30          32         100
 Medium
 Port
 Comma
 nd,
 Breme
 rhave
 n,
 Germa
 ny
1320th           3             1           5           4                      13
 Medium
 Port
 Comma
 nd,
 Felix
 stowe
 ,
 Unite
 d
 Kingd
 om
1321st          21                                                            21
 Medium
 Port
 Comma
 nd,
 Livor
 no,
 (Camp
 Darby
 ),
 Italy
MTMC
 Outpo
 rt,
 Lisbo
 n,
 Portu
 gal\b
1319th          10                                                            10
 Medium
 Port
 Comma
 nd,
 Pirae
 us,
 Greec
 e
1323th          15                                                            15
 Medium
 Port
 Comma
 nd,
 Izmir
 ,
 Turke
 y
MTMC            17                                                            17
 Port
 Detac
 hment
 ,
 Isken
 derun
 ,
 Turke
 y
1324th           5                                                             5
 Medium
 Port
 Comma
 nd,
 Azore
 s
1315th           6            18          15          30          15          84
 Medium
 Port
 Comma
 nd,
 Okina
 wa,
 Japan
1316th           5            16          35          34          16         106
 Medium
 Port
 Comma
 nd,
 Yokoh
 ama,
 Japan
1317th           4             9          28          39          12          92
 Medium
 Port
 Comma
 nd,
 Pusan
 ,
 Korea
================================================================================
Total          231           104         271         372         295       1,273
--------------------------------------------------------------------------------
\a Primarily fire prevention, safety, security, engineering, supply,
equipment operation, and maintenance personnel. 

\b Staff numbers are not segregated but included with figures for the
1321st Medium Port Command. 


--------------------
\3 The Defense Transportation System:  Competitor or Complement to
the Private Sector?, Clinton H.  Whitehurst, Jr. 


      ADDITIONAL PERSONNEL AT MSC
      PORT SITES ADDS MORE TO
      INFRASTRUCTURE COSTS
-------------------------------------------------------- Chapter 3:2.5

MSC, as part of its DBOF-T mission, also maintains personnel at ports
around the world.  It has 14 port-related offices with 50 positions
authorized for its DBOF-T missions.  Costs for these offices are
several million dollars annually.  (See table 3.4 for location of the
positions.) Most of these offices are maintained primarily for Navy
fleet-related missions that are funded directly by the Navy.  The
DBOF-T missions are secondary and include exercising local
operational control of MSC-controlled ships in port and maintaining
liaison with service, local government, and commercial activities
concerned with MSC activities. 



                               Table 3.4
                
                        MSC Port Facility Staff

                                                                Number
                                                                    of
Location                                                       staff\a
------------------------------------------------------------  --------
U.S. East Coast
----------------------------------------------------------------------
MSC-Atlantic Representative, Southport, N.C.                         1
MSC Detachment Office, MSC-Atlantic, Charleston, S.C.                3
MSC Office, Port Canaveral, Patrick Air Force Base, Fla.             2

U.S. Gulf Coast
----------------------------------------------------------------------
MSC Unit, New Orleans, La.                                           7

U.S. West Coast
----------------------------------------------------------------------
MSC Office, San Diego, Calif.                                        1
MSC Office, Seattle, Wash.                                           5
MSC Detachment Office, MSC-Pacific, Anchorage, Alaska                1

Central America
----------------------------------------------------------------------
MSC Office, Balboa, Panama                                           4

Europe/Southwest Asia
----------------------------------------------------------------------
MSC Office, BENELUX, Rotterdam, Netherlands                          5
MSC Office, Southwest Asia, Manama, Bahrain                          2

Far East
----------------------------------------------------------------------
MSC Office, Okinawa, Okinawa, Japan                                  4
MSC Office, Korea, Pusan, Korea                                      8
MSC Detachment Office, MSC-Western Pacific, Singapore                1
MSC Unit, Diego Garcia                                               6
======================================================================
Total                                                               50
----------------------------------------------------------------------
\a Numbers are the authorized positions for the DBOF-T mission only. 


   MOBILIZATION COSTS ALSO DRIVE
   DEFENSE TRANSPORTATION EXPENSES
   HIGHER
---------------------------------------------------------- Chapter 3:3

Another factor driving costs higher is the need to maintain a
transportation mobilization capability.  Although DOD policy mandates
direct appropriation funding for maintaining capability to
expeditiously respond to mobilization conditions and the services do
use direct appropriations to fund certain AMC and MTMC mobilization
costs, other mobilization costs are passed to customers. 

As discussed earlier, MTMC operates an extensive port structure,
supported by more than 1,200 staff and costing over $70 million for
salaries and wages alone in fiscal year 1994.  While this structure
may be needed to provide a mobilization capability, it may not be
necessary to move cargo during peacetime.  These ports are largely
unused during peacetime because cargo moves by commercial carriers
through commercial ports, although many of the personnel are actively
engaged in documenting shipments and other management areas. 
Additionally, MSC, for some high-volume shipping routes, uses other
than the low-cost carrier to maintain a mobilization capability.  The
costs of MTMC's port structure and MSC's use of other than low-cost
carriers are paid by the customers. 


      DOD POLICY IS NOT CLEAR
      ABOUT WHICH COSTS SHOULD BE
      FUNDED BY DIRECT
      APPROPRIATIONS
-------------------------------------------------------- Chapter 3:3.1

While DOD's policy and procedures for funding USTRANSCOM mobilization
capability are set forth in its Financial Management Regulation, this
guidance does not cover all situations in which USTRANSCOM components
charge their customers for costs that appear to be for mobilization
requirements.  The existing guidance provides: 

     "4.  United States Transportation Command (USTRANSCOM).  Because
     a capability must be maintained by the USTRANSCOM DBOF
     Transportation business area to expeditiously respond to
     requirements to transport personnel, material, or other elements
     required to satisfy a mobilization condition, direct
     appropriation funding will be provided for:

     a.  Air Mobility Command (AMC).  Airlift flying hours and
     associated costs are based on the requirement to maintain the
     capability of the airlift system, including crew training (and
     concurrent mobilization) requirement.  The airlift system
     training generated capacity is used by DOD to move air eligible
     cargo and passengers.  In order to extend air eligibility and
     increase capacity utilization, rates are generally established
     to be competitive with commercial carriers.  However, resulting
     contributed revenue does not cover the costs of operations due
     to the mobilization requirement.  This requirement will be
     recorded/ budgeted as follows:

     (1) .  .  .  Military personnel within the Air Mobility Command
     will be direct funded by a Military Personnel appropriation. 
     Although the cost shall be recorded as a DBOF cost, it shall be
     recorded so that it is not required to be recovered in customer
     rates.

     (2) The balance of the mobilization requirement costs will be
     funded through a direct appropriation to the Air Force and will
     be placed as an order with the DBOF.  This will assure that
     revenue is reflected to offset the costs."

Accordingly, the Air Force uses appropriated funds to reimburse the
DBOF-T account an amount that it estimates will cover the difference
between a calculated competitive commercial rate total and the total
costs AMC incurs in providing airlift.  As a result, the amount
reimbursed, which is considered an Air Force readiness cost, is not
passed on to defense transportation system customers.  In fiscal year
1994, the Air Force reimbursed the DBOF-T account about $1.5 billion. 

For MTMC, the guidance provides: 

     "b.  Military Traffic Management Command (MTMC).  The MTMC shall
     plan for and maintain a Reserve Industrial Capacity (RIC) to
     transport personnel resources, material and other elements
     required to satisfy a mobilization requirement.  The costs of
     RIC will be funded by Army Operation and Maintenance."

Accordingly, the Army directly funded about $52 million for readiness
in fiscal year 1994, through the Reserve Industrial Capacity budget
line item.  However, the Army did not clearly show what this funding
was used for. 

No specific guidance exists for Navy support of MSC.  Yet, MSC
charges customers through its billing rates for what amounts to
mobilization costs.  MSC contractually agrees to book some cargo to
other than the low-cost ocean carriers.  It does this, in part, to
maintain a sufficient number of ships in the maritime mobilization
base to meet the continuing requirement to augment emergency sealift
capacity.  The additional costs for using other than the low-cost
carriers are paid for by the customers. 


   CONCLUSIONS
---------------------------------------------------------- Chapter 3:4

Three factors drive USTRANSCOM defense transportation costs higher: 
process fragmentation, organizational redundancy, and mobilization
requirements.  In each of these areas, there are opportunities to
improve effectiveness and efficiency.  As discussed in chapter 4, DOD
and USTRANSCOM are reengineering fragmented transportation business
processes, but they are delaying organizational structure change. 
Recommendations relative to improvements in areas discussed in this
chapter are addressed in chapter 4 in the context of our overall
recommendations regarding reengineering the entire defense
transportation process. 


   AGENCY COMMENTS AND OUR
   EVALUATION
---------------------------------------------------------- Chapter 3:5

DOD partially concurred with our findings.  DOD acknowledged the
impact of defense transportation business processes and
readiness/mobilization costs on the charges DOD customers pay.  It
also agreed that MSC often uses other than the low-cost carrier to
meet its customers' needs.  DOD said that this practice serves to
maintain a mobilization capacity and ensure retention of more
carriers, thereby fostering competition among the carriers and
resulting in lower costs to its customers. 

DOD stated that the fragmented business processes and infrastructure
will be reviewed as part of its planned reengineering effort.  DOD
further stated that as the processes are reengineered and the
infrastructure assessed, a joint, global, seamless, intermodal
transportation system will emerge that emphasizes origin to
destination movement and visibility, supports customer requirements,
and is an integral part of the entire logistics process.  DOD also
stated that another objective of the reengineering effort is to
separate the readiness/mobilization costs of providing peacetime
transportation so that customers will pay for peacetime costs only. 
We agree with the stated goals of the reengineering effort and
discuss it further at the end of chapter 4. 


REENGINEERING EFFORTS MUST
INTEGRATE LONG-STANDING
ORGANIZATIONAL ISSUES TO ACHIEVE
OPTIMUM RESULTS
============================================================ Chapter 4

Various studies, commissions, and task forces dating back as far as
1949 have recommended changes in the defense transportation system
organizational structure.  Both USTRANSCOM and DOD have also
recognized the need for fundamental changes in defense transportation
processes and structures.  However, over time, recommendations to
change the structure have not been implemented because several key
players were reluctant to allow change.  Even after its designation
as the single manager of defense transportation, USTRANSCOM retained
the same component command structure that existed prior to its
establishment.  As recently as May 1995, DOD initiated a task force
to reengineer the defense transportation processes, but that task
force's plan does not involve a review of organizational structure
until after DOD completes all other defense transportation
reengineering efforts.  By delaying structural change, DOD runs the
risk of superimposing reengineered processes on a fragmented,
inefficient, and costly component command organizational structure. 
Given the long- standing reluctance to change, it is unlikely that
the component commands would adopt any new processes that would
necessitate changes to that structure.  It is essential that DOD
consider organizational structure as an integral part of its
reengineering efforts if it is to achieve the optimum results. 


   NEED FOR CHANGE RECOGNIZED BY
   DOD
---------------------------------------------------------- Chapter 4:1

Over the years, studies have recommended unifying traffic management
in one organization to improve defense transportation and reduce
costs.  However, these recommendations were not implemented because
of opposition from component commands, services, the Joint Chiefs of
Staff, or the Congress.  (App.  III provides a history of attempts to
realign defense transportation.)

In 1992, the Commander-in-Chief, USTRANSCOM, stated before the House
Committee on Appropriations, Subcommittee on Defense, that moving
cargo in peacetime the same way they are moved during a contingency
would simplify the process.  It would require no change in procedures
to "gear up" for a deployment, just an increase in the level of
operations.  He added that the single manager assignments of the
component commands--MTMC, MSC, and AMC --would be integrated into
USTRANSCOM, making USTRANSCOM the single manager for all defense
transportation. 

Operations Desert Shield/Desert Storm deployment experience
highlighted the need for centralized transportation management as the
most effective and flexible way to manage and coordinate air, sea,
and land movements, while retaining the ability to react quickly to
changing priorities and efficiently schedule and employ
transportation resources.  Studies dating back to 1949 also concluded
that an integrated transportation system was a critical element of an
efficient and effective transportation system.  In 1986, a Blue
Ribbon Commission on Defense Management (the Packard Commission)
recommended establishing a single unified command to integrate global
air, land, and sea transportation.  This recommendation was acted
upon with passage of the Goldwater-Nichols DOD Reorganization Act of
1986, which ordered the Secretary of Defense to consider creation of
a unified transportation command, to include MTMC, MSC, and AMC.  In
1987, the Secretary of Defense established the unified transportation
command--USTRANSCOM.  However, USTRANSCOM retained the same component
command structure that existed prior to its establishment. 

In 1994, a USTRANSCOM study, Reengineering the Defense Transportation
System, The "Ought to Be" Defense Transportation System for the Year
2010, concluded that more can and must be done to better integrate
traffic management and to provide more effective support, at lower
cost, both in peace and war.  The study found that the defense
transportation system continued to be replete with redundant
organizational structure and inefficient and costly processes.  As a
result, USTRANSCOM and the Office of Secretary of Defense are taking
steps to reengineer the defense transportation system.  These efforts
have concluded that a fundamental restructuring of business practices
and organizational structure is needed for the defense transportation
system to keep pace in a volatile and resource-constrained operating
environment.  Both efforts include actions to improve and consolidate
fragmented processes such as procurement and financial management. 
However, both efforts postpone any actions related to organizational
structure issues until after process changes are completed.  By
delaying organizational structure change, DOD runs the risk of
superimposing reengineered processes on a fragmented, inefficient,
and costly component command organizational structure. 


      PAST REASONS NOT TO CHANGE
      STRUCTURE NOT VALID TODAY
-------------------------------------------------------- Chapter 4:1.1

In response to a 1988 DOD Inspector General report recommendation to
eliminate transportation component command headquarters and to
transfer all defense transportation functions to USTRANSCOM, the
command cited three reasons for not implementing the recommendation. 
The reasons cited were (1) by law, the services have the authority to
train, equip, and manage their assigned forces; (2) addition of the
peacetime mission to USTRANSCOM would detract from its primarily
wartime mission; and (3) removal of the services and their
departments from the resource allocation process would significantly
complicate programming and budgeting.  These reasons for not
reorganizing are not valid today. 

First, although the services have the statutory responsibility to,
among other things, train, equip, and manage their assigned forces,
the Secretary of Defense is authorized under 10 U.S.C.  125(a) to
transfer, reassign, consolidate or abolish any function, duty or
power not vested by law in an official of DOD in order to provide
more effective, efficient, and economical operation of DOD.  We are
not aware of any provision of law that would preclude the Secretary
from exercising this authority to abolish the transportation
component command headquarters. 

In addition, realigning defense transportation activities under
USTRANSCOM would be consistent with USTRANSCOM's current mission.  At
the time of its activation, USTRANSCOM was the single manager for
defense transportation during war.  The service secretaries retained
their single manager charters over peacetime transportation
functions.  However, Desert Storm highlighted the disadvantages of
fragmentation between wartime and peacetime transportation
activities.  Therefore, in 1992, DOD made USTRANSCOM the single
manager for defense transportation in both peace and war. 

Finally, since USTRANSCOM is the DOD financial manager for all
defense transportation through the DBOF, realigning defense
transportation under USTRANSCOM would create a more efficient
resource allocation process.  Currently, each component command
develops its own DBOF-T budget submission.  USTRANSCOM consolidates
the separate budget submissions to create a single DBOF-T budget
submission.  If defense transportation activities were aligned under
USTRANSCOM, there would be no need for each component to develop a
separate DBOF-T budget submission. 


   CONCLUSIONS
---------------------------------------------------------- Chapter 4:2

The ongoing DOD and USTRANSCOM efforts to reengineer fragmented
transportation processes are a step in the right direction.  However,
these efforts continue to delay organizational structure changes. 
Even these current reengineering efforts run a significant risk of
reengineering processes to operate a fragmented and costly defense
transportation organization.  In order for any defense transportation
reengineering effort to achieve the maximum improvement in processes
and reduction in costs possible, it must include as an integral part
changes to organizational structure. 


   RECOMMENDATIONS TO THE
   SECRETARY OF DEFENSE
---------------------------------------------------------- Chapter 4:3

We recommend that the Secretary ensure that the defense
transportation reengineering efforts simultaneously address process
and organizational structure improvements.  Specifically, the
reengineering efforts should confront, at a minimum,

  need for separate traffic management component command headquarters
     staff,

  consolidation of separate field subordinate command traffic
     management staff, and

  elimination of all remaining duplicative field-based subordinate
     command support staff. 

We also recommend that the Secretary clarify which USTRANSCOM
mobilization costs should be passed along to its customers.  The
amounts and purpose of any such costs should be contained in
transportation component annual financial statements and in the
budget justification statements submitted annually to the Congress. 


   AGENCY COMMENTS AND OUR
   EVALUATION
---------------------------------------------------------- Chapter 4:4

DOD generally concurred with our findings and recommendations.  It
indicated that it has already begun addressing our concerns and
pursuing the objectives of our recommendation related to business
processes and organizational improvements through its Reengineering
Transportation Action Plan, established at the direction of the
Deputy Secretary of Defense by memorandum of May 3, 1995.  Under the
plan, prepared on June 30, 1995, DOD is establishing Integrated
Product Process Teams, comprised of representatives from the Military
Services, Joint Staff, Defense Logistics Agency, Under Secretary of
Defense (Comptroller), Under Secretary of Defense (Acquisition and
Technology), Defense Finance and Accounting Service, DOD Inspector
General, and USTRANSCOM.  These teams are charged with developing a
transportation vision, reengineering transportation processes,
reengineering transportation financial management processes, and
assessing the infrastructure required to support the proposed
reengineered processes.  The first initiative, developing a
transportation vision, was completed on October 25, 1995.  DOD said
that the organizational structure will be assessed in concert with
reengineering the business processes and the handling of
readiness/mobilization costs will be reviewed by the task force. 

If the Reengineering Transportation Action Plan is carried out as
described and it results in a consolidated, global, seamless,
intermodal transportation system that eliminates and reduces
infrastructure, thereby lowering overall system costs and charges to
DOD customers, it is responsive to our concerns.  As we noted
earlier, however, many other DOD efforts have had similar goals but
the recommended changes to the defense transportation organization
were never implemented because key defense transportation interests
were reluctant to allow them to occur.  In the near future, we will
be reviewing the results of the current reengineering initiatives to
see whether DOD is successful in implementing necessary changes this
time. 


COMPARISON OF CARRIER COSTS WITH
CHARGES TO CUSTOMERS
=========================================================== Appendix I



                                    Table I.1
                     
                       Shipment Examples Comparing Carrier
                     Costs with Amounts Charged to USTRANSCOM
                                    Customers

---------------------------------------  ---------------------------------------
A. Port-to-Port Shipmen
--------------------------------------------------------------------------------

Example A.1
From Coast (any port in rang Europe (any port in ra
--------------------------------------------------------------------------------
Cost of low-rate carrier: $1,552.88      Amount charged by USTRANSCOM: $3,292.48
                                         (breakdown: MSC: $2,221.35; MTMC at
                                         origin: $557.89; MTMC at destination:
                                         $513.24)


Percent by which total charges exceeded carri 112 percent
--------------------------------------------------------------------------------

Example A.2
From: U.S. Gulf Coast (any port in ran Europe (any port in ra
--------------------------------------------------------------------------------
Cost of low-rate carrier: $1,552.88      Amount charged by USTRANSCOM: $3,616.98
                                         (breakdown: MSC: $2,545.85; MTMC at
                                         origin: $557.89; MTMC at destination:
                                         $513.24)


Percent by which total charges exceeded carri 133 percent
--------------------------------------------------------------------------------

Example A.3
From: U.S. West Coast (any port in ran Korea (any port in ran
--------------------------------------------------------------------------------
Cost of low-rate carrier: $1,280.89      Amount charged by USTRANSCOM: $3,815.07
                                         (breakdown: MSC: $2,486.85; MTMC at
                                         origin: $573.87; MTMC at destination:
                                         $754.35)


Percent by which total charges exceeded carri 198 percent
--------------------------------------------------------------------------------

Example A.4
From: U.S. West Coast (any port in ran Japan (any port in ran
--------------------------------------------------------------------------------
Cost of low-rate carrier: $1,280.89      Amount charged by USTRANSCOM: $3,809.17
                                         (breakdown: MSC: $2,480.95; MTMC at
                                         origin: $573.87; MTMC at destination:
                                         $754.35)


Percent by which total charges exceeded carri 197 percent
--------------------------------------------------------------------------------

Example A.5
From: U.S. West Coast (any port in ran Okinawa (any port in r
--------------------------------------------------------------------------------
Cost of low-rate carrier: $2,024.29      Amount charged by USTRANSCOM: $3,632.17
                                         (breakdown: MSC: $2,303.95; MTMC at
                                         origin: $573.87; MTMC at destination:
                                         $754.35)


Percent by which total charges exceeded carri 79 percent
--------------------------------------------------------------------------------

B. Port Area-to-Port Ar Cost Comparisons (local
--------------------------------------------------------------------------------

Example B.1
From Terminal, Bayonne, N.J Bremerhaven, Germany
--------------------------------------------------------------------------------
Cost of low-rate carrier: $1,712.18      Amount charged by USTRANSCOM: $3,292.48
                                         (breakdown: MSC: $2,221.35; MTMC at
                                         origin: $557.89; MTMC at destination:
                                         $513.24)


Percent by which total charges exceeded carrier costs
--------------------------------------------------------------------------------

Example B.2
From: Military Ocean Terminal-Bay Area, Oak Calif.
To: Pusan, Kore
--------------------------------------------------------------------------------
Cost of low-rate carrier: $1,267.32      Amount charged by USTRANSCOM: $3,815.07
(based on carrier's single factor rate)  (breakdown: MSC: $2,486.85; MTMC at
                                         origin: $573.87; MTMC at destination:
                                         $754.35)


Percent by which total charges exceeded carrier costs
--------------------------------------------------------------------------------

C. Port Area-to-Inland (local drayage at origi transportation at desti
--------------------------------------------------------------------------------

Example C.1
From Terminal, Bayonne, N.J Frankfurt, Germany
--------------------------------------------------------------------------------
Cost of low-rate carrier: $2,152.91      Amount charged by USTRANSCOM: $3,292.48
                                         (breakdown: MSC: $2,221.35; MTMC at
                                         origin: $557.89; MTMC at destination:
                                         $513.24)


Percent by which total charges exceeded carrier costs
--------------------------------------------------------------------------------

Example C.2
From: Norfolk (Zone 2), Va.
To: Giessen, G
--------------------------------------------------------------------------------
Cost of low-rate carrier: $2,361.18      Amount charged by USTRANSCOM: $3,292.48
(based on carrier's single factor rate)  (breakdown: MSC: $2,221.35; MTMC at
                                         origin: $557.89; MTMC at destination:
                                         $513.24)


Percent by which total charges exceeded carrier costs
--------------------------------------------------------------------------------

Example C.3
From: Military Ocean Terminal-Bay Area, Oak Calif.
To: Yokosuka, J
--------------------------------------------------------------------------------
Cost of low-rate carrier: $1,607.16      Amount charged by USTRANSCOM: $3,809.17
(based on carrier's single factor rate)  (breakdown: MSC: $2,480.95; MTMC at
                                         origin: $573.87; MTMC at destination:
                                         $754.35)


Percent by which total charges exceeded carrier costs
--------------------------------------------------------------------------------

D. Inland Point-to-Port Area Shipment Cost Comparisons (line-haul transportati
drayage at destination)
--------------------------------------------------------------------------------

Example D.1
From Calif.
To: Naha, Okina
--------------------------------------------------------------------------------
Cost of low-rate carrier: $2,136.39      Amount charged by USTRANSCOM: $3,632.17
(based on carrier's single factor rate)  (breakdown: MSC: $2,303.95; MTMC at
                                         origin: $573.87; MTMC at destination:
                                         $754.35)


Percent by which total charges exceeded carrier costs
--------------------------------------------------------------------------------

E. Inland Point-to-Inla (line-haul transportati
--------------------------------------------------------------------------------

Example E.1
From Pa.
To: Frankfurt, Ger
--------------------------------------------------------------------------------
Cost of low-rate carrier: $2,380.65      Amount charged by USTRANSCOM: $3,292.48
(based on carrier's single factor rate)  (breakdown: MSC: $2,221.35; MTMC at
                                         origin: $557.89; MTMC at destination:
                                         $513.24)


Percent by which total charges exceeded carrier costs
--------------------------------------------------------------------------------

Example E.2
From Kaiserslautern, German
--------------------------------------------------------------------------------
Cost of low-rate carrier: $2,650.87      Amount charged by USTRANSCOM: $3,292.48
(based on carrier's single factor rate)  (breakdown: MSC: $2,221.35; MTMC at
                                         origin: $557.89; MTMC at destination:
                                         $513.24)


Percent by which total charges exceeded carrier costs
--------------------------------------------------------------------------------

Example E.3
From Distribution Depot Red (Texarkana), Tex.
To: Germany
--------------------------------------------------------------------------------
Cost of low-rate carrier: $2,711.05      Amount charged by USTRANSCOM: $3,616.98
                                         (breakdown: MSC: $2,545.85; MTMC at
                                         origin: $557.89; MTMC at destination:
                                         $513.24)


Percent by which total charges exceeded carrier costs
--------------------------------------------------------------------------------

Example E.4
From Calif.
To: Seoul, Kore
--------------------------------------------------------------------------------
Cost of low-rate carrier: $1,723.39      Amount charged by USTRANSCOM: $3,815.07
(based on carrier's single factor rate)  (breakdown: MSC: $2,486.85; MTMC at
                                         origin: $573.87; MTMC at destination:
                                         $754.35)


Percent by which total charges exceeded carrier costs
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------

COMPONENT COMMAND ORGANIZATIONS
========================================================== Appendix II

   Figure II.1:  MTMC (authorized
   staff in parentheses)

   (See figure in printed
   edition.)

   Source:  MTMC.

   (See figure in printed
   edition.)

   Figure II.2:  MSC (authorized
   DBOF-T positions in
   parentheses)

   (See figure in printed
   edition.)

   Source:  MSC.

   (See figure in printed
   edition.)

   Figure II.3:  AMC (authorized
   DBOF-T staff)

   (See figure in printed
   edition.)

   Source:  AMC.

   (See figure in printed
   edition.)


HISTORY OF ATTEMPTS TO REALIGN
DEFENSE TRANSPORTATION
========================================================= Appendix III

Proponent               Date      Action or recommendation
----------------------  --------  ----------------------------------------------
Department of Defense   1948      Created the Military Air Transport Service
                                  (later called the Military Airlift Command),
                                  merging the Air Force's Air Transport Command
                                  and the Navy's Naval Air Transport Service.

Commission on           1949      Concluded that government traffic management
Organization of the               was inefficient and recommended creation of a
Executive Branch of               central traffic organization.
the Government (Hoover
Commission)

Department of Defense   1949      Created the Military Sea Transportation
                                  Service (later called MSC), combining the
                                  ocean transport activities of the Army
                                  Transport Service and the Naval Transportation
                                  Service.

Department of Defense   1950      Established the Military Traffic Service to
                                  unify traffic service for all of the
                                  Department of Defense, but the service lacked
                                  authority to bring about consolidation of the
                                  traffic functions of different segments of the
                                  Department.

Commission on           1955      Concluded that there was a continuing lack of
Organization of the               Department of Defense centralized cargo and
Executive Branch of               passenger traffic management and identified
the Government (Hoover            many duplicate defense facilities and
Commission)                       services.

Department of Defense   1956      Designated the Secretary of Army as Single
                                  Manager for Traffic Management within CONUS.
                                  Military Traffic Management Agency established
                                  to integrate existing headquarters command and
                                  field traffic management agencies of the Army,
                                  Navy, Air Force, and the Marine Corps.

Department of Defense   1961      Established the Defense Supply Agency under
                                  the direct authority of the Secretary of
                                  Defense and placed the Military Traffic
                                  Management Agency (renamed the Defense Traffic
                                  Management Service) under Agency control.

Department of Defense   1964      Returned the Defense Traffic Management
                                  Service (renamed the Military Traffic
                                  Management and Terminal Service) to the Army,
                                  with the Secretary of the Army designated
                                  Single Manager for Military Traffic, Land
                                  Transportation, and Common-User Ocean
                                  Terminals.

Blue Ribbon Defense     1970      Recommended creation of a logistics command to
Panel                             take over the Military Traffic Management and
                                  Terminal Service and MSC traffic and terminal
                                  management functions. New command would also
                                  include the Military Airlift Command.

Department of Defense   1971      Directed a merger of the Military Traffic
                                  Management and Terminal Service and MSC into a
                                  joint Department of Defense Surface
                                  Transportation Command, effectively moving
                                  sealift functions to the Army.

Department of Defense   1971      Following opposition by the Joint Chiefs of
                                  Staff (less the Army) and hearings by a
                                  Special Transportation Subcommittee of the
                                  House Committee on Armed Services, withdrew
                                  the merger proposal.

Department of Defense   1974      Renamed the Military Traffic Management and
                                  Terminal Service, MTMC, to make it more
                                  identifiable with its mission.

Joint Chiefs of Staff   1977      Examined options for consolidating defense
(Steadman study)                  surface transportation but concluded that
                                  status quo should be maintained, effectively
                                  keeping the air, land, and sea single managers
                                  independent under their respective services.

Surveys and             1979      Recommended that a Defense Traffic Management
Investigations staff              Agency be established to assume the traffic
of the House Committee            management responsibilities of MTMC and MSC.
on Appropriations

Conference Report on    1979      Directed the Department of Defense to develop
the Department of                 an implementation plan to consolidate MTMC and
Defense Appropriation             MSC and/or create a Defense Traffic Management
Act, 1980                         Agency.

Department of Defense   1979      Responded to congressional report by
                                  contracting with Harbridge House, Inc., to
                                  analyze the functional and organizational
                                  relationships of MTMC, MSC, and to a limited
                                  degree, Military Airlift Command.

Harbridge House, Inc.   1980      Provided a report for the Department of
                                  Defense recommending establishment of a
                                  Defense Traffic Management Agency or a Unified
                                  Traffic Management Command comprised of MTMC
                                  and MSC.

Department of Defense   1981      Agreed to transfer MSC sealift cargo/
                                  passenger booking and related contract
                                  functions to MTMC.

Joint Chiefs of Staff   1981      Agreed that management of surface movement
                                  system could best be accomplished by
                                  integration of MTMC and MSC into a single
                                  command reporting through Joint Chiefs of
                                  Staff to Secretary of Defense.

Department of Defense   1981      Set October 1982 as goal for completing
                                  integration of MTMC and MSC.

Report of the House     1981      Endorsed plan to merge MTMC and MSC.
Committee on
Appropriations,
Department of Defense
Appropriations Act,
1982

Joint Chiefs of Staff   1982      Recommended integration of MTMC and MSC into a
                                  unified Military Transportation Command.

Department of the Navy  1982      Officials testifying before the House
                                  Committee on Armed Services indicated that
                                  they were against the planned merger.

Department of Defense   1982      Department of Defense was prohibited from
Authorization Act,                taking any action to consolidate MTMC and MSC.
1983

Department of Defense   1983      The Congress rejected proposal by the
                                  Department of Defense in fiscal year 1984
                                  authorization request to repeal language
                                  prohibiting consolidation of transportation
                                  functions.

Department of Defense   1984      The Congress rejected proposal by the
                                  Department of Defense in fiscal year 1985
                                  authorization request to repeal language
                                  prohibiting consolidation of transportation
                                  functions.

Blue Ribbon Commission  1986      Recommended establishment of a single unified
on Defense Management             command to integrate global air, land, and sea
(Packard Commission)              transportation.

Goldwater-Nichols       1986      Ordered Secretary of Defense to consider
Department of Defense             creation of a unified command and lifted
Reorganization Act                prohibition against consolidation of traffic
                                  management functions.

Department of Defense   1987      Established USTRANSCOM with operational
                                  control of defense lift forces assigned to
                                  MTMC, MSC, and Military Airlift Command during
                                  war, contingencies, and exercises.

Department of Defense   1988      Released report recommending abolishing
Inspector General                 component command headquarters and eliminating
                                  1,015 component command headquarters level
                                  positions.

Department of Defense   1988      Disagreed with Inspector General report.

USTRANSCOM              1990      Recommended expanding USTRANSCOM mission to
reorganization task               include time of peace, as well as wartime.
force                             Developed charter establishing common-user
                                  lift responsibilities, including consolidating
                                  traffic management and contracting functions.
                                  Recommended establishment of a financial
                                  management office for visibility over
                                  component command industrial funds.
--------------------------------------------------------------------------------



(See figure in printed edition.)Appendix IV
COMMENTS FROM THE DEPARTMENT OF
DEFENSE
========================================================= Appendix III



(See figure in printed edition.)



(See figure in printed edition.)



(See figure in printed edition.)



(See figure in printed edition.)



(See figure in printed edition.)


MAJOR CONTRIBUTORS TO THIS REPORT
=========================================================== Appendix V


   NATIONAL SECURITY AND
   INTERNATIONAL AFFAIRS DIVISION,
   WASHINGTON, D.C. 
--------------------------------------------------------- Appendix V:1

David R.  Warren, Director
James F.  Wiggins, Associate Director
Nomi R.  Taslitt, Assistant Director
J.  Kenneth Brubaker, Evaluator
Nancy T.  Lively, Evaluator
Suzanne K.  Wren, Evaluator
Michelle F.  Kidd, Evaluator
Robert E.  Sanchez, Evaluator
Priscilla M.  Harrison, Evaluator


   KANSAS CITY REGIONAL OFFICE
--------------------------------------------------------- Appendix V:2

John G.  Wiethop, Evaluator-in-Charge
David J.  Henry, Evaluator
Denice M.  Millett, Evaluator
*** End of document. ***