Defense Transportation: Reengineering the DOD Personal Property Program
(Letter Report, 11/27/96, GAO/NSIAD-97-49).

The Military Traffic Management Command is reengineering the Defense
Department's personal property program. Although Congress supports DOD's
reengineering efforts, it is concerned that the reengineered program
could harm the moving industry, particularly small businesses. As a
result, Congress directed that DOD report on small business issues
before undertaking a pilot test. Because this report did not
satisfactorily address congressional concerns about the impact on small
businesses, Congress directed DOD to convene a military/industry working
group to develop a mutually agreeable program to test pilot. The working
group reached consensus on many issues, including a set of program
goals, but it could not agree on the approach to take for the pilot
test. Consequently, each side presented a separate proposal. This report
reviews the two proposals. Specifically, GAO analyzes the extent to
which each proposal met the DOD/industry goals for a reengineered
personal property program.

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

 REPORTNUM:  NSIAD-97-49
     TITLE:  Defense Transportation: Reengineering the DOD Personal 
             Property Program
      DATE:  11/27/96
   SUBJECT:  Department of Defense contractors
             Competitive procurement
             Household goods
             Freight transportation operations
             Federal agency reorganization
             Defense procurement
             Quality assurance
             Small business contractors
             Freight transportation rates
             Customer service
IDENTIFIER:  DOD Personal Property Program
             North Carolina
             South Carolina
             Florida
             Europe
             
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Cover
================================================================ COVER


Report to Congressional Committees

November 1996

DEFENSE TRANSPORTATION -
REENGINEERING THE DOD PERSONAL
PROPERTY PROGRAM

GAO/NSIAD-97-49

Reengineering Personal Property Program

(709204)


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

  DOD - Department of Defense
  FAR - Federal Acquisition Regulation
  MTMC - Military Traffic Management Command
  TRANSCOM - Transportation Command

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


B-275016

November 27, 1996

Congressional Committees

The Military Traffic Management Command (MTMC) is reengineering the
Department of Defense (DOD) personal property program.  The Congress,
while expressing support for DOD's plan to reengineer the process, is
concerned that the reengineered program could adversely affect the
moving industry, particularly small business.  Therefore, the
Congress directed DOD to report on small business concerns prior to
implementing a pilot test.  Since this report did not satisfactorily
address congressional concerns about the impact this might have on
small business, the Congress directed DOD to convene a DOD/industry
working group to develop a mutually agreeable program to pilot test. 

Although the working group came to a consensus on many issues,
including a set of program goals, it could not reach agreement on the
approach to take for the pilot test.  Consequently, the two sides
presented separate proposals.  We are directed to review the
proposals by the House and Senate reports accompanying the National
Defense Authorization Act for Fiscal Year 1997.  This report provides
the results of reviewing the two proposals.  Specifically, we provide
an analysis of the extent to which each proposal met the DOD/industry
goals for a reengineered personal property program. 


   BACKGROUND
------------------------------------------------------------ Letter :1

DOD has long been concerned about the quality of its nearly billion
and half dollar annual program to transport, store, and manage the
household goods and unaccompanied baggage of its servicemembers and
employees with permanent change of station and other type orders. 
Some of the concerns related to poor service from its movers,
excessive incidence of loss or damage to service members' property,
and high claims costs to the government.  All these problems
contributed to a poor quality of service for persons using the
system. 

Consequently, DOD proposed reengineering the personal property
program as a quality-of-life initiative.  Its primary goals were to
substantially improve and put on par with corporate customer
standards, the quality its military personnel and their families
received from DOD's contracted movers; simplify the total
process--from arranging the moves to settling the claims; and base
the program on business processes characteristic of world-class
customers and suppliers. 

Generally, DOD must acquire the goods and services it needs through
the competitive acquisition system consisting of the statutes in
chapter 137 of title 10 of the United States Code and the primary
implementing regulations contained in the Federal Acquisition
Regulation (FAR).  However, pursuant to 49 U.S.C.  13712, the
acquisition of transportation services of a common carrier through
the use of a government bill of lading\1 is not subject to the
acquisition laws.\2 Instead, these services have been acquired based
upon published rates in accordance with procedures contained in DOD
transportation regulations. 

A key feature of MTMC's proposal to reengineer the personal property
program is to simplify the process of acquiring transportation
services and to bring it in line with the government's acquisition of
most other services by using multiple award, fixed-price, indefinite
delivery/indefinite quantity-type contracts awarded under the
competitive acquisition system.  MTMC's proposed contracts would
cover statewide services and provide for a base and several option
years.  The solicitations for the contracts would be open to all
responsible offerors, including carriers, forwarders, and relocation
companies.  Awardees would be selected in accordance with
solicitation evaluation factors, which will include such elements as
technical or operational requirements, past performance, subcontract
plan, and price. 

To achieve these goals and to comply with congressional direction,
MTMC is proposing to begin a pilot test.  The plan is to begin the
test in early 1997 and run it for at least a year.  Fifty percent of
the DOD household goods and unaccompanied baggage moving from the
test area--North Carolina, South Carolina, and Florida--to all other
states, except Alaska and Hawaii, and to Europe, would be included in
the test.  The other 50 percent would continue moving in the existing
program. 

Industry objected to MTMC's proposal, particularly because of what it
perceived as the negative impact that MTMC's proposal would have on
small business moving companies.  It offered for consideration an
alternative plan having two distinct programs, one for handling
domestic shipments and another for handling international shipments. 
The industry proposal would not be based on the competitive
acquisition system but would use a government bill of lading to
acquire the services in accordance with procedures contained in DOD
and the General Services Administration transportation regulations. 


--------------------
\1 A "government bill of lading" is the basic acquisition document
used by the government for procuring transportation services from
common carriers pursuant to 49 U.S.C.  13712, which authorizes the
acquisition of transportation services at published rates from any
carrier lawfully operating in the territory where such services are
to be performed. 

\2 See Sam Trucking, B-229890, March 3, 1988, 88-1 CPD 425. 


      REENGINEERING GOALS AND OUR
      EVALUATION APPROACH
---------------------------------------------------------- Letter :1.1

As a result of the initial joint DOD/industry working group session,
DOD and industry agreed to the following goals for the reengineered
personal property program.  These were to

1.  Provide quality service
2.  Improve on-time pickup
3.  Improve on-time delivery
4.  Achieve high customer satisfaction in relationship to the entire
move process
5.  Adopt corporate business processes that lead to world-class
customer service
6.  Lower loss/damage and lower claims frequency and claims averages
7.  Simplify the system, including reducing administrative workload
8.  Ensure capacity to meet DOD's needs for quality moves
9.  Provide opportunity for small businesses offering quality service
to compete for DOD business as a prime contractor and
10.  Provide best value moving services to the government. 

Our assessment of the extent to which each proposal met the goals was
necessarily limited by the lack of precise definitions of each goal
and the way to achieve it.  Moreover, the proposals were written in
such a way that did not specifically address how each would achieve
the stated goals.  We necessarily had to interpret the goals based on
our observations and review of available material and assess each
proposal's ability to meet those goals using our knowledge of the
existing personal property program, our understanding of the
proposals, associated documents, attendance at all of the working
group meetings, a review of the transcripts of the meetings, and our
prior studies. 


   RESULTS IN BRIEF
------------------------------------------------------------ Letter :2

Our assessment shows that MTMC's proposal meets the goals for
reengineering the personal property program to a greater extent than
the industry plan.  Both proposals are likely to equally achieve
several of the
10 goals of the program.  For example, for achieving high customer
satisfaction, both proposals provide for more communication between
servicemember and contractor, increased contractor liability,
streamlined claims settlement, and use of a customer survey for
obtaining feedback.  However, overall, MTMC's proposal appears more
likely to achieve the program goals to a greater extent. 

  -- MTMC's approach to providing quality service would give DOD the
     opportunity to assess a prospective contractor's plan to improve
     the quality of the service prior to contract awards.  This would
     enable MTMC to determine best value to the government by
     assessing the trade-off between price and technical factors. 
     That is, award would be made only to responsible offerors whose
     proposals represent the best overall value to the government in
     terms of (1) the offeror's proposed approach to performing the
     work, (2) past performance, (3) subcontracting plan, and (4)
     price.  Price would be one evaluation criterion and would not
     provide the primary basis for award.  We believe determining
     best value is an essential element of providing higher quality
     service to servicemembers.  The industry's proposal provides for
     selecting contractors initially on price, then quality after the
     carrier or forwarder has already handled DOD traffic.  This does
     not provide for assessment of quality up front using the
     criteria MTMC has proposed to use under its proposal. 

  -- MTMC's approach to simplifying the system and adopting corporate
     business practices would enable DOD to dramatically reduce the
     number of contractors it must use.  This would simplify
     contractor selection and could lead to more stability and
     provide leverage leading to cost efficiencies for both
     contractors and DOD.  Industry's proposal, though it changes the
     existing program to some extent, still retains a process in
     which DOD has to distribute traffic to many different carriers
     and forwarders. 

Overall, we believe that MTMC's proposal provides a greater
opportunity than the industry proposal to achieve the program goals. 
Therefore, we support moving forward with the pilot without further
delay.  The conduct of a pilot test is essential to gathering the
necessary data to ultimately design the reengineered personal
property program.  In addition, it is important that performance
standards be developed and data gathered in such a way to ensure
measurable results of the pilot, particularly as it relates to
quality of service and small business participation.  If the Congress
still has concerns about the impact on small business, piloting both
proposals is an option.  However, doing this would likely place an
additional administrative and costly burden on MTMC and could delay
implementation of the program. 


   DOD'S PERSONAL PROPERTY PROGRAM
------------------------------------------------------------ Letter :3

DOD's nearly billion and a half dollar annual personal property
program--household goods and unaccompanied baggage--is run centrally
by the headquarters office of MTMC but administered locally by about
200 military and DOD transportation offices around the world.  DOD
relies almost exclusively on commercial movers, both directly with
more than 1,100 moving van companies (carriers) and forwarders and
indirectly with thousands more agents and owner-operator truckers
working for the carriers and forwarders. 

The program consists of three major processes:  carrier/forwarder
approval, rate solicitation, and traffic distribution.  To
participate in the program, a carrier or forwarder must first be
approved by MTMC.  This requires proof, or certification, that the
carrier or forwarder has the requisite state or federal
transportation operating authority and agrees to abide by the terms
and conditions in MTMC's tender of service.  The carrier or forwarder
must also be approved by the local military and DOD transportation
office at which the company is planning to serve.  This requires
proof, or certification, in the form of a letter of intent that the
company has local agents ready and able to meet the local
installation's needs. 

MTMC solicits rates every 6 months.  Each carrier and forwarder must
file rates individually for the particular traffic channel it intends
to serve.  For the domestic part of the household goods program,
rates are submitted as a percentage discount, or premium of a
baseline schedule of rates by origin installation and destination
state channel.\3 For the international part of the program, rates are
filed as a fixed dollar and cents per hundredweight basis by state
and overseas area, or other subdivision channel.\4 Carriers and
forwarders have two chances to file rates before the beginning of
each rate cycle--an initial rate filing and a "me-too" rate filing in
which a carrier or forwarder can lower its initially filed rate to
that of any other carrier or forwarder.  Rates cannot be changed
during the 6-month rate cycle, except for special cause, but they can
be canceled at various times during the rate cycle. 

Each local military installation must distribute its traffic using a
traffic distribution roster.  Carriers and forwarders are placed on
the rosters for each channel by order of rate level and quality
score.  In the domestic program, traffic is distributed on the basis
of low-to-high rate, with highest quality scored carriers given the
first 20,000 pounds.  In the international program, the forwarder or
forwarders initially offering the low rate for the particular channel
are given a pre-specified percentage of the traffic on that channel. 


--------------------
\3 Separate rates must be filed for different types of domestic
shipments--motor van (loose pack in a moving van) and containerized
(crated in plywood containers). 

\4 Separate rates have to be filed for three different types of
international shipments (dependent on whether the forwarder has to
arrange the entire "through" movement or just parts of the "through"
move). 


   THE PROPOSALS:  MTMC AND
   INDUSTRY
------------------------------------------------------------ Letter :4


      MTMC'S PROPOSAL
---------------------------------------------------------- Letter :4.1

Overall, MTMC's proposal would result in a program that would operate
in much the same way other DOD programs operate for acquiring goods
and services.  Emphasis is placed on assessing quality of service in
the contractor selection process and obtaining military member
satisfaction with the services received. 

At the first meeting of the DOD/industry working group, MTMC provided
a briefing on its proposal.\5 Following that meeting, on June 24,
1996, MTMC provided the working group with a draft request for
proposals summary.  The summary described a standardized program for
handling both domestic and international shipments.  It laid out
MTMC's proposed acquisition strategy and the major events that MTMC
expected to occur in the proposed acquisition process.  The MTMC
proposal is the result of the DOD/industry working group process and
includes a number of features put forward by industry. 

Under its plan, MTMC would make major changes to the existing
carrier/forwarder approval, rate solicitation, and traffic
distribution processes.  The existing approval process would be
eliminated and replaced by a contract award process.  Prices would be
fixed for 1 year, with no provision for increases during the contract
period.  Rate solicitation would be based on competitive acquisition
procedures used by government in procuring other types of goods and
services and eliminate the twice yearly re-solicitation of rates
under the current system.  Traffic distribution would be limited to
the number of contractors receiving awards. 

Key points in MTMC's acquisition strategy were that offerors would be
required to submit proposals addressing technical factors (i.e., how
the offeror proposed to perform specified technical or operational
requirements), past performance, subcontracting plan, and price. 
MTMC said that it anticipated that price would be less important than
the other factors combined.  Award would be made only to responsible
offerors whose offers conformed to the solicitation and represented
the best overall value to the government--price and other evaluation
criteria considered.  There were no restrictions on the type of
company that could compete for the contracts.  Therefore, companies
other than licensed carriers and forwarders--the only type of
companies now allowed to compete for DOD traffic--would be allowed to
make an offer for the DOD business. 

MTMC's proposal also detailed DOD's movement and storage
requirements, shipment origins (all areas of North Carolina, South
Carolina, and Florida) and destinations (13 regions in the contiguous
48 states and 5 regions in Europe), categories of shipments
(household goods and unaccompanied baggage) that would and would not
be handled under the pilot test, minimum contractor personnel
requirements, specific tasks that were to be performed, length of the
contract (1 year plus an unspecified number of option years), the way
offerors should specify price for each traffic channel (expressed as
a discount percentage using the commercial rate tariff for domestic
shipments and a fixed dollar and cents per hundredweight rate for
international shipments), the accessorial services DOD would be
requiring, contractor's liability and loss and damage claims
procedures (full value protection based on certain minimum declared
valuations subject to an overall cap), contractor's required quality
assurance procedures (use of a customer survey), certain performance
standards for shipment pickup and delivery, and the invoicing and
payment process. 

MTMC also indicated that it would establish and specify in the
solicitation a total contract minimum guaranteed tonnage amount from
each origin pilot state to each destination region included in the
pilot program.  It will request that offerors furnish by traffic
channel a maximum daily capacity that they are willing to commit to
the contract, stated in pounds, from each installation in the pilot
test to any or all destination pilot regions that they may wish to
serve. 

MTMC's proposal, as amended, was endorsed and supported by one of the
five industry associations attending the meetings--the Military
Mobility Coalition, an industry group with members from relocation
companies; move management companies; independent and van
line-affiliated carriers and forwarders; and industry specialty
firms, such as cargo insurance companies. 


--------------------
\5 A description of the events leading up to the working group
meetings and the meetings is contained in appendix I. 


      INDUSTRY PROPOSAL
---------------------------------------------------------- Letter :4.2

The household goods carrier/forwarder industry associations prepared
and submitted for comment an alternative plan (referred to in this
report as the industry proposal) on June 24, 1996.  Industry restated
its proposal on October 25, 1996, in a letter to us.  The industry
proposal also represents the results of the DOD/industry working
group process and includes certain features favored by DOD. 

The summary described a plan that consists of two distinct programs,
one for handling domestic shipments and another for handling
international shipments.  Under its plan, industry would build on the
existing DOD program.  It would not be based on the government
competitive acquisition system but would use a government bill of
lading to acquire the services in accordance with procedures
contained in DOD and the General Services Administration
transportation regulations.\6 The industry proposal would limit the
type of company that could participate to only those types--licensed
carriers and forwarders--currently in the program. 

Industry's proposal for handling both domestic and international
shipments is like MTMC's proposal to the extent that it would be
based on the same pricing system for each traffic channel (expressed
as a discount percentage using the commercial rate tariff for
domestic shipments and a fixed dollar and cents per hundredweight
rate for international shipments), provide for the same level of
contractor liability (full value protection based on certain minimum
declared valuations subject to an overall cap), provide for certain
performance standards for shipment pickup and delivery, and provide
for the use of a customer survey. 

Industry's proposal differed in (1) who could participate in the DOD
program (only licensed carriers and forwarders), (2) lengthened the
rate cycle period from a current 6-month cycle to a yearly cycle, (3)
indicated that rates could be adjusted at stated times during the
rate cycle to account for underlying cost increases, and (4)
explained how traffic would be distributed among firms using a
combination of price and customer survey feedback data.  Its proposal
also indicated that carriers and forwarders in the domestic program
could submit a "best and final" rate
3 months into the rate cycle to improve their competitive position
and that forwarders in the international program could lower their
originally filed rates 60 days prior to the start of the rate cycle. 
Accompanying the proposal was some discussion on how the industry
would provide for program simplification and eliminate "paper
companies." That is, paper companies are companies in the domestic
program that lack actual operating assets but are affiliates of
companies that have assets.  These paper companies do not increase
DOD's capacity. 

The industry proposal was signed by the presidents of the four
carrier associations--American Movers Conference, the Household Goods
Forwarders Association of America, the National Moving and Storage
Association, and the Independent Movers Conference.  The
associations' members represented virtually every facet of the moving
industry, including van lines with agent networks, independent
carriers, agents, and forwarders.  As previously mentioned, the
Military Mobility Coalition supported the MTMC proposal. 


--------------------
\6 This would include the General Services Administration's Federal
Property Management Regulations
(41 CFR 101-41). 


   OUR ASSESSMENT OF THE PROPOSALS
------------------------------------------------------------ Letter :5

The DOD/industry working group did not define the individual elements
that made up each of the agreed-to 10 goals for reengineering DOD's
personal property program.  The goals are qualitative and not easily
measured.  Nor were the proposals written in such a way that
specifically addressed how DOD and industry would meet each goal. 
Consequently, our assessment of the extent to which each proposal met
the goals was necessarily limited by the lack of precise definitions
of each goal and the way to achieve it. 

Every goal was debated at length by DOD and industry officials
without complete agreement.  For example, there were varying
interpretations of the goals to improve quality service and to
achieve best value.  We assessed each proposal's ability to meet
those goals using our knowledge of the existing personal property
program, our understanding of the proposals, associated documents,
information gathered from our attendance at all of the working group
meetings, review of the transcripts of the meetings, and our prior
studies. 

In table 1, we list the goals and provide a general comment about the
extent to which each proposal is likely to meet the goals.  Following
the table, we then discuss the goals and the basis for our assessment
of the extent to which the proposals are likely to meet each goal. 
In discussing the industry proposal, our comments are directed at
both the domestic and international programs, unless otherwise noted. 



                                     Table 1
                     
                      Our Assessment of the Extent to Which
                        DOD and Industry Proposals Met the
                     Agreed Upon Goals for Reengineering the
                            Personal Property Program

                                            Extent to which the proposals are
                                                 likely to meet each goal
                                          --------------------------------------
Goal                                      DOD proposal        Industry proposal
----------------------------------------  ------------------  ------------------
1. Provide quality service                Greater extent      Lesser extent

2. Improve on-time pickup                 Equal extent        Equal extent

3. Improve on-time delivery               Equal extent        Equal extent

4. Achieve high customer satisfaction in  Equal extent        Equal extent
relationship to the entire move process

5. Adopt corporate business processes     Greater extent      Lesser extent
that lead to world-class customer
service

6. Lower loss/damage and lower claims     Equal extent        Equal extent
frequency and claims averages

7. Simplify the system, including         Greater extent      Lesser extent
reducing administrative workload

8. Ensure capacity to meet DOD's needs    Greater extent      Lesser extent
for quality moves

9. Provide opportunity for small          Unknown extent      Unknown extent
businesses offering quality service to
compete for DOD business as a prime
contractor

10. Provide best value moving services    Greater extent      Lesser extent
to the government
--------------------------------------------------------------------------------

      ASSESSMENT OF PROPOSALS: 
      EQUAL EXTENT
---------------------------------------------------------- Letter :5.1

Both proposals are likely to equally achieve 4 of the 10 goals of the
program.  These include the goals for improving on-time shipment
pick-up (goal 2), improving on-time shipment delivery (goal 3),
achieving high customer satisfaction (goal 4), and reducing claims
and improving claims handling (goal 6). 

Both MTMC and industry agreed on the need for performance standards
to achieve the above goals.  For example, to achieve high customer
satisfaction, each proposal provides for more direct communication
between servicemember and contractor (matters such as the pre-move
survey, movement counseling, phone numbers to check with the
contractors, and intransit visibility) and use of a customer survey
as a tool for obtaining feedback on contractor performance.  Included
would be such questions as the timeliness of pickup, timeliness of
delivery, loss and damage occurrence, evaluation of origin and
destination agent service, and the customer's decision on whether to
use the particular contractor again. 

To reduce claims and the problems associated with them, each proposal
provides for increased contractor liability (full value protection)
and more streamlined claims settlement, including direct settlement
(servicemember with contractor). 


      ASSESSMENT OF PROPOSALS: 
      GREATER AND LESSER EXTENT
---------------------------------------------------------- Letter :5.2

MTMC's proposal meets 5 of the 10 goals for reengineering the
personal property program to a greater extent than the industry plan. 
The goals are providing quality service (goal 1), providing best
value (goal 10), simplifying the system (goal 7), adopting corporate
business practices (goal 5), and ensuring capacity to meet DOD's
needs (goal 8). 


      QUALITY SERVICE
      (GOAL 1) AND BEST VALUE
      (GOAL 10)
---------------------------------------------------------- Letter :5.3

MTMC has said it wants its reengineering effort to produce a dramatic
improvement in the quality of personal property shipment and storage
services provided to military servicemembers or civilian employees
and their families when they are relocating on U.S.  government
orders.  This means providing a service to DOD personnel on par with
corporate customer standards. 

MTMC's proposal would fundamentally change the existing system by
using multiple award, fixed-price, indefinite delivery/indefinite
quantity-type contracts awarded under the competitive acquisition
system.  It would require prospective contractors to address before
contract award how they would perform MTMC-specified technical or
operational requirements.  This would provide DOD the opportunity to
assess a prospective contractor's plan to improve the quality of the
service DOD receives prior to contract award.  It would give MTMC an
opportunity to assess "best value," that is, the ability to assess
the trade-offs between price and technical factors.  Awards would not
have to be made on price alone.  Therefore, we believe MTMC's
proposal would achieve the goal of quality service and best value to
a greater extent than the industry proposal. 

MTMC had indicated that before any company is awarded DOD business,
it wants to ensure that company has submitted a proposal indicating
its "best value," that is addressing the technical factors (e.g., how
the offeror proposed to perform specified technical or operational
requirements), identifying its past performance, subcontracting plan,
and price.  MTMC said that it anticipated that price would be less
important than the other factors combined.  Award would be made only
to responsible offerors whose offers conformed to the solicitation
and represented the best overall value to the government, price and
other evaluation criteria considered. 

Both MTMC and industry agreed that in order to obtain quality
service, there would be a need for longer term binding arrangements. 
In the current system, rates are re-bid every 6 months, and there are
periods within each rate cycle when rates can be canceled.  However,
there was no agreement on the exact length of the longer term, nor on
the type of binding arrangement.  MTMC originally proposed
establishing fixed prices for 1 year, with option years.  Industry
proposed 1 year with no options, plus the opportunity to cancel rates
or meet other contractors' rates at the 3-month point of the
year-long price cycle.  MTMC wanted multiple award, fixed-price,
indefinite delivery/indefinite quantity-type contracts with a base
and several option years awarded under the FAR, whereas industry
wanted continuation of the current non-FAR arrangements with
modifications. 

Industry's proposal defines "best value" in terms of ranking carriers
and forwarders on the basis of price and performance.  It would
require MTMC to develop a best value score for each carrier wanting
to participate in the program.  The contractor's "best value" score
would be based 30 percent on price and 70 percent on customer survey. 
Traffic would be distributed to the top-rated 30 to 50 carriers and
forwarders.  The industry proposal would not be based on the
competitive acquisition system but would use a government bill of
lading to acquire the services in accordance with procedures
contained in DOD and the General Services Administration
transportation regulations.  It would not require prospective
contractors to address how they would perform MTMC-specified
technical or operational requirements before contract award. 
Consequently, MTMC would not have opportunity to assess a prospective
contractor's plan to improve the quality prior to contract award and
would limit MTMC's ability to assess the trade-offs between price and
technical factors. 


      SIMPLIFICATION (GOAL 7)
---------------------------------------------------------- Letter :5.4

MTMC has stated that it is looking for administrative simplification
of the program.  This relates to simplifying the total process from
arranging the movement to settling the claim. 

Elements of both proposals offer some simplification.  For example,
both proposals price services on the basis of most corporate move
contracts (percentage discount off industry's Domestic Commercial
Tariff for domestic household goods shipments and single factor rates
for international household goods and unaccompanied baggage
shipments).  They agreed to simplify the pricing of certain
accessorial services. 

For reasons described below, MTMC's proposal meets this goal to a
greater extent than the industry's proposal.  MTMC's program is a
standardized, domestic and international program.  Industry's
proposal is composed of separate domestic and international programs. 
MTMC proposed to have offerors submit prices and fix them for at
least 1 year.  Industry proposed offering prices that could be
changed or canceled.  In industry's domestic program, prices would be
established for 1 year, effective January 1 of each year, with
specific escalation provisions to account for significant increases,
such as fuel costs, insurance, containers, and labor costs.  The
proposal also included allowing prices to be re-submitted as "best
and final" on April 1 of each year.  In industry's international
program, industry proposed to allow for increases 6 months into the
contract period to compensate for currency exchange adjustments. 

We have previously urged DOD to take the actions it is proposing
here, such as eliminating the frequent rate re-solicitations.  In a
previous report, we recommended that MTMC replace or modify the
two-phase (me-too) domestic household goods bidding system so that
all carriers have incentive to initially bid the lowest possible
rates.\7 We also noted that as a result of the current acquisition
process, the domestic segment of the industry had created many paper
companies that significantly added to DOD's workload but did not
increase industry operating asset capacity.  The MTMC proposal would
implement our recommendation and limit the participation of paper
companies through the use of the competitive acquisition system and
provide for simplification.  The carrier industry acknowledges that
nearly half of the currently approved interstate carriers may be
paper companies.  Its proposal states that it will eliminate from the
domestic program the many paper companies that do not provide
"legitimate capacity," but would still require MTMC to determine what
is "legitimate capacity."

MTMC anticipates making awards to fewer contractors and basing the
system on fewer, more consolidated traffic channels.  Currently, in
the domestic program, each of the roughly 170 U.S.-located shipping
offices has to maintain a traffic distribution roster for every
traffic channel, or destination state.  Each channel can involve
several hundred carriers or forwarders.  Industry suggests a
distribution system that involves fewer companies on each channel,
but the numbers would still involve 30 to 50 companies. 

Neither proposal specifically addresses the numbers of staff and
other resources needed to implement them.  There is no way to tell
from the proposal specifically how many people would be involved in
reviewing the proposal, how many people or resources are needed to
handle the rate solicitation process or any specific traffic
distribution roster system.  Accordingly, our analysis is necessarily
limited.  However, we believe that MTMC's proposal offers the greater
opportunity to provide for administrative simplification because it
(1) is a consolidated domestic and international proposal; (2)
changes the rate solicitation process by eliminating re-solicitation;
(3) provides for use of fewer companies to handle the traffic,
necessitating less administrative effort for military installation
traffic management personnel; and (4) relies on traffic channels that
cover entire states.  The industry proposal, though it improves on
the current program somewhat, retains the rate re-solicitation
process in both the domestic and international programs; continues
the need to administer a large, complex traffic distribution roster
process for every channel; and continues to base traffic channels on
each individual military shipping office. 


--------------------
\7 Household Goods:  Competition Among Commercial Movers Serving DOD
Can Be Improved (GAO/NSIAD-90-50, Feb.  12, 1990). 


      ADOPTING CORPORATE BUSINESS
      PRACTICES
      (GOAL 5)
---------------------------------------------------------- Letter :5.5

MTMC has said that it is attempting to capitalize on the best
applicable commercial business practices.  This relates to adopting
business practices characteristic of world-class customers and
suppliers, such as using contractual arrangements to simplify
contractor selection. 

For the following reasons, MTMC's proposal meets this goal to a
greater extent than industry.  It would eliminate DOD-unique
transportation regulations for the acquisition of services.  As we
noted earlier, the industry proposal, similar to the existing MTMC
program, would not be based on the competitive acquisition system but
would use a government bill of lading to acquire the services in
accordance with procedures contained in DOD and the General Services
Administration transportation regulations. 

In addition, in the past, we have recommended that DOD adopt
commercial practices, such as using a smaller number of carriers to
achieve quality and cost benefits.\8 In the personal property
program, we note that MTMC has approved more than 1,100 motor van
carriers and regulated forwarders to handle its domestic moving
needs.  It has more than 150 forwarders at its disposal for its
international traffic.  All military shipping offices have to spend
considerable time and effort to allocate a relatively small number of
shipments to an enormous number of carriers.  Fort Bragg, North
Carolina, a typical example of the roughly 170 shipping offices in
the contiguous 48 states, is serviced by more than 200 different
domestic movers, more than 160 international forwarders, and 50 local
carrier/forwarder agents.  It has on average about 100 domestic and
40 international household goods shipments a week, moving in roughly
50 domestic and 30 international traffic channels, each requiring a
separate shipment distribution roster.  Some carriers and forwarders
get but one shipment a week, if that.  Many of the companies that get
a shipment are "paper companies" that provide DOD no new operating
asset capacity but were formed by their parent company to increase
the parent company's market share of the DOD business.  The
administrative effort does little to improve the quality of life for
the servicemember and his or her family. 

In the same report, we recommended greater use of corporate practices
that promote use of contractual arrangements to simplify the carrier
selection.  This could lead to more stability and provide leverage
leading to cost efficiencies for both the carriers and DOD. 


--------------------
\8 See, for example, Defense Transportation:  Commercial Practices
Offer Improvement Opportunities (GAO/NSIAD-94-26, Nov.  26, 1993). 


      ENSURE CAPACITY (GOAL 8)
---------------------------------------------------------- Letter :5.6

MTMC has long been concerned about having the necessary capacity to
meet DOD's moving needs.  There was no consensus, however, as to how
to achieve the goal.  MTMC is looking for commitment from the
contractors to meet their needs, particularly during peak shipping
periods.  Over the years, there have been many examples of carriers
and forwarders not being able to provide services when needed. 

MTMC's proposal, we believe, provides the greater opportunity to meet
this goal than does the industry proposal because it (1) would
involve the award of contracts that would obligate the contractors to
provide specific minimum capacity and (2) would not limit
participation in the program to only licensed carriers or forwarders. 
MTMC's proposal would allow any company, whether carrier, forwarder,
relocation company, or anyone else, to participate.  Relocation
companies stated that they are prepared to make capacity available to
DOD as needed.  Industry's proposal specifically excludes relocation
company participation unless such companies are licensed carriers or
forwarders. 

Carrier/forwarder industry officials state that MTMC's proposal with
regard to noncarrier/forwarder relocation company participation sets
bad public policy and raises serious legal questions.  Under such a
system, a relocation company, with legal status as a broker, could be
awarded a prime contract to effect the moves from a given base or
locality.  It would be the responsibility of that company to secure
the services of carriers to perform the actual packing and moving
services under the contract.  Industry believes that a federal agency
purchasing goods or services should contract only with entities
actually providing those goods or services.  Allowing relocation
companies to compete for prime contracts, industry argues, would
create logistical problems and raise questions concerning possible
violations of the Anti-Kickback Act of 1986,
41 U.S.C.  51-58 and antitrust laws. 

As previously discussed, we believe MTMC's proposal to meet its goals
has the potential for eliminating paper companies and opens the way
for more competition among companies having or bringing to DOD actual
capacity.  It does not appear that MTMC wishes to restrict
competition.  The competitive acquisition system that MTMC proposes
to use requires, as a general rule, that DOD obtain full and open
competition in its acquisitions
(10 U.S.C.  2304).  Concerning the potential for legal problems, the
propriety of the relationship between firms participating in an
acquisition as prime contractor and/or subcontractor is governed by
the particular facts and circumstances in the context of the
applicable laws. 


      ASSESSMENT OF PROPOSALS: 
      UNKNOWN EXTENT
---------------------------------------------------------- Letter :5.7

We are unable to determine the extent that either proposal provides
or does not provide opportunity for small business to participate in
the personal property program (goal 9).  As was pointed out during
the DOD/industry working group meetings, opportunities for small
business and the impact on small business is difficult to assess or
measure.  The moving industry is made up of both large and small
businesses, with many different types of organizational structures. 
The majority of moves are handled by the large business, van lines,
but the work itself--packing and unpacking of the household goods,
the loading and unloading of the trucks, and the actual truck
driving--is done by small businesses, some independent and some part
of the van line. 

In addition, our data indicate that there are about 25 major,
nationwide van lines; a thousand independent van lines; several
hundred freight forwarder moving companies; about 4,500 agents; and
thousands of owner-operator truckers.  In some instances, the agents
actually own the major van lines.  In other instances, the agents are
independent companies working for the van lines.  More recently, the
industry has expanded to include relocation companies that handle the
moves as part of a total package relocation service. 

On April 17, 1996, as directed by the Fiscal Year 1996 Defense
Appropriations Bill Conference Report (House Conference Report
Number 104-344), MTMC reported on the impact of the reengineering
program on small business.  It said that it believed small businesses
can reasonably be expected to fare as well or better than they do in
the existing program.  The reason, it said, was that MTMC's program
would provide small businesses additional protection and
opportunities, based on the establishment of subcontracting goals. 
However, the extent that small business is impacted remains a concern
to the Congress and the industry because of the many uncertainties
involved in implementing a new program. 

The two sides agreed, however, to reduce the size of traffic channels
for the test, at least in part, to allow for greater participation of
small business as prime contractors.  MTMC had originally wanted
contractors to submit offers by regions (4 in the contiguous 48
states).  For the pilot test, MTMC significantly decreased the size
of the contract area, from regions to states.  The pilot test
includes three states--North Carolina, South Carolina, and
Florida--and although contractors will be required to serve all
points within a state, they can offer on any or all of the other 13
regions into which MTMC has divided the country.  Furthermore, the
test includes only 50 percent of the shipments from those states and
only certain types of shipments.  Intrastate and local shipments, for
example, are not in any test plans.  Industry preference is for
traffic channels much as the current system exists, where traffic
channels are based on personal property shipping offices (presently,
more than 150 in the contiguous 48 states). 

MTMC officials state that if a small business is intimidated by the
size of the contracts, it can participate as a subcontractor of a
large company or of another small business.  MTMC indicated that for
purposes of its proposal, small business would be defined as any
company with annual receipts less than $18.5 million.  The carrier
association officials, however, do not believe that subcontracting
counts toward this goal.  Accordingly, the association officials
believe that the MTMC proposal, by relegating small business to a
subcontractor role, would reduce the number of small business prime
contractors, resulting in the goal not being met.  DOD's position is
based on the opportunity to compete, not numbers.  We based our
assessment on the opportunity to compete. 

Under MTMC's proposal, contracts for transportation services will be
awarded under the competitive acquisition system.  The requirements
of the Small Business Act, 15 U.S.C.  631, et seq.; FAR part 19; and
the applicable part of the Defense Federal Acquisition Regulations
Supplement will apply to these acquisitions.  These provisions
include such matters as subcontracting plans for the utilization of
small, small disadvantaged, and women-owned small business, and
set-asides for small business.  Therefore, the protection for small
business appear to reside in the proposed MTMC plan as it would in
any other contract awarded under the government's competitive
acquisition system. 


   MATTER FOR CONGRESSIONAL
   CONSIDERATION
------------------------------------------------------------ Letter :6

We support moving forward with the pilot test of a reengineered
personal property program because it will provide the necessary data
to ultimately design an improved system.  MTMC's proposal represents
a collaborative effort to a large degree between DOD and industry
and, as such, provides the better opportunity to achieve the program
goals.  In addition, it is important that performance standards be
developed and data gathered in a way that enables measurable results
of the program, particularly as they relate to quality of service and
small business participation.  We recognize that our assessment of
the extent to which the proposals met the program goals required
judgments about likely outcomes and that only actual data can
determine with greater certainty the impact of the proposals.  If the
Congress still has concerns about the impact on small business,
piloting both proposals is an option.  However, doing this would
likely place an additional administrative and costly burden on MTMC
and could delay implementation of the program. 


   AGENCY COMMENTS AND OUR
   EVALUATION
------------------------------------------------------------ Letter :7

We asked DOD, the four carrier associations--the American Movers
Conference, the Household Goods Forwarders Association of America,
the National Moving and Storage Association, and the Independent
Movers Conference--and the Military Mobility Coalition to comment on
a draft of this report.  Our reporting time frames necessitated that
we meet with each group and obtain only their informal oral comments
prior to the issuance of the report.  All expressed concern about the
short time frame provided for preparing their comments.  We
acknowledged that this was the case and agreed to include their
informal comments in this report and encouraged them to provide any
additional comments as appropriate. 


      DOD COMMENTS
---------------------------------------------------------- Letter :7.1

DOD officials agreed with our analysis of the proposals and the facts
in the report.  However, they strongly disagreed with our
interpretation of what MTMC's proposal represents and the option we
suggested to pilot both proposals.  According to DOD officials, the
proposal submitted for review to us from the DOD/industry working
group represents the collaborative product of the working group as
indicated by a consensus list signed by the industry representatives. 
Thus, they believe that MTMC's proposal represents a joint
DOD/industry proposal.  DOD officials stated that testing the
independent industry proposal would be a disservice to the
collaborative process and would obviate the instructions of the
congressional defense committees to reach agreement on a single plan. 
Moreover, DOD officials stated that if directed to pilot test the
industry proposal in addition to the industry/DOD proposal, DOD would
want to test it against MTMC's original proposal.  Furthermore, they
expressed concern that testing of the industry proposal would further
delay their effort to improve the quality of service and reduce the
$100 million annual claims for loss and damage now being experienced
by military members and their families. 

DOD officials also stated that they do not have enough detail on the
industry proposal to go forward without significant delay.  They said
that the industry proposal was not debated during the working group
meetings; consequently, a number of areas are unclear, vague, and
ambiguous from their point of view.  Further, they were concerned
that the industry proposal would be technically and operationally
difficult to implement, costly to administer, and cumbersome for
installation transportation officials to handle simultaneously with
the other pilot.  Moreover, DOD officials stated the industry
proposal would not provide the opportunity to improve quality of
service, which is one of the primary goals of the reengineering
effort. 

We recognize DOD's concerns about the administrative burden and the
delay that might be caused by dual testing the pilots.  Consequently,
we modified the matter for congressional consideration, noting that
the dual pilot could be an administrative and costly burden for MTMC
and could delay implementation.  Regarding DOD's comments on what
MTMC's proposal represents, we believe MTMC's proposal represents the
DOD approach.  Our view is based primarily on the letter we received
on October 1, 1996, from the Commander, MTMC, which stated

     "The Working Group has agreed to disagree on one major area: 
     our plan to use Part 12 of the Federal Acquisition Regulation
     (FAR) as the basis for our projected contracts.  .  .  .  MTMC
     respectfully disagrees with industry and proposes to use the FAR
     to obtain the benefits of free and open competition for the
     government and our military service members.  .  .  .  The
     House/Senate Conference Committee on National Defense included
     language in the 1996 Defense Appropriations Bill Conference
     Report (House Report 104-450) directing MTMC to test its concept
     for improved service by conducting a Pilot Program.  We are
     incorporating ideas from the industry/DOD consensus, and propose
     to begin the test in the immediate future."


      INDUSTRY COMMENTS
---------------------------------------------------------- Letter :7.2

The four carrier associations and the Military Mobility Coalition had
differing opinions on our report.  The American Movers Conference,
the Household Goods Forwarders Association of America, the
Independent Movers Conference, and the National Moving and Storage
Association disagreed with our analysis of the proposals in each area
where we stated that MTMC's proposal would likely achieve the goals
to an unknown extent (goal 9) or to a greater extent (goals 1, 5, 7,
8, and 10) than the industry proposal.  The Military Mobility
Coalition, however, agreed with our analysis of the proposals. 

In addition, the carrier associations strongly supported the option
we presented as a matter for congressional consideration to pilot
both proposals.  They said that an advantage to piloting both
proposals would be to obtain with certainty the impact of the
proposals on small business participation.  They added that to pilot
their proposal should not be difficult to implement and stated that
they would be willing to work with DOD to help implement a dual
pilot.  However, the Military Mobility Coalition officials expressed
concern about the time it would take to set up and run two pilots,
the significant administrative effort that would be required, and the
limited value such a test would yield.  The Coalition believes that
the carrier association's proposal is so similar to the structure of
the current program that it negates the need for a pilot program. 

The following are key points provided by the four carrier
associations where they disagreed with our analysis of the proposals. 
Most of the concerns raised by the four carrier associations were
regarding MTMC's proposal, our characterization of the industry
proposal, and our assessment of the proposals.  We have revised the
report to reflect their concerns, provided additional information to
support our position, or clarified the position of DOD and industry,
as appropriate. 

Regarding our analysis of the goal to provide opportunity to small
business to participate as prime contractors (goal 9), the carrier
associations stated that they believed we had sufficient information
to conclude that small business would be negatively impacted under
MTMC's proposal.  They took issue with MTMC's conclusion that the
small business goal would be met through small business competing as
either subcontractors or prime contractors.  The carrier associations
point out that the stated goal relates to participation of small
business concerns as prime contractors.  Accordingly, the
associations state that MTMC's proposal, by relegating small business
to a subcontractor role, would substantially reduce the number of
small business prime contractors and therefore, would not meet the
stated goal.  As we stated, there was insufficient data for us to
assess this area.  However, we revised the report to more fully
discuss the carrier associations' concerns. 

Regarding our analysis of the goal to ensure capacity to meet DOD's
needs (goal 8), the carrier associations stated that the industry
proposal would not limit new capacity, it would only limit companies
not properly licensed as carriers or forwarders from participating in
the program.  They also argue that MTMC's proposal would be too
complicated to successfully guarantee adequate capacity and would
reduce capacity by reducing the number of service providers with
assets.  The Military Mobility Coalition countered that many in the
moving industry do not now participate because of the current
cumbersome methods, but would enter the program under the MTMC
proposal.  Our overall basis for favoring MTMC's proposal in this
area was based on the fact that contractors would be required to
commit minimum capacity and participation of contractors would not be
limited to licensed carriers and forwarders.  The four carrier
associations provided us no new information to change our view in
this area. 

Regarding our analysis of the goal to simplify the system (goal 7),
the carrier associations stated that we limited our analysis only to
certain aspects of simplification and did not consider, in their
opinion, the complicated systems and processes that would be added
under MTMC's proposal.  These included the complex method MTMC
proposed to allocate traffic, bid on channels, and use the FAR.  The
associations stated that the MTMC-proposed program would become
administratively cumbersome if expanded worldwide.  The Military
Mobility Coalition, having operated under competitive FAR procedures,
believes the FAR is less cumbersome than contracting with thousands
of individual carriers, which occurs under MTMC's current operating
system and the carrier associations' proposal.  Regarding the carrier
associations' concerns, we added information on why we believed
MTMC's proposal better met this goal, particularly as it relates to
simplifying the rate solicitation and traffic distribution processes. 
In addition, we explained that the proposals do not specifically
address the numbers of staff and other resources needed to implement
them, limiting our analysis.  Thus, we focused on the extent that the
proposed process changes would simplify traffic management processes. 
Finally, we pointed out that industry's proposal represents two
separate programs, as opposed to MTMC's single program, for handling
both domestic and international traffic. 

Regarding the goal to adopt corporate business processes (goal 5),
the carrier associations stated that using the government competitive
acquisition system, the FAR, and other practices proposed by MTMC
does not represent corporate business practices.  We agree that the
FAR is not used in the corporate world.  However, we believe MTMC's
proposal moves closer toward adopting corporate business practices,
such as using contractual arrangements to simplify the carrier
selection process. 

Regarding the goals to provide quality service and best value (goals
1 and 10), the carrier associations noted that awarding contracts for
these services pursuant to the FAR would involve the evaluation of
complex proposals that must be prepared by the competing firms. 
According to the association officials, such proposals are best
prepared by large companies, and there is not always a direct
relationship between well-written proposals and actual quality
service.  The Military Mobility Coalition pointed out that small
businesses in this carrier field can have annual receipts up to $18.5
million and should be able to handle preparing proposals.  Given the
conflicting views, we have no basis for judging the extent to which
proposal preparation would or would not be a problem.  This type of
issue illustrates why we strongly support a pilot program. 

The carrier associations pointed out that our report in many places
referred specifically to the domestic program and was silent about
issues surrounding the international program and the impact of the
MTMC pilot program on international service providers.  We have
revised the report to more fully discuss the international aspect of
the industry proposal. 

Other comments were provided to us that clarified or corrected our
characterization of the industry proposal.  We incorporated, as
appropriate, these comments into the report.  For example, we added
that the industry proposal actually is composed of two programs--one
for handling domestic traffic and another for international traffic. 
In addition, we clarified that the industry proposal modifies the
current system, provides for selecting carriers on quality as well as
price, and has features that address the problem of paper companies. 

According to the four carrier associations, the specific reasons
relied on for their position is contained in the Industry Critique of
MTMC's Proposed Pilot Program for Domestic and International, signed
by American Movers Conference and the Household Goods Forwarders
Association of America and agreed to by the Independent Movers
Conference and the National Moving and Storage Association.  At their
request, the document provided by the carrier associations giving
more detail on their position is included as appendix II. 


      OVERALL EVALUATION
---------------------------------------------------------- Letter :7.3

The diverse nature of the comments illustrates the difficulty of
assessing the two proposals and making the judgments when precise
data is absent.  We believe that our assessment of the extent to
which each proposal meets the program's reengineering goals is
appropriate.  We have revised the report to better reflect the
content of both proposals and specific points made by the commenting
officials.  Overall, we continue to believe that MTMC's proposal
provides a greater opportunity than the industry proposal to achieve
the program goals and that the pilot should not be delayed any
further. 


   SCOPE AND METHODOLOGY
------------------------------------------------------------ Letter :8

The source proposals for our analysis were

1.  MTMC's "Draft Request for Proposal Summary, Reengineering the DOD
Personal Property Program," dated June 24, 1996, as clarified in DOD
correspondence, position papers, and white papers distributed to the
working group members over the period of the working group meetings
held through September 16, 1996. 

2.  The "Joint Industry Proposed Alternative Plan to MTMC's
Re-Engineering of the Domestic and International Personal Property
Programs," dated June 24, 1996, and signed by the presidents of the
four moving industry carrier associations--American Movers
Conference, the Household Goods Forwarders Association of America,
the National Moving and Storage Association, and the Independent
Movers Conference--as revised in an American Movers Conference and
Household Goods Forwarders Association of America document entitled
"Industry Alternative Pilot Plan for MTMC's Domestic and
International Personal Property Program," dated October 25, 1996. 

Since MTMC and industry could not agree on a single approach to the
pilot test, we analyzed the two approaches.  As discussed with your
office, we agreed to use the source proposals described above as the
basis for analyzing the pilot test approach. 

The program goals were those developed at the June 10, 1996, working
group meeting and agreed to by a September 16, 1996, DOD and
association-signed document entitled TRANSCOM/MTMC/Industry
Reengineering Personal Property Working Group Consensus List. 

Our analysis was based on the review of the proposals; examination of
the transcribed record of the working group meetings; review of
correspondence of both sides relative to the two proposals, points of
clarification, and statements of disagreement; reference to our prior
reports and findings on the subject area; research and analysis of
the applicable procurement statutes and DOD and the General Services
Administration transportation procurement and traffic management
regulations; analysis of data related to the moving industry and
small business affairs, not necessarily discussed at the working
group meetings; and follow-up discussions with officials in DOD and
the moving industry who attended the working group sessions. 

Our analysis of the reengineering initiative was conducted between
June and November 1996.  Since agreement could not be reached on a
mutually acceptable proposal to pilot test, we began assessing in
October 1996, the separate DOD and industry proposals.  Our
assessment of the specific proposals was conducted during a 30-day
period as specified in the House and Senate reports accompanying the
National Defense Authorization Act for Fiscal Year 1997.  Our review
was performed in accordance with generally accepted government
auditing standards. 


---------------------------------------------------------- Letter :8.1

We are sending copies of this report to the Secretary of Defense; the
Commander-in-Chief, U.S.  Transportation Command; the Commander,
MTMC; the American Movers Conference; the Household Goods Forwarders
Association of America; the National Moving and Storage Association;
the Independent Movers Conference; and the Military Mobility
Coalition.  We will also make copies available to others upon
request. 

Please contact me on (202) 512-8412 if you or your staff have any
questions concerning this report.  Major contributors to this report
are listed in appendix III. 

David R.  Warren, Director
Defense Management Issues


List of Congressional Committees

The Honorable Strom Thurmond
Chairman
The Honorable Sam Nunn
Ranking Minority Member
Committee on Armed Services
United States Senate

The Honorable Ted Stevens
Chairman
The Honorable Daniel K.  Inouye
Ranking Minority Member
Subcommittee on Defense
Committee on Appropriations
United States Senate

The Honorable Floyd D.  Spence
Chairman
The Honorable Ronald V.  Dellums
Ranking Minority Member
Committee on National Security
House of Representatives

The Honorable C.  W.  Bill Young
Chairman
The Honorable John P.  Murtha
Ranking Minority Member
Subcommittee on National Security
Committee on Appropriations
House of Representatives


BACKGROUND ON THE MILITARY TRAFFIC
MANAGEMENT COMMAND'S PILOT TEST
INITIATIVE TO REENGINEER DOD'S
PERSONAL PROPERTY PROGRAM
=========================================================== Appendix I


   DEPARTMENT OF DEFENSE'S
   REENGINEERING INITIATIVE
--------------------------------------------------------- Appendix I:1

On June 21, 1994, the Deputy Commander-in-Chief, U.S.  Transportation
Command, directed the Military Traffic Management Command (MTMC), the
Army component of the U.S.  Transportation Command and program
manager for the Department of Defense (DOD) Personal Property
Shipment and Storage Program, to reengineer the personal property
program.  On March 13, 1995, MTMC formally published a notice in the
Federal Register of its plans to consider employment of full-service
contracts to improve DOD's personal property program.  The notice
highlighted the fact that the evolving defense environment
encompasses a smaller uniformed force, less overseas basing, reduced
funding, and diminished staffing of support activities.  It indicated
that these changes will directly affect quality-of-life issues.  In
light of these changes, the notice said MTMC is engaged in an effort
to simplify current processes, control program costs, and ensure
quality of service by reengineering the existing personal property
program.  It further indicated that the reengineering effort will
adopt, to the fullest extent possible, commercial business processes
characteristic of world-class customers and suppliers and relieve
carriers of DOD-unique terms and conditions.  It said it will also
focus on the customer, reward results, foster competition, and seek
excellence of vendor performance.  The notice indicated that members
of industry would be afforded an opportunity to comment on the draft
solicitation and to attend the presolicitation and preproposal
conferences. 

On June 30, 1995, MTMC released a written proposal to reengineer the
personal property program.  A notice of proposal was published in the
July 13, 1995, Federal Register.  A further statement of acquisition
strategy was released to industry on July 31, 1995. 


   CONGRESSIONAL CONCERN
--------------------------------------------------------- Appendix I:2

On June 15, 1995, the House Committee on National Security reported
that it, too, was convinced that DOD must pursue a higher level of
service that moves toward greater reliance on commercial business
practices, including simplified procedures.  It directed that DOD
undertake a pilot program to implement commercial business practices
and standards of service.  It asked for a report from DOD on this by
March 1, 1996. 

On October 11, 1995, MTMC testified on the reengineering effort
before the House Committee on Small Business.  MTMC discussed the
impact on small business and its rationale for planning to award
contracts for the new program under the Federal Acquisition
Regulation (FAR).  Carrier and forwarder industry officials also
testified at this hearing. 

In September 25, 1995, and November 15, 1995, reports accompanying
the conference report on the Fiscal Year 1996 Defense Appropriations
Bill, congressional managers directed that prior to implementing any
pilot test, DOD report on the program's impact on small business
resulting from the application of the FAR and any requirements that
were not standard commercial business practices.  DOD responded with
reports dated January 1996 and April 1996. 

In a May 7, 1996, report accompanying the National Defense
Authorization Act for Fiscal Year 1997, the House Committee on
National Security stated that after reviewing the reports, it was
still concerned that MTMC's pilot program did not satisfactorily
address issues raised by the small moving companies comprising a
majority of the industry.  The Committee, therefore, directed the
Secretary of Defense to establish a working group of military and
industry representatives from all facets of the industry to develop
an alternative pilot proposal. 

The instructions were that the working group would be chaired by the
Commander, MTMC; include those DOD representatives the Chairman
deemed necessary (not to exceed six in number); and include an
industry delegation to be represented by no more than six people,
including one each from the American Movers Conference and the
Household Goods Forwarders Association of America.  The Committee
asked that the working group submit the alternative proposal, along
with the current pilot proposed by MTMC, to us for review.  The
Committee further directed that we report to the congressional
defense committees the results of our review.  The report said that
DOD may not proceed with the formal solicitation for, or
implementation of, any pilot program prior to August 1, 1996. 
Similar instructions were contained in the May 13, 1996, Senate
report accompanying the National Defense Authorization Act for Fiscal
Year 1997. 


   MTMC/INDUSTRY ATTEMPT TO REACH
   AGREEMENT ON A SINGLE PLAN TO
   PILOT TEST
--------------------------------------------------------- Appendix I:3

The congressionally directed working group of DOD and industry
officials met over a period of 3 months beginning in June 1996 and
ending in September 1996.  In six sessions--9 days (June 10, July
1-2, July 18-19, August 14, September 5-6, and September
16)--representatives of MTMC, the U.S.  Transportation Command, DOD,
and various segments of the moving industry, including the American
Movers Conference, the Household Goods Forwarders Association of
America, the National Moving and Storage Association, the Independent
Movers Conference, the Military Mobility Coalition, and a DOD-invited
group of auxiliary members from the moving industry met in a formal
group setting to forge a plan for a pilot test.  We and the Army
Audit Agency attended as observers.  The meetings were chaired by the
Commander, MTMC, and led by a DOD-provided facilitator.  All meetings
were transcribed and made available to anyone in the industry or the
interested public through MTMC's Internet Web page.  All written
correspondence and position papers were also made available on the
MTMC Internet Web page. 

At the first meeting, the Chairman reported that the objectives were
to meet the intent of the Congress for developing an alternative
program that could be reported to the Congress and to establish a
forum for industry and DOD to forge agreement on a single program for
the pilot test.  MTMC explained its proposed pilot plan; laid out the
program goals, which were to dramatically improve the quality of
personal property shipment and storage services provided to military
servicemembers or civilian employees and their families when they are
relocating on U.S.  government orders and to simplify the
administration of the program, capitalizing on the best applicable
commercial business practices characteristic of world-class customers
and suppliers; and asked for industry comment. 

After the first meeting, goals for the program were announced.  These
goals and various issues were discussed and refined throughout the
meetings.  Also, at the initial meeting, MTMC announced that it was
not going to release a formal request for proposals but instead have
industry submit for discussion any alternative plan they might wish
to offer.  MTMC also agreed to provide for clarification its
previously proposed plan. 

Industry and MTMC offered proposals on June 24, 1996.  Both, and
others, as desired, offered comments on the proposals on June 27. 
These two proposals served as a framework, or center of discussion,
for reaching or attempting to reach, a single, mutually acceptable
plan for testing. 

In the end, on September 16, 1996, DOD and industry could not reach
agreement on any single plan.  At the final meeting, representatives
of DOD and industry signed a document called a consensus list, on
which the goals and points of agreement reached by the working group
were stipulated. 

On October 1, 1996, the Commander of MTMC and the joint working group
chairman wrote us on the status of reengineering effort and work of
the group.  The Chairman indicated that the group had come to a
consensus of many issues but had agreed to disagree on one major
area:  MTMC's plan to use part 12 of the FAR as the basis for its
projected contracts.  The Commander indicated that MTMC planned to
move forward with a test by releasing a request for proposals in
November 1996 and making contract awards in January 1997. 

On October 10, 1996, the American Movers Conference wrote us
expressing its concerns about the adequacy of MTMC's October 1 letter
in providing us information to use in evaluating MTMC's proposed
plan.  The Conference indicated that there were other areas of
disagreement than the FAR and that it believed that MTMC had tried to
cover up these areas of disagreement and emphasize instead the minor
points of agreement.  These other areas included MTMC's guaranteeing
capacity (minimums and maximums), distributing shipments to
contractors, impact of MTMC's decision to permit relocation companies
to participate in the program, rules governing payment for
storage-in-transit, and the number of contracts that ultimately would
be awarded.  The Conference indicated that it was planning to submit
a more detailed industry plan for our review. 

On October 25, 1996, the American Movers Conference and the Household
Goods Forwarders Association, in a joint letter, submitted their
views of MTMC's reengineering proposal to date.  They provided an
industry critique of the MTMC proposal and the industry alternative
plan.  The proposal provides for small business participation,
program simplification, best value, and the elimination of paper
companies.  The associations said that while they are supportive of
any effort to improve the existing program, they believe that there
are legitimate concerns that must be adequately addressed before this
program can proceed. 




(See figure in printed edition.)Appendix II
DOCUMENT PROVIDED BY THE CARRIER
ASSOCIATIONS GIVING MORE DETAIL ON
THEIR POSITION
=========================================================== Appendix I



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MAJOR CONTRIBUTORS TO THIS REPORT
========================================================= Appendix III

NATIONAL SECURITY AND
INTERNATIONAL AFFAIRS DIVISION,
WASHINGTON, D.C. 

Charles I.  Patton, Jr., Associate Director
Nomi R.  Taslitt, Assistant Director
J.  Kenneth Brubaker, Evaluator-in-Charge
Barbara L.  Wooten, Evaluator
Leo G.  Clarke, III, Evaluator

OFFICE OF THE GENERAL COUNSEL,
WASHINGTON, D.C. 

John G.  Brosnan, Assistant General Counsel


*** End of document. ***