State Department: Using Best Practices to Relocate Employees Could Reduce
Costs and Improve Service (Letter Report, 10/17/97, GAO/NSIAD-98-19).
GAO discussed: (1) the Department of State's process for transferring
employees and their household effects overseas; and (2) opportunities
for State to apply the best practices that private-sector and other
government organizations use to complete overseas transfers.
GAO noted that: (1) GAO's comparison of State's process for transferring
employees and their household goods overseas to the processes of other
public- and private-sector organizations suggests that State's
procedures are overly cumbersome and inefficient; (2) State's employee
transfer process has remained essentially unchanged for years and
involves at least 12 agency bureaus and offices, over 150 support staff,
and numerous administrative forms; (3) State employees transferring
overseas are confronted with a myriad of steps and handoffs requiring
individual transactions with multiple offices; (4) no single office
within the Department is held accountable for ensuring the timely and
successful transfer of employees and their families; (5) similarly,
employees' household shipments are typically channeled through a maze of
offices and contractors, resulting in unnecessary costs; (6) the
Department of State has an opportunity to significantly streamline its
employee transfer process, enabling it to provide better services to its
employees and to reduce costs; (7) leading U.S. companies and other
organizations have achieved these benefits by implementing a number of
best practices, such as: (a) providing one point of contact for
assistance to the employee, a method known as one-stop shopping; (b)
centralizing the administration of transfers under one organizational
unit and integrating various functions into that unit; (c) developing an
integrated information system for tracking and coordinating transfers;
(d) contracting with one freight forwarder to ship an employee's
household effects, rather than using multiple vendors for the various
segments of the same move; and (e) outsourcing various parts of the
transfer process; (8) although GAO was unable to develop precise cost
reduction estimates for implementing these best practices, several
organizations indicated that they were able to achieve substantial cost
savings by doing so; (9) in addition, GAO analyses of certain cost data
and other information available at State, including some of State's own
studies, indicate the potential for achieving similar cost reductions
for the Department; and (10) for these and other reasons, GAO believes
that the potential cost reductions could total millions of dollars
annually.
--------------------------- Indexing Terms -----------------------------
REPORTNUM: NSIAD-98-19
TITLE: State Department: Using Best Practices to Relocate
Employees Could Reduce Costs and Improve Service
DATE: 10/17/97
SUBJECT: Federal agency reorganization
Relocation allowances
Employee transfers
Household goods
Transportation costs
Freight transportation operations
Americans employed abroad
Federal employees
Cost control
Centralization
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Cover
================================================================ COVER
Report to Congressional Committees
October 1997
STATE DEPARTMENT - USING BEST
PRACTICES TO RELOCATE EMPLOYEES
COULD REDUCE COSTS AND IMPROVE
SERVICE
GAO/NSIAD-98-19
State Department
(711206)
Abbreviations
=============================================================== ABBREV
ACDA - Arms Control and Disarmament Agency
USAID - U.S. Agency for International Development
USIA - United States Information Agency
Letter
=============================================================== LETTER
B-277431
October 17, 1997
Congressional Committees
In the past few years, the Department of State has begun to examine
the applicability of "best practices" used in both the public and
private sector to key agency processes. Because the Department, like
many private sector and other government organizations, expends
considerable resources each year to relocate employees
internationally, we examined its process for transferring employees
and their household effects to identify best practices that State
should consider adopting to reduce costs and improve services.
This report discusses (1) State's process for transferring employees
and their household effects overseas and (2) opportunities for State
to apply the best practices that private sector and other government
organizations use to complete overseas transfers. We plan to report
separately on the processes for providing housing and residential
furniture to employees posted overseas. The analysis in this report
should be useful to the working groups charged with planning for the
reorganization of State, the U.S. Agency for International
Development (USAID), the United States Information Agency (USIA), and
the Arms Control and Disarmament Agency (ACDA) to the extent that
State is to assume responsibility for the international transfer and
transportation activities of those agencies.
BACKGROUND
------------------------------------------------------------ Letter :1
Over 3,000 State employees, along with their household effects, are
transferred to new duty stations each year, of which about 1,000
employees are transferred from Washington, D.C., to foreign
locations. State's direct costs associated with the employee
transfer process have typically exceeded $60 million annually in
recent years. Indirect personnel costs are difficult to quantify due
in part to the numerous offices and staff involved in the process.
Other U.S. agencies operating overseas also routinely transfer large
numbers of employees to foreign locations. For example, USAID and
USIA alone transfer a total of approximately 1,000 employees
annually. Many private sector firms also regularly transfer large
numbers of employees overseas.
RESULTS IN BRIEF
------------------------------------------------------------ Letter :2
Our comparison of State's process for transferring employees and
their household goods overseas to the processes of other public and
private sector organizations suggests that State's procedures are
overly cumbersome and inefficient. State's employee transfer process
has remained essentially unchanged for years and involves at least 12
agency bureaus and offices, over 150 support staff, and numerous
administrative forms. State employees transferring overseas are
confronted with a myriad of steps and handoffs requiring individual
transactions with multiple offices. No single office within the
Department is held accountable for ensuring the timely and successful
transfer of employees and their families. Similarly, employees'
household shipments are typically channeled through a maze of offices
and contractors, resulting in unnecessary costs.
The Department of State has an opportunity to significantly
streamline its employee transfer process, enabling it to provide
better services to its employees and to reduce costs. Leading U.S.
companies and other organizations have achieved these benefits by
implementing a number of "best practices," such as
-- providing one point of contact for assistance to the employee, a
method known as "one-stop shopping;"
-- centralizing the administration of transfers under one
organizational unit and integrating various functions into that
unit;
-- developing an integrated information system for tracking and
coordinating transfers;
-- contracting with one freight forwarder to ship an employee's
household effects, rather than using multiple vendors for the
various segments of the same move; and
-- outsourcing various parts of the transfer process.
Although we were unable to develop precise cost reduction estimates
for implementing these best practices, several organizations
indicated that they were able to achieve substantial cost savings by
doing so. In addition, our analyses of certain cost data and other
information available at State, including some of State's own
studies, indicate the potential for achieving similar cost reductions
for the Department. For these and other reasons, we believe that the
potential cost reductions could total millions of dollars annually.
STATE'S EMPLOYEE TRANSFER
PROCESS IS INEFFICIENT,
CUMBERSOME, AND COSTLY
------------------------------------------------------------ Letter :3
State's process for transferring employees overseas is inefficient,
cumbersome, and costly. It requires employees to work with personnel
in at least 12 bureaus and offices and involves over 150 support
staff. There is no integrated data base containing all of the
information needed to track and coordinate the employee's transfer,
so some data are entered into various systems repeatedly. Initially,
an employee transferring abroad must contact several officials in the
Bureau of Personnel for guidance and information. There are
currently 38 counseling and assignments officers, whose
responsibilities entail preparing assignment notifications and
coordinating training for the employee being transferred. The
counseling and assignments officers maintain close liaisons with
State's other Washington bureaus and the overseas posts. In the
Assignment Support Division, personnel technicians are assigned to
prepare travel orders and personnel actions, provide counseling, and
give employees a checklist of 17 steps to complete in the transfer
process. In addition, officials in the Bureau of Personnel's
Executive Office often work with employees who seek exceptions to
departmental policy on matters such as entitlements for shipping
household effects. They also provide certain administrative
functions, such as adding accounting-related data to the employee's
travel order. Figure 1 illustrates the employee contact points for
relocating overseas.
Figure 1: Key Stops for State
Department Employees
Transferring Abroad From
Washington, D.C.
(See figure in printed
edition.)
\a Bureau of Personnel.
\b Bureau of Administration.
\c Bureau of Consular Affairs.
\d Bureau of Finance and Management Policy.
Source: Department of State.
In the Bureau of Administration, the employee being transferred has
to contact several additional officials for counseling, guidance, and
assistance. The employee is expected to (1) work with a counselor in
the Transportation Division to arrange for the storage and/or
shipment of household effects and (2) contact the Offices of Overseas
Schools and Allowances if questions or related issues arise. The
employee may also visit the Employee Service Center's Foreign Service
Lounge any time during the process. The Center helps an employee
obtain information concerning the move, provides a checklist of 23
steps to complete, and helps register the employee's new location.
Other bureaus/offices that an employee typically deals with include
the Bureau of Diplomatic Security for security briefings, the Bureau
of Finance and Management Policy for pay advances and other payroll
issues, the bureau/office/post that is gaining or losing the
employee, the Office of Medical Services, and the American Express
Travel Office. If in training at the Department's Foreign Service
Institute in Arlington, Virginia, the employee also has the option of
working with transportation and travel representatives assigned to
the mini one-stop processing unit and with a nurse from Medical
Services. In addition, employees often work with personnel
specialists in the regional bureaus to address administrative matters
associated with their transfer, including changes in medical
insurance coverage and addresses for tax/benefits purposes.
State has known for years that its process for transferring employees
and their households overseas was cumbersome and inefficient.
State's most recent attempt to examine the issue took place in 1994
and 1995 as part of its agencywide Strategic Management Initiative.\1
State recognized that the transfer process had numerous problems: it
took over 100 steps to complete a transfer, it lacked a single source
fully familiar with the system, and it did not have a comprehensive
data base for tracking the entire process. A working group
recommended a complete overhaul of the transfer system, with a goal
of having a simple, one-stop, customer-oriented program. The group's
recommendations included (1) establishing customer representatives in
State's Bureau of Administration to manage the transfer of employees
from start (assignment notification) to finish (arrival at post and
resolution of claims), (2) outsourcing certain processes, and (3)
creating a new transfer data base for all participants in the
process.
According to Bureau of Personnel officials, these recommendations
were not implemented largely due to State's (1) focus at that time on
improving its process for selecting/assigning employees to meet
specific overseas post requirements and (2) reluctance to make the
substantial organizational changes necessary for a successful
reengineering of the process. Although the process remains
essentially the same, State's Bureau of Personnel took several steps
to improve parts of the system under its domain. These included
simplifying some of the forms required for a transfer, centralizing
the location of its personnel technicians,\2 and combining functions
previously handled by separate assignments officers and career
development officers into one position. The Bureau also began
developing a new integrated personnel management system. In
addition, the Department established a "mini" travel and
transportation assistance unit for employees receiving training at
its Foreign Service Institute.
We interviewed four employees that were in the final stages of
transferring from Washington, D.C., to an overseas post--the most
onerous of all the possible transfer situations, according to the
Strategic Management Initiative working group that examined the
transfer process. The employees had mixed views concerning the
process' efficiency, but frequently described it as cumbersome and
time consuming. Specific descriptions of some of the problems with
the current process included the following:
-- Too many people must be contacted to obtain the necessary forms
and complete all the steps. No one person is available to
coordinate the various requirements. It is not clear to whom
family members could/should turn for help in solving relocation
problems if the employee has already reported overseas or is not
physically available to assist them.
-- Progress through the system is seriously hampered if any delays
are encountered, particularly in the process for obtaining a
medical clearance. A clearance is required for a travel order,
which is a prerequisite for finalizing travel, transportation,
and other actions.
-- There is no automated tracking system or single data base
containing all of the information relevant to the employee's
transfer. The main tracking system is the employee's personal
working file, which is a manual set of various forms,
checklists, and contacts.
Appendix I shows in detail the typical steps and complexities
involved in State's current transfer process.
--------------------
\1 The Secretary of State established the initiative in 1994 to help
set the Department's future course and eliminate unnecessary or
marginal functions and internal duplication. Its first phase
resulted in a series of 1995 reports analyzing key issues, including
reengineering of the Foreign Service's transfer process.
\2 Personnel technicians provide counseling, prepare travel orders,
and execute other administrative actions related to employee
transfers.
TRANSPORTING HOUSEHOLD
EFFECTS
---------------------------------------------------------- Letter :3.1
The single most costly element of the overall transfer process is
transporting employees' household effects. Of the $62 million in
direct costs related to transferring employees in fiscal year 1996,
State spent about $36 million, or about 60 percent, on moving
household effects.\3 The indirect costs associated with the process
are also high due to the complexity of the process and the numerous
personnel involved. For example, State's Transportation Division,
which oversees shipments of both household effects and official
supplies, employs 69 permanent staff and 38 contractor staff at its 6
locations (Washington, D.C.; 4 regional despatch agencies; and the
European Logistical Support Office).\4
The process that State uses for managing the bulk of its household
effects shipments is very complicated, entailing multiple steps and
handoffs. No single contractor is responsible for the entire move.
For most shipments, State contracts separately for each segment of
the move, including packing and crating of the household effects at
the employee's residence, trucking to the port, consolidating the
effects with other shipments at the port, transporting by ocean or
air, separating consolidated shipments at the destination port,
trucking to a local contractor for delivery, and unpacking at the
destination residence. This multistep approach is known as the
"direct procurement method." This method involves various
combinations of State's Transportation Division in Washington, D.C.;
its four regional despatch agencies; and the European Logistical
Support Office, to contract for, coordinate, and monitor each move
segment. An additional disadvantage associated with the fragmented
nature of this method is that it makes it difficult to document the
total actual costs and to exercise accountability and control over
the process. Figure 2 illustrates the multiple handoffs required for
direct procurement shipments.
Figure 2: The State
Department's Direct Procurement
Process
(See figure in printed
edition.)
Source: Department of State.
State makes very limited use of "door-to-door" channels to contract
with a single freight forwarder for shipping an employee's household
effects--a practice used throughout the private sector and seen as
more cost-effective than using multiple vendors for the various
segments of the same move. For example, in 1996, State used the
door-to-door program for only about 16 percent of the 1,065 shipments
from the United States to 38 overseas locations where use of the
door-to-door program was feasible.
--------------------
\3 Other key direct cost categories include travel, allowances, and
temporary storage of household effects.
\4 The despatch agencies are located in Baltimore, Maryland; Miami,
Florida; New York, New York; and Seattle, Washington. The European
Logistical Support Office is located in Antwerp, Belgium.
APPLICATION OF BEST PRACTICES
BY STATE COULD SIGNIFICANTLY
IMPROVE ITS OPERATIONS
------------------------------------------------------------ Letter :4
Many private sector companies have recently reengineered their
processes for international relocation to control the growing costs
associated with their international operations and to provide better
service to their employees. If State applied industry best practices
to its process for transferring people, it could improve the quality
of services to its employees and their families, reduce the time
required for employees to complete the process, and possibly lower
costs by reducing the number of staff and other resources required to
administer the program.
A 1995 study by a private consulting firm examined the overseas
management policies of 30 corporations and identified several "best
practices" that we believe should be considered for application to
State's transfer process. These include (1) centralizing program
administration under the responsibility of one unit to have more
specialized staff dedicated to the function; (2) providing one-stop
shopping to improve employee satisfaction and accountability; (3)
developing integrated information systems to eliminate outdated and
duplicate systems, track costs, identify the status of key events,
and reduce management burdens; and (4) outsourcing. The companies
surveyed ranged from small to large, indicating that best practices
are applicable regardless of the size of the overseas population.
During our benchmarking exercise, we visited a number of companies
that demonstrated how one or more of these best practices has been
applied to improve the quality of services provided to their
employees and/or to reduce costs. In addition, all of the companies
that we visited used the door-to-door method of shipping household
effects.
FORD MOTOR COMPANY'S
INTERNATIONAL SERVICE CENTER
---------------------------------------------------------- Letter :4.1
Ford currently supports a population of about 2,150 international
service employees in nearly 50 countries. In 1996, about 400
employees were transferred from the United States to foreign
locations, and about 400 were repatriated to the United States. In
April 1996, the company began a major reengineering of its
international service employee relocation and management function.
The key feature of the reengineered process is Ford's new
International Service Center, which completely centralized the
company's process for transferring, managing, and returning
international service employees. Before establishing the center,
Ford's management of the process was spread across divisional lines
and, according to Ford officials, "it simply did not work very well."
Ford officials believe that the center has (1) significantly improved
the quality of services provided to its international service
employees and (2) enabled the company to better support its
substantial investments in overseas operations.
Critical to the operations of the International Service Center are
the 17 international service associates (counselors) who are
organized on a geographical basis. The associates are responsible
for coordinating and ensuring that all aspects of an employee's
international transfer are completed successfully, including the move
out to post, the coordination of activities during the assignment,
and the repatriation of the employee. An employee being transferred
is assigned to one counselor as his/her focal point for the entire
duration of the international assignment. At any one time, each
counselor is responsible for supporting about 130 international
assignees. Ford also relies heavily on private vendors to execute
key components of the process, including Orientation Services for
policy briefings and cross-cultural presentations; American Express
for travel, passports, and business visas; Coopers and Lybrand (an
accounting firm) for tax issues; John Hancock Company for health care
orientations and insurance inquiries; and Palmer Moving and Storage
for moving and transportation of household effects. Each of these
vendors is located in the International Service Center. The only
part of the international transfer process that is managed outside
the center is the employee's medical clearance. Figure 3 shows the
major parts of Ford's process for transferring an employee overseas.
Figure 3: Key Stops for Ford
Employees Transferring Overseas
(See figure in printed
edition.)
Source: U.S. GAO.
OTHER POTENTIAL CORPORATE
MODELS
---------------------------------------------------------- Letter :4.2
Texaco also clearly demonstrates the benefits of centralizing the
management of international transfers. Texaco currently supports
about 550 international assignment employees worldwide, and the
number of its transfers to and from the United States to foreign
locations totaled about 230 in 1996. The majority of Texaco's
employees transferred are professional mid-level positions, and the
typical overseas assignment is for 3 years. Texaco reengineered both
its domestic and international relocation processes beginning in
1994. Texaco's reengineering, which included benchmarking with nine
companies, identified several corporate best practices in expatriate
management. These included providing centralized management, having
geographic expertise among staff, using state-of-the-art technology
to support administration, and outsourcing various services.
Texaco's reengineering resulted in a centralization of its expatriate
management activities into two key offices:
(1) In 1994, the company made a significant change in its operations
by outsourcing for the transportation of household effects and
related services and centralizing these services in the Texaco
Relocation Center. Initially, the vendor only handled domestic
transfers but soon took over international services. The vendor's
three counselors and two associates had primary responsibility for
674 moves in 1996. Texaco officials said that the quality of the
services provided to its employees has substantially improved and
costs have been reduced by relying entirely on the vendor for this
component of the process. Cost savings were attributed to reductions
in corporate overhead and to the ability of the vendor to negotiate
lower rates for moving household effects.
(2) In 1995, many of the various internal expatriate support
processes that had been decentralized in the corporation's three
international divisions were centralized in the Expatriate Service
Center. The center, which coordinates payroll, allowances, medical,
visa, and related services for persons transferred to and from
foreign locations, is staffed with 12 corporate personnel (5
counselors, 2 tax specialists, 2 compensation specialists, 2
secretaries, and 1 center manager). The counselors are organized on
a geographic basis, and they track/assist the employees for the
entire length of their overseas assignment, including repatriation.
A computerized information system was purchased from a consulting
firm and adapted to coordinate these various functions. The system
is integrated with Texaco's main payroll systems and contains several
important data elements, including a checklist for key parts of the
transfer process and information on employees' assignments,
addresses, emergency contacts, visas, and compensation.
According to Texaco officials, the benefits of centralizing services
in the center have included the following:
-- Communication with employees and their families has improved.
-- Employee downtime has been minimized throughout the process.
-- Problems and complaints have diminished.
-- Service has been cost-effective.
-- Administrative support has focused on value-added work.
Another company that we visited and that asked for anonymity has for
years had one point of contact for its employees assigned
internationally. This company, which has an international employee
assignment work force of about 2,200, transferred about 400 employees
to and from the United States in 1996. Historically, most of its
international transfers have been in professional and mid- to
upper-level management positions. The typical period of assignment
overseas has been for 3 years. This company relies on a centralized
international assignments unit to manage the transfer of employees.
Key to the process are regional counselors in the unit, who provide
one focal point for the employee for coordinating all aspects of the
transfer. These include a one-on-one discussion of corporate
relocation policy, referral to a moving company, and arrangements for
a homefinding visit to the next post. To facilitate the process, the
unit also purchased an off-the-shelf software system to handle the
process' information requirements. According to company officials,
this eliminated older obsolete systems, reduced costs and time
requirements for administering the program, and created better
interface with other corporate systems. Similar to Texaco, the use
of enhanced information systems also improved the company's
budgeting, accountability, and control over the relocation process.
Appendix II compares State's practices to some of the best practices
we identified.
ADOPTING ONE-STOP SHOPPING
AND CENTRALIZED PROGRAM
ADMINISTRATION
---------------------------------------------------------- Letter :4.3
If State implemented one-stop shopping (one focal point for the
employee) and centralized program administration, it could achieve
benefits such as improved quality of services for employees and their
families, reduced time required for employees to complete the
process, and possibly lower costs resulting from fewer staff required
to administer the program. If State were to develop an integrated
information system to support the transfer process, it could
significantly enhance counselors' support capabilities and possibly
enable them to efficiently handle a greater number of transfers.
State officials in the Bureau of Personnel were very supportive of
the one-stop shopping concept and an integrated information
management system to support the process. Officials in State's
Bureau of Administration endorsed the development of an integrated
system for tracking and coordinating the transfer process. They also
endorsed one-stop shopping wherever possible, although they expressed
some concern about whether one coordinator/counselor should be given
complete responsibility for both the transfer of the employee and the
shipment of his/her household effects. They believed that (1)
certain functions such as counseling, travel, passport, and visa
requirements, could clearly be consolidated into one customer service
office and (2) customer service coordinators could help coordinate
other transfer activities with designated transportation specialists
and medical, security, and assignments officers.
Based on the best practices we identified in the private sector and
the views of State officials, figure 4 shows a one-stop shopping
process that we believe State could effectively adopt.
Figure 4: Potential Model for
One-stop Shopping at State
(See figure in printed
edition.)
Source: U.S. GAO.
EXPANDING DOOR-TO-DOOR
SHIPMENTS
---------------------------------------------------------- Letter :4.4
If State applied industry practices to its process for transporting
employee household effects, it could further streamline the transfer
process, reduce overhead, and exercise better accountability and
control. The direct procurement method that State currently uses for
transporting most of its shipments was designed at a time when State
was one of a few organizations operating on a worldwide basis. Now
that numerous private and public organizations operate globally, a
broad range of companies to transport household effects
internationally is available. Private industry, many foreign
governments, and other organizations generally use some form of the
less complicated and usually cheaper door-to-door approach for
shipping overseas, including transportation to developing countries.
None of the companies or governments that we visited used processes
similar to the one State uses for direct procurement shipments.
Unlike the multistep direct procurement approach, the door-to-door
method entails contracting with one commercial forwarder for all
transportation and related services required to move an employee's
household effects from their origin to their final destination. The
forwarder acts as a broker, arranging and paying for each of the move
segments. The General Services Administration makes available to
U.S. executive branch civilian agencies international household
goods tender (offers) of service agreements for door-to-door
shipments to and from certain overseas locations. Figure 5 depicts
the limited number of handoffs that are required for door-to-door
shipments. It is important to note that many of the same activities
that occur using the direct procurement method are included in the
door-to-door approach--the difference being that when using
door-to-door, the commercial forwarder, rather than the State
Department, is responsible for all steps.
Figure 5: The Door-to-Door
Shipment Process
(See figure in printed
edition.)
Source: Department of State.
(See figure in printed
edition.)
We believe that State could also reduce the costs of shipping
household effects overseas by expanding its use of the door-to-door
approach. Because of the fragmented nature of State's current
transportation process and deficiencies in State's financial
management system, we were not able to document the direct cost
reductions that State could achieve by expanding its door-to-door
program. However, in recent years, a number of State Department
Office of Inspector General reviews found that, although using the
direct procurement method could have lower costs in some instances,
the door-to-door method is usually less expensive and could result in
"significant" savings over time.\5
Our work further shows that even if the direct costs associated with
direct procurement and door-to-door shipments are essentially the
same, the overall costs of using the direct procurement method are
higher because of substantially greater personnel and other indirect
costs associated with this system. Because of the multiple handoffs
involving the Transportation Division, the various despatch agencies,
and the European Logistical Support Office, these costs range from
about $600 to about $1,600 per shipment, based on estimates developed
by State's Logistics Reengineering Project team.\6 In contrast, the
indirect costs for transportation management salaries, facilities
expenses, and other charges associated with the much simpler
door-to-door method are only about $400 per shipment and could be
even lower if State were to expand its use.
In addition, as State further reengineers its process for obtaining
goods and services, the costs associated with direct procurement
shipments are likely to rise even higher. State's logistics
reengineering program involves, among other initiatives, expanded use
of local purchase and direct-from-vendor delivery for supplies and
equipment needed at overseas posts. These changes mean that fewer
supplies and other items will flow through State's transportation
infrastructure and there will be fewer opportunities to consolidate
such shipments with household effects--one of the primary benefits of
the direct procurement approach. Reduced consolidation equates to
higher direct costs, but the increases do not end there. As State
comes to rely less on its own Transportation Division resources such
as the despatch agencies for moving supplies and other items
overseas, the per shipment indirect costs associated with the direct
procurement approach will increase accordingly.
Although the cost considerations are considerable, State has not
significantly expanded its use of the door-to-door program since
implementing it on a test basis in 1992. In 1996, State used the
door-to-door program for only about 16 percent of the 1,094 shipments
to locations where use of the door-to-door program was feasible and
in only 2 percent of the shipments back to the United States.
According to State transportation officials, reasons for not
expanding the program further have included (1) concerns that
door-to-door opportunities may be limited, particularly in remote
locations around the world; (2) lack of Transportation Division
authority over posts' choice of shipping methods; and (3)
apprehension about possible opposition from the U.S. moving industry
because of concerns about some firms losing business as a result of
changes in State's practices.
A recent increase in the number of overseas locations for which the
General Services Administration offers international tenders of
service could facilitate the expansion of State's door-to-door
program. Until recently, the General Services Administration had
made such agreements available for shipments from the United States
to 40 overseas locations. It had also offered the tenders for
shipments from these same 40 locations back to the United States. In
May 1997, the General Services Administration increased the number of
door-to-door routes to more than 150 cities worldwide. We believe
that the expanded use of these routes by State for its shipments from
the United States will encourage the overseas posts to adopt similar
cost-saving practices. While changes in State's practices might
affect the U.S. moving industry, the potential benefits to the
government are significant.
Expanding its door-to-door program would also enable State to
consider limiting the number of freight forwarders used for shipping
household effects, thereby maximizing its leverage with individual
companies by offering a greater volume of business for specific
vendors. Most of the private sector companies we visited, the World
Bank, and the U.S. Customs Service used this strategy, limiting to
between one and three the number of freight forwarders used for
international household effects shipments. In addition, we found
that the British government contracts with only one freight forwarder
to ship diplomatic effects worldwide, and the Canadian government
relies on two freight forwarders. New Zealand also uses a global
contract with one freight forwarder and, according to a 1996
Australian Department of Foreign Affairs and Trade report on options
for streamlining its process for moving international household
effects, both Canada and New Zealand have reduced costs by using this
approach. The Director of the office responsible for relocations at
Customs said that limiting the number of freight forwarders has
enabled him to hold the vendors to a much higher standard of
performance. Also, Ford officials said that limiting the number of
freight forwarders has reduced costs and improved controls over
shipments.
We believe that State could expand the use of the door-to-door method
on a route-specific basis, taking overall costs, accountability and
control, and quality of service into consideration. Overall cost
comparisons would need to consider both direct and indirect costs,
including personnel and other indirect costs in the Transportation
Division, the regional despatch agencies, and the European Logistical
Support Office. Since State's Logistics Reengineering Project team
has already developed much of the necessary data on indirect costs,
it would be a logical choice for making such comparisons. Also,
since the continued implementation of the Logistics Reengineering
Project has an impact on the indirect costs associated with household
effects shipments, the team would be well positioned to factor such
variables into the analysis.
--------------------
\5 In 1992, the Inspector General first recommended that State use
the door-to-door method. State agreed to implement a program on a
test basis beginning in 1992. In 1993, another Inspector General
review established that the door-to-door method was less costly and
recommended that State expand its use to include, wherever feasible,
shipments from overseas posts back to the United States and shipments
from post to post. A follow-up review in 1995 found that State's use
of the door-to-door method for 225 shipments between December 1992
and March 1994 to both developed and developing countries had
resulted in $376,687 in direct cost savings, or an average shipment
savings of $1,674.
\6 This team, comprised of civil and Foreign Service logistics
managers in the Department, recently completed the design for an
entirely new "reengineered" process for obtaining the goods and
services needed to support State's worldwide mission.
OUTSOURCING OPTIONS
---------------------------------------------------------- Letter :4.5
Another best practice that may have application in certain areas of
State's transfer process is outsourcing. The private consulting firm
that recently surveyed the expatriate management practices of 30
companies identified outsourcing as a "best practice." The study
noted that (1) some functions are better candidates than others for
outsourcing and (2) decisions concerning outsourcing need not only to
weigh its cost-effectiveness but also to consider other factors such
as the level of service available, the extent certain skills can only
be provided in-house, and the amount of internal control required.
During our benchmarking exercise, we also found that private firms
typically outsource parts of the transfer process. For example, one
company used vendors for compensation functions, overseas destination
services, tax services, immigration services, and shipping. That
company also examined the possibility of outsourcing its entire
relocation function but decided against it because of cost
considerations and uncertainty that the relocation service provider
could perform as well as the company's own employees. Another
company had completely outsourced its domestic/international
transportation function, saving substantial sums based on reduced
shipping/moving rates and lower corporate staff requirements.
Historically, various State studies have also recognized outsourcing
as an option but little action has materialized. For example, in
1995 the Strategic Management Initiative special study group
reviewing the transfer process recommended that the Department
establish customer service representatives using private contractors
for the bulk of the work. However, the study did not examine the
cost-effectiveness of the option. The Department did not endorse the
group's recommendation. Another team examined operations of State's
medical office, which is a key step in the transfer process.\7 That
team concluded that as much as $1.5 million could be saved in annual
salary costs by outsourcing the Department's medical examination
program with a private health contractor. The Secretary of State at
that time subsequently endorsed the use of private firms or other
agencies to handle such services, if justified by rigorous cost
analysis.
In response to the Secretary's endorsement, the Office of Medical
Services assembled a working group in 1996 to study the issue
further. The group developed information that showed that (1) over
4,700 medical examinations were conducted in the Department in fiscal
year 1994, (2) the average cost of an examination was $890 in the
same year, and (3) costs became higher in subsequent years because
the clinic was moved to larger and more expensive space. Moreover,
the analyses noted that the Department's average examination cost of
$890 was substantially higher than the rate of $450 per examination
that State had negotiated with George Washington University in
Washington, D.C. Although this analyses stated it was clear that
medical exams could be obtained at a lower cost elsewhere, no action
was taken on the working group's study.
Outsourcing all or portions of the transportation process for
household effects also offers potential benefits. An obvious
advantage of outsourcing is that it offers a "surge capability"
during peak moving periods--in State's case, during the summer
months--without having to devote unneeded resources to the
transportation function during nonpeak periods. Some private
companies operating internationally expect the contractors that are
providing the door-to-door transportation services also to provide
other services such as relocation policy counseling--a function that
State currently performs in-house using a combination of more than 20
permanent employees and contractor staff. Depending on the volume
involved, some of these contractors locate their counselors on-site.
The World Bank ships the household effects of its approximately 1,000
employees who relocate each year using an in-house transportation
staff comprised of only 2 permanent Bank employees. The three moving
companies that the Bank uses for international relocations have
counselors located on-site at the Bank. Contracts have been
competitively bid to get the best value.
We also found during our review that move management companies
provide an even wider range of services than do traditional moving
companies, such as claims management, voucher processing, destination
services, and accounting services. In one case, the relocation
company provided the extra services at no additional charge. In some
cases, the companies charged a per shipment fee. These fees should
be factored into cost comparisons involving various outsourcing
options, along with any related overhead savings.
--------------------
\7 To get a medical clearance, employees typically visit State's
medical office twice for initial tests and followup. Additional
tests in the unit or externally may be required. Overall, it may
take 3-5 weeks to complete the process.
LUMP SUM OPTION
---------------------------------------------------------- Letter :4.6
Another option that some companies employ to streamline the transfer
process is to provide lump sum advances to employees to cover
specific categories or all of an employee's relocation expenses. The
advantage of this approach is that it eliminates the requirement for
employees to itemize or document expenses and thus reduces overhead
associated with processing vouchers and other monitoring and
compliance activities. An interagency working group addressing
travel reengineering as part of the Joint Financial Management
Improvement Program recommended that federal agencies have the option
of using such an approach to provide subsistence assistance for
temporary quarters associated with relocations. State is currently
exploring a variation of this option. The Strategic Management
Initiative working group that examined State's transfer system
mentioned the "radical" alternative of providing a lump sum for an
employee's entire relocation, where the employee would then arrange
for moving his/her household effects and family members. Although
the working group said that this method would involve "significant
FTE (full-time equivalent) and dollar savings," it also recognized
that it would work well for relocations only to some of the countries
where State operates.
POTENTIAL COST REDUCTIONS
---------------------------------------------------------- Letter :4.7
Applying best practices to State's transfer process could result in
significant cost reductions. The total that could be achieved is
dependent on a number of factors, including (1) the personnel and
other resources State chooses to redeploy as they are freed up in
connection with a more streamlined transfer process; (2) the number
of routes where the door-to-door method of shipping household effects
is found to provide the best combination of overall
cost-effectiveness, accountability and control, and quality of
service; (3) the extent to which changes resulting from State's
Logistics Reengineering Project affect household effect shipment
costs; and (4) the parts of the transfer process State decides to
outsource.
Although these and other variables preclude making precise
projections, we believe that the potential cost reductions could
total millions of dollars annually, based on (1) our limited analysis
of the indirect costs associated with certain portions of State's
current process, (2) documented direct cost savings resulting from
use of the door-to-door method on a pilot basis, (3) the experiences
of companies and organizations that we visited as part of our
benchmarking exercise, and (4) State's own studies. One organization
with which we benchmarked saved millions of dollars by applying best
practices to its transfer process--an operation smaller in scope than
State's. Also, as noted earlier, State's own analysis indicated that
as much as $1.5 million could be saved by outsourcing one element of
the transfer process alone.
POTENTIAL BENEFITS FOR OTHER
AGENCIES
------------------------------------------------------------ Letter :5
A successful reengineering of State's transfer process based on
adoption of best practices and other options could also have
significant benefits for other foreign affairs agencies. For
example, the Strategic Management Initiative study group that
examined State's transfer process in 1994 noted that both USAID and
USIA had transfer processes that were similar to State's.
Our more recent work at USAID as part of this review indicates that
USAID's transfer system continues to be complex and cumbersome. A
significantly improved State process could serve as a model for
agencies such as USAID. On the other hand, an even more significant
challenge and opportunity for improvement will be afforded State
based on current plans to consolidate the operations of the
Department and other foreign affairs agencies. Specifically, the
executive branch is developing plans to (1) consolidate the
operations of USIA and ACDA into the State Department and (2)
integrate certain administrative functions of USAID and State. When
that occurs, a streamlined transfer process could produce much
greater benefits. However, several issues will have to be addressed,
including whether (1) staff resources in each agency can/should be
consolidated to support one transfer process, (2) outsourcing would
help manage a significantly larger volume of transfer activity, and
(3) any of the agencies' in-place or planned information systems can
effectively meet process requirements. Officials in State's Bureau
of Administration also noted that State, USIA, and USAID have very
similar transportation systems and integrating them would be
relatively painless. We believe that this possibility provides
substantial opportunities for even greater cost savings through a
consolidation of transportation functions and the broader application
of door-to-door shipments.
CONCLUSIONS
------------------------------------------------------------ Letter :6
In today's budget environment, State can no longer afford to operate
costly and outdated systems. State's complicated approach to
transferring its employees--developed when the agency was one of the
few organizations supporting worldwide operations--remains an
unnecessarily complicated maze of costly handoffs and mini-operations
without a lead person in charge or accountable for the entire
process. Now that many organizations have global operations based on
reengineered and modern processes, State has an opportunity to
rethink its transfer process. Several corporations have made
significant changes in the way they do business in order to remain
competitive and to control the costs associated with their
international operations. By applying best practices to their
employee transfer processes, firms have reaped several benefits
including cost reductions, better accountability and control,
consistent application of corporate policy across division lines, and
improved services to their employees. Implementing best practices as
a fundamental part of modernizing its transfer operations would
enable State to do the same. A modernized State transfer process
would also enable State to more efficiently integrate the operations
of other foreign affairs agencies and serve as a model to
non-foreign-affairs agencies supporting significant numbers of
employees overseas.
RECOMMENDATIONS
------------------------------------------------------------ Letter :7
We recommend that the Secretary of State establish a special team
under the direction of the Under Secretary for Management to design
an implementation strategy for improving management of the
Department's employee transfer process. The strategy should take
into account the transfer activities of ACDA, USAID, and USIA. The
team should be composed of staff from each of the key bureaus and
offices currently involved in the process. Its mandate should
include the following:
-- Identify the most appropriate organizational structure,
location, and staffing arrangements for centralizing management
of the transfer function, ensuring accountability and control
over the entire process, and providing one-stop shopping for the
employee.
-- Develop an integrated information management system to handle
the reengineered transfer process, based on off-the-shelf
technologies or information resource management initiatives
already under way in the Department, if possible.
-- Develop a plan for outsourcing those parts of the transfer
process where analyses show that outsourcing would provide
better, more cost-effective service than performing the function
in-house. Key parts of the process that should be examined
include medical and move management services.
-- Develop cost, time, and quality performance measures for
managing the process and measuring the impact of reengineering
efforts.
We also recommend that the Secretary of State direct the
Transportation Division to substantially expand the use of
door-to-door shipments of household effects.
AGENCY COMMENTS AND OUR
EVALUATION
------------------------------------------------------------ Letter :8
In commenting on a draft of this report, State acknowledged that its
transfer process needs improvement, that "one-stop shopping" should
be the touchstone for such improvement, and that the use of
door-to-door shipments should be expanded. However, it did not agree
to implement any of our recommendations. State gave several reasons
for not taking action, including its (1) limited capacity to take on
the issue given the magnitude of agency consolidation, logistics and
medical services reengineering, and information technology efforts
already underway; (2) concerns that the Department's transfer
requirements are different from those of the private sector; (3)
questions about whether Ford Motor Company would be a good model; and
(4) efforts to significantly expand the number of door-to-door
shipments since 1994.
We do not believe that State's reasons for delaying action or for not
supporting our recommendations are persuasive. In our view,
reengineering the transfer process would improve services, reduce
costs, and represent a logical extension of the Department's ongoing
efforts to reengineer its logistics system. Additionally, it is
important that State's reengineering studies consider whether
outsourcing is the best way to provide certain services.
We also do not share State's concerns that the best practices of the
private sector may not be applicable because of differing
requirements. Employee transfer requirements are much the same in
the public and private sector, essentially focusing on ensuring that
employees and their families are successfully transferred to their
new overseas assignments. State's concerns are also inconsistent
with the reengineering methodology generally used in government and
the private sector and adopted by its own logistics reengineering
team, which relied heavily on the best practices of the private
sector. State's questions about whether Ford Motor Company would be
a good model appear to be based on the Department's misinterpretation
of information in our draft report. State believed that our draft
report had implied that Ford's international relocation program costs
hundreds of millions of dollars annually. That is not the case--in
fact, Ford officials believe that the company's new International
Service Center, which has adopted one-stop shopping, outsourcing, and
other industry best practices, has significantly improved the quality
of services to its employees and enabled the company to more
efficiently support its entire investment in overseas operations.
State claimed that it had significantly increased its use of
door-to-door shipments. A closer examination of State's shipping
data indicates that the Department has misinterpreted its own data.
Despite its claims of significantly greater use of door-to-door
shipments, only about 10 percent of the shipments in 1996 that were
eligible for the door-to-door method were actually channeled by the
Department through that process.
In summary, we continue to urge State to act on our recommendations.
State's detailed comments, along with our analyses, are included in
their entirety in appendix III.
MATTER FOR CONGRESSIONAL
CONSIDERATION
------------------------------------------------------------ Letter :9
Because the Department of State has not indicated support for our
recommendations intended to improve the quality and efficiency of its
transfer and shipping process, Congress may wish to direct State to
implement them.
SCOPE AND METHODOLOGY
----------------------------------------------------------- Letter :10
Recognizing that pressure exists to reduce the budget for conducting
foreign affairs activities, we undertook to identify potential cost
savings for the Department of State. To review and map State's
current process for transferring employees, we obtained prior
studies, including the Department's 1995 Strategic Management
Initiative reports and 1991-95 audits by its Inspector General. We
also interviewed appropriate officials at State's headquarters in
Washington, D.C. We developed flow charts of generic transfer and
shipping processes and developed related cost data to the extent
practical.
To identify best practices in the private sector and other
organizations, we researched literature and consulted with various
experts in the area. The Employee Relocation Council--a professional
association of several thousand corporations, government agencies,
and other organizations concerned with relocation issues--helped us
pinpoint several companies that had a large number of overseas
employees and that were considered leaders in the international
relocation field and/or had recently reengineered their international
employee relocation processes.
To compare best practices in the private sector and State transfer
processes, we visited six companies identified during our review to
develop detailed information on these processes and their
reengineering efforts. We selected these companies based on the
number of employees transferred, typical time frames for an overseas
assignment, and actions taken to control costs of international
operations. One of the companies we visited was also a participant
in a study of best practices in expatriate personnel management in 30
private corporations, conducted by a private consulting company in
1995. We also visited the embassies of the United Kingdom and Canada
in Washington, D.C., and met with representatives of the Australian
National Audit Office to obtain an understanding of how other
national governments transfer their employees to overseas locations.
In addition, we developed information on USAID's and the World Bank's
transfer processes. We did not independently verify any cost savings
or performance benefits data provided by the companies and other
organizations we visited or those identified in other studies.
We conducted our review from August 1996 to July 1997 in accordance
with generally accepted government auditing standards. We performed
our work at government, public, and private organizations in
Washington, D.C.; New York; New Jersey; and Michigan.
--------------------------------------------------------- Letter :10.1
We are sending copies of this report to the Administrator, USAID; the
Director, USIA; the Director, Office of Management and Budget; and
interested congressional committees. We will also make copies
available to others upon request.
Please contact me at (202) 512- 4128 if you or any of your staff have
any questions concerning this report. The major contributors to this
report are listed in appendix IV.
Benjamin F. Nelson, Director
International Relations and Trade Issues
List of Congressional Committees
The Honorable Jesse A. Helms
Chairman
The Honorable Joseph R. Biden Jr.
Ranking Minority Member
Committee on Foreign Relations
United States Senate
The Honorable Judd Gregg
Chairman
The Honorable Robert C. Byrd
Ranking Minority Member
Subcommittee on Commerce, Justice, State,
The Judiciary and Related Agencies
Committee on Appropriations
United States Senate
The Honorable Benjamin A. Gilman
Chairman
The Honorable Lee H. Hamilton
Ranking Minority Member
Committee on International Relations
House of Representatives
The Honorable Harold Rogers
Chairman
The Honorable Alan B. Mollohan
Ranking Minority Member
Subcommittee on Commerce, Justice, State,
The Judiciary and Related Agencies
Committee on Appropriations
House of Representatives
THE DEPARTMENT OF STATE'S EMPLOYEE
RELOCATION PROCESS (WASHINGTON TO
POST ONLY)
=========================================================== Appendix I
(See figure in printed
edition.)
(See figure in printed
edition.)
(See figure in printed
edition.)
DIFFERENCES BETWEEN THE STATE
DEPARTMENT AND SOME ORGANIZATIONS
EMPLOYING BEST PRACTICES FOR
INTERNATIONAL TRANSFERS
========================================================== Appendix II
Best practice State Ford Texaco
------------------ ------------------ ------------------ --------------------
Centralized No--currently Yes-- Yes--Expatriate
program administered in International Service Center and
Administration several bureaus Service Center Texaco Relocation
and/or offices Center
One point of No--numerous Yes--one counselor Yes--one point of
contact for points of contact in the contact in
transferring in several bureaus International Expatriate Service
employee and offices Service Center Center coordinates
required to coordinates all the transfer
complete the aspects of the
transfer transfer
Integrated Partial--the Partial--data Yes--purchased an
information Bureau of centralized but integrated system
systems Personnel's new not linked from consultant and
integrated system electronically linked with existing
will upgrade information systems
information
capability for
parts of the
transfer process
Outsourcing
Travel Yes Yes Yes
Move management No Yes Yes
Household Partial, some Yes Yes
effects counseling contractors used Yes Yes
Tax consulting Not applicable Yes Yes
Home sales Not applicable Yes Yes
Orientation No No No
Medical No
--------------------------------------------------------------------------------
(See figure in printed edition.)Appendix III
COMMENTS FROM THE DEPARTMENT OF
STATE
========================================================== Appendix II
(See figure in printed edition.)
(See figure in printed edition.)
The following are GAO's comments on the Department of State's letter
dated August 29, 1997.
GAO COMMENTS
1. Although State is taking actions to improve many of its systems,
its position of delaying action to improve its transfer process
because of other reengineering and consolidation initiatives
contributes to long-standing and costly inefficiencies in one of the
Department's key operations. We believe that (1) the reengineering
initiatives already underway in the Department have helped create a
climate of support for new and more efficient ways of doing business,
(2) the transfer process is a logical extension of the systems being
reengineered, and (3) the working groups charged with reorganizing
the foreign affairs agencies can and should incorporate these and
other best practices in their analyses. Although State took some
actions, it essentially failed to satisfactorily address the transfer
process problem in the mid-1990s as part of its Strategic Management
Initiative. Given the inefficiencies involved and the cost savings
that would follow, we believe State should not miss this opportunity
to take timely and meaningful action. A large number of employees'
quality of life would be improved and numerous other benefits could
be derived from a reengineered process.
2. State's concern that Ford Motor Company would not be a good model
for it to consider appears based on the Department's
misinterpretation of information in our draft report. Our draft
report did not state that Ford's relocation costs total hundreds of
millions of dollars annually. It said that Ford officials believed
that the company's new International Service Center had enabled Ford
to better manage its international assignment process that costs
hundreds of millions of dollars annually. Ford officials had used
the terminology "international assignment process" to describe the
total investment Ford has made in its overseas operations, including
employee relocation, salaries, equipment, infrastructure, and so
forth. We modified our report to reflect this point. We strongly
believe that the best practices of Ford, as well as those of the
other companies described in our report, provide a good basis for
State to reengineer its relocation process to reduce costs and
improve services. Those best practices include one-stop shopping for
employees, centralization of the transfer administration function,
outsourcing, development of information systems to track and
coordinate transfers, and greater use of door-to-door shipments for
employees' household effects.
3. We recommended that State develop an integrated information
system to manage its reengineered transfer process, adding that it
should be done either with off-the-shelf technologies or information
resource initiatives already underway in the Department. Some of the
companies that we benchmarked have used off-the-shelf systems from
major vendors, and State documents indicate that, as part of its
modernization strategy, it plans to identify commercial off-the-shelf
products as options for designing a comprehensive resource management
system. The thrust of our recommendation is that State should build
on the numerous initiatives underway in the Department to modernize
systems and link agency processes. The development of an information
system to support a reengineered transfer process would be a logical
part and/or extension of the overall modernization process.
4. We support the Department's efforts to reengineer its medical
clearance processes and its consideration of several options for
improving medical services. Although State believed that outsourcing
should not be considered until the reengineering has been completed,
our recommendation is designed to encourage the Department to
consider all practical options for reengineering, including
outsourcing. The experiences of the private sector, as well as
State's own data, indicate that outsourcing is a reengineering option
that can produce greater efficiency and better service for certain
processes.
5. Although State agreed that door-to-door shipments should be
increased, the data it provided is misleading concerning the actual
level of progress made by the Department. Specifically, State
provided data showing that the number of door-to-door shipments have
increased 37 percent in the past 3 years. While this may appear
progressive, it is misleading because the total number of shipments
sent door-to-door in 1996 represented only about 10 percent of those
that could have utilized this method. Clearly, State has a lot of
room to expand its use of door-to-door shipments and reap the
financial benefits.
6. We asked State to provide data supporting its claim that it cost
an average of $6,000 more using the door-to-door method for shipments
to Mexico. State could not substantiate this claim.
7. We believe that the greater use of door-to-door shipments by the
European Logistical Support Office further confirms our conclusion
that State can and should expand the use of such shipments. We
believe that it also demonstrates that door-to-door shipments are a
viable alternative for overseas posts, eliminating the need to incur
the additional expenses associated with channeling posts' shipments
through the European Logistical Support Office in Antwerp, Belgium.
MAJOR CONTRIBUTORS TO THIS REPORT
========================================================== Appendix IV
NATIONAL SECURITY AND
INTERNATIONAL AFFAIRS DIVISION,
WASHINGTON, D.C.
Diana M. Glod
Michael J. Courts
Edward D. Kennedy
Jesus A. Martinez
Rona Mendelsohn
Lynn B. Moore
Jodi M. Prosser
La Verne G. Tharpes
OFFICE OF THE GENERAL COUNSEL
Richard P. Burkard
Richard Seldin
*** End of document. ***